Cryptocurrencies and Natural Selection

  • 02-Jul-2021
  • 0
  • Cryptocurrency
  • Blockchain
  • Artificial Intelligence

From Aristotle’s Scala Naturae – the chain of being – to Adam Smith’s invisible hand¸ the dynamics and evolution of money has always been the invisible chain of transactions and transfers among the human populace. Let’s dive deeper to find out how natural the ideological revolution and prophecy of blockchain is to human life. Darwinian evolution comprises of three steps: Variation – the variants in a new generation doesn’t need to be directed, they can be as blind and random as can be. Selection – a criterion to judge the best fit for the environment (this providing direction), and Inheritance – the retention of key traits of the previous generation for a stable cumulative capability of the species. Natural selection in biology refers to the different rates of survival and reproduction, due to differences of traits, properties, behavior and products of behavior of individual organisms. When individuals of a species reproduce, regardless if it happens by splitting (for example in microbes) or by combining DNA of two individuals (sexual reproduction, like in most mammals, birds, etc.), there is always a slight chance of a random mutation happening and leading to the resulting individual(s) having new or changed traits, which their “parents” did not have. In some cases, these traits (or changes to them) happen to improve the chances of those individuals who have them to survive and/or reproduce in their current environment, which increases the chance of these traits to be passed on to the offspring. Over time, the traits which enable higher rates of survival / reproduction become prevalent, while “competing” traits subside. As the ability of a trait to enable higher survival / reproduction rate depends on the environment (for example, thick fur might be beneficial in a cold climate, but would be a disadvantage in a hot climate), when individuals of the same species migrate to different environments, they develop different traits over generations. There is no particular moment when a new species is “born” – every offspring belongs to the same species as their parents, yet over a sufficiently long timeframe, the difference in various traits between individuals living in different environments becomes so big, that they cannot be considered the same species anymore. There is a Darwinian struggle for survival between the current cryptocurrency heavyweights. This is a new paradigm that requires money to be decentralized or smart (programmable). Cryptocurrencies possess these traits while gold and fiat currencies do not. Cryptocurrencies have added heightened competition. All currencies are in a state of hyper-evolution. Growing distrust in centralized entities has encouraged many to consider alternative stores of value. Sovereignty, once a trait necessary for the survival of a currency, has fallen out of favor. Centralized failures have created growing awareness that a decentralized world is possible. Historically, the existence and survival of any entity, be it plant, animal, corporation, or currency is subject to the laws of natural selection. However, there have been several mass-extinction events during the history of life. Such an event happens when the environment changes so drastically and/or so rapidly, that most of the species existing at that time fail to adapt quickly enough and are annihilated. An example of such an event is an asteroid hitting Earth, which made the dinosaurs go extinct. Fiat financial system’s mass-extinction event has already occurred. It began with the birth of the Internet, peer-to-peer technological revolution and the 2008 financial crisis. Fiat is sliding into irrelevancy. The internet of money (cryptocurrencies led by Bitcoin) and the Internet-of-Things (IoT) era has already begun. During this period, fiat may very well become extinct and be replaced by cryptocurrencies. The average life of a fiat currency is 27 years. The main reasons for the increasing irrelevancy of fiat currencies are monetary reforms, hyperinflation, wars, and changing geopolitical climates (for example, countries declaring independence). Even without failure, all fiat currencies continually lose value, which was not the case with most commodity-based currencies. As easy accessibility is needed for currencies to gain widespread acceptance, cryptocurrencies currently still use the on-ramps interacting with the legacy currency systems. While everyone can acquire cryptocurrencies simply by accepting them as payment for their work, goods, or services, a lot of people still choose to use exchanges for purchasing (and selling) cryptocurrencies. These third-party institutions safeguard private keys and facilitate trades. In a way, they benefited from centralization – governments' acceptance enabled entrepreneurship and investor confidence. Long term, exchanges, especially centralized ones, are not needed at all. Fully decentralized exchanges already exist (not only crypto-to-crypto, but fiat-to-crypto as well), for example Bisq. Markets are not constant – the only constant is fluctuation and change. Market participants must therefore also adapt. While several years ago, the most popular cryptocurrency to be used in Darknet markets has been Bitcoin, while recently Monero has become the currency of choice on the Darknet, as it has much better anonymity / privacy features than Bitcoin. The ability to adapt should not be equated to being easily changeable. Sometimes, the ability of individuals or species to remain unchanged and uninfluenced by outside factors are actually the best adapted to the environment, especially if the environment, and the influencing factors, are harmful. Recently there has been an attack planned to be performed against Bitcoin, named SegWit2x (not to be confused with SegWit). Several large companies using Bitcoin, and the majority of miners, have tried to hijack the development of Bitcoin, to give it to their own corporate-backed developers. The whole Bitcoin community fought together to prevent this from happening, and in the end, they emerged victorious – the attack was canceled a few weeks before its supposed date. This is similar to what happens in nature, when the whole biotope reacts to and defends itself from a foreign invader, especially if it threatens to destroy the whole habitat. This is similar to a human organism reacting to and defending itself from a virus. There are several scenarios of how cryptocurrencies might evolve in the future. One possible way is for one or several of the largest cryptocurrencies to survive, while all others become obsolete. This is akin to situations in nature, where one or several species become dominant and extinguish other competing species. This can happen even without specifically trying to eradicate another species, an example of which is how homo sapiens wiped out neanderthals by spreading diseases which infected the Neanderthals and sped up their annihilation. Blockchain technology is at an evolutionary juncture. Will the future be dominated by permissioned or permission-less blockchain technology, or could the two coexist? Darwinian history has shown that, competing and analogous species tend to coexist for extended periods of time, until there is a divergence, creating separate species, sometimes ones that are vastly different or sometimes one obliterating the other. The future of blockchain may be a social experiment for the betterment of humanity. These solutions could be either benevolent, or malevolent, or both. As the world becomes more polarized and populism ascends, nation states and countries might choose individual interests and self-preservation. Private and consensus blockchains might be given exclusive legitimacy. These blockchains’ efficiency benefits could be exploited but their permissioned qualities that are inherently centralized and