BLOCKCHAIN, BITCOIN AND STIGMERGY: AN EXPLANATION?

Summary: 1. Introduction. 2. Organization without Organizer. 2.1. Swarm Intelligence. 2.2. Bitcoin system 2.3. Forks, cryptocurrencies, and ICOs. 3. Conclusion.

Photo by James Wainscoat on Unsplash

1. Introduction.

The explosion of expectations about the blockchain requires a semantic reflection: is this technology clearly defined to have a common base to be discussed?

The real fact is that too many definitions and interpretations led to an ambiguity that does not allow any serious analysis.

The semantics becomes central: what is a blockchain and how it is possible to decentralize a system.

First, it becomes compulsory to start from some basic notions: Distributed Register Technology or Distributed Ledger Technology (DLT) consists in a system of recording and storing data through multiple data files (ledger), in which each “point” contains the same data: these data are collectively maintained and controlled by a network of distributed computers, called nodes[i]. The ledger contains the chronology of the transactions.

The schemes to update and maintain the database are various, and the system based on the chain of transaction blocks linked one to one another on an only-append philosophy is called Incremental Block DLT. In this system the chronology of the transactions takes place through the connection of blocks with mathematical functions aimed to create an “unalterable chain”[ii].

The computer network can be “without authorization” (Permissionless DLT or PDLT), in which each participant can become a node without the need of permission from any authority, only with the use of a software connected to the network. In this way everyone can take part in the network, having a complete copy of the ledger, participating in the consensus mechanism, or exiting without any consequence for the system.

The network, on the other hand, may be subject to “permission” (Permissioned DLT or Authorized DLT or ADLT), where some activities and/or some functions are permitted only to the actors pre-selected and, therefore, only certain ones can participate in the network. These networks can be private, therefore accessible only to some users, which can coincide with the nodes or with other authorized users, or public, and therefore accessible and viewable by anyone.

Authorized networks may have transactions originating from any user or only by some authorized users, but in any case the registry changes are carried out by the pre-selected nodes.

The DLT has value if the participants reach a consensus on: (i) rules, (ii) history and (iii) that the cryptoassets has a value.

While understanding central/private/permissioned DLT is quite simple for the existence of a conceptual framework, the creation and existence ex nihilo of a decentralized system is very difficult indeed.

The discriminant is not on the storage of data, because a database could have data stored on multiple computers or nodes (distributed database), but on the management of the system, varying from the control of the algorithm to authorizing nodes by an entity or a control group.

In decentralized systems (i.e. Bitcoin) there is not any central entity, but the system relies upon an open source algorithm .

2. Organization without Organizer.

A decentralized system follows the logics that guarantees operations despite the absence of a coordinator, but through self-organization.

The organizational element consists of an instruction, a script, an element that allows the participating individuals to generate the organized system, similarly to swarm intelligence and stigmergy[iii].

The organization is therefore neither spontaneous nor self-organized, but generated by that aggregating element of the individual’s behavior, becoming an organization without an organizer.

The script contains the architectural project, the DNA of the system, and even contains a pheromone, portmanteau of the Greek terms Phero (bring) and Orme (excitement), biochemical/semiochemical substances emitted by living organisms that generate behavioral reactions to the contact of organisms of the same species.

It could be useful to analyse the studies and theories of the swarm behaviour and the organizational system that arises from the interactions of individuals in these cases.

2.1. Swarm Intelligence.

The study on the swarm intelligence generated a heterogeneous doctrine, aimed to explain the behavior of animals and humans, without reaching shared theories and definitions.

The concept of pheromone is the basic point of this unconscious behaviour, concept that relies upon four main features[iv]:

1. a pheromone corresponds to one (or a few simple ones) chemical compounds (simplicity);
2. the functional response to contact is specific to each species (specificity);
3. the response, endocrine or behavioral, is well defined (predictability);
4. the answer does not depend on the level of learning (automatism).

The pheromones, then, are generally divided into four classes depending on the effect they cause on the recipient:

1. Tracing pheromones; if released by an individual they are followed as a trace by the other individuals;

2. Alarm pheromones; emitted in dangerous situations induce a greater state of vigilance in the individuals who pick them up;

3. Priming or triggering pheromones: induce long-term behavioral and / or physiological changes in the recipient;

4. Free pheromones or signaling : trigger aggression or mating behavior in the individual who captures them.

The classes of pheromones together with the features are the basis of the collective behaviour that eases the generation of an organization. The system is similar to the building of an anthill by termites, thanks to tracing pheromones to adding “brick of mud”.

The individual behaviour generated by pheromones can modify the environment in a decentralized way, and in this case this phenomenon is called Stigmergy[v]

Stigmergy is not limited to animals, but is also observed on the Internet, even on centralized systems, such as interactions that can occur through a communication system in a shared environment (leave messages in a newsgroup, bulletin board system, etc).

The examples are numerous, starting from wikis like Wikipedia, or in an open source software project: the structure and development of available information is comparable to a termite nest, with a first user who leaves the sketch of an idea that attracts other users who continue to add ideas and changes until they arrive at a complex and elaborate structure, but on the basis of a simple instruction (writing on a wiki), with specific response (idea of ​​change), predictable behavior (proposed modification) and without any level of learning (only basic computer skills).

Stigmergy relies upon pheromones and upon interactions through a communication system and in the Web these interactions could become easier and the modification of the environment faster due to its virtual nature.

It is obvious that the concept of stigmergy and pheromones must be adapted to the virtual environment, and it is possible to identify the virtual pheromone in the part of the code that (i) allows individuals to communicate each other without central control or an organized structure, and (ii) induces certain behaviours.

The virtual pheromone eases the interaction between users, and if the interaction generates a common coordination among the users, creating a network, even unstable, the modification of the virtual environment had happened and virtual stigmergy took place.

This new system could live with evolution and adaptation or die, but the stigmergy did exist with the birth of the system.

The capacity of survival of the new organization that modified the virtual environment is the key factor of its success, but from a theoretical point of view the basic element is its birth, the existence.

The instruction contained in the code is simple, easy, and without any explicit design of the system, but the virtual activity put in place induces others in acting: the instruction is the unifying element, the virtual pheromone that allows the interacting amongst individual.

The interactions move in an unpredictable and indeterminable way because it is impossible to understand the final network from the analysis of the code or on the behaviour at individual level: it is like to understand a human being from the DNA.

The individual is neither aware of the global network nor the contribution of the individual part, acting without awareness but following the virtual pheromone.

It is possible to indicate the four typical ingredients for these phenomena:

1. Positive feedback: they consist of “reinforcements” deriving from the execution of simple rules of behavior. Such reinforcements can generate the creation of structures.

2. Negative feedback: they balance positive feedback and allow the stabilization of the system, such as limitation of resources, depletion of the source the behavior tended, disappearance of pheromones or competition between several rules of behavior.

3. Fluctuations of positive feedback: the actors who follow these rules have a behavior based on randomness that is often decisive for the discovery of new solutions or for recruiting new actors.

4. Direct or stigmergic interactions: they are indispensable for the production of deterministic results and for the appearance of durable structures.

In any case, these phenomena are not possible without a decentralized communication system.

2.2. Bitcoin system

The peer-to-peer[vi] network allows a system of communication between individuals without a central body, without a platform owned by anyone, but based exclusively on a data exchange protocol.

The virtual pheromone is contained in the algorithm (Bitcoin Core[vii]) that generated imitative energy and allowed the organized development of the system, orienting the behavior of individuals (nodes).

The actors involved are:

1. Users.
2. Nodes.
3. Miners.
4. Devs.

These actors follow the algorithm, putting into place activity according to the limited instruction of the code.

The Bitcoin system auto-organizes the whole system around the longest chain and the trust generated in the decentralized environment as result of the simple rules of behavior.

Each individual acts following the virtual pheromone (like an ant following the path), starting a competition that generates a chain of blocks to make the chronology of transactions unalterable (albeit economically), without anyone participating in such a system to modify it but only to imitate and follow others.

Using the typical ingredients seen above, the positive feedback consists in the attribution of new bitcoins for the solution of the block computation problem, the negative feedback from the abandonment of the shorter/lighter/invalid chain of blocks, the fluctuations from the acceptance or not of the BIPs (protocol modification proposals / Bitcoin Improvement Proposal) and direct interactions, all conventions, meetings and the community.

It is undoubted that this form of organization without organizer (or monopoly without a monopolist[viii]) generates an extreme new paradigm in which individual behavior does not even have the awareness nor the intention to put in place behaviors tending to an end, but to participate to a system based on imitation or positive or negative reinforcement.

2.3. Forks, cryptocurrencies, and ICOs.

The Satoshi Nakamoto’s paper and Bitcoin chain of blocks gave evidence that it was possible to create a decentralized network and various actors started to try to improve or to maximize their utility.

The decentralized system then evolved with forks, creation of new altchain and altcoin, modifying the script, the virtual pheromone. The modifications start from Devs that could propone, on a open source philosophy:

- Proposal of modification of the protocol that can lead to:

- Acceptance of the modification;

- Refusal;

- Fork of the protocol with the birth of multiple chain as Ethereum and Ethereum Classic or Bitcoin and BitcoinCash.

- Creation a new script (new system)

- Altchain.

- Altcoin.

The ecosystem evolves with a new form a virtual darwinism with acceptance and consensus on some crypto-assets rather than other.

The difficulty to create a new decentralized system is increasing and to pass over token over an already existing system took place: a centralized system over a decentralized one.

The Token system start with an organizator, but the logics relies upon a decentralized system (Bitcoin, Ethereum, Ark, etc.) and the central part is the initial framework: after than, in many cases, the system is decentralized.

This step complicates the analysis as it is possible to create a new system over another one in a decentralized manner: the Initial Coin Offerings (ICO).

3. Conclusion.

This theoretical framework could ease the understandings of the dynamics of a distributed ledger system, the logics, and the difficulty to apply rules and law written for a centralized system.

The key point is the lack of awareness for the individual that participates to the maintenance of the system, because that person is not knowingly act for the system, but according to a behaviour induced by a virtual pheromone.

A decentralized system that is autonomous is hard to understand and to regulate, because there is neither a central point of intervention nor a particular actor to regulate. These systems do not need anything else from the external but only a community that trust the code.

The actors involved fall outside the scope of existing rules even if new service providers (wallet service providers, exchangers, token issuers, custodian wallet, etc.) are arising new issues to be fixed, changing the perspective of the analysis.

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[iv] DOTY, R.L., The Great Pheromone Myth. Johns Hopkins Press, 2010

[v]The term “stigmergy” was introduced by French biologist Pierre-Paul Grassé in 1959 to refer to termite behavior. He defined it as: “Stimulation of workers by the performance they have achieved.”

[vi] See: https://en.wikipedia.org/wiki/Peer-to-peer

[vii] ANTONOPOULOS, A.M., Mastering Bitcoin: Unlocking Digital Cryptocurrencies, O’Reilly Media, Inc. pp. 31–32. ISBN 1491902647, 2014..

[viii] HUBERMAN, G., LESHNO, JD, MOALLEMI, C., Monopoly without a monopolist : An economic analysis of the bitcoin payment system, Research Discussion Papers 27/2017, Bank of Finland.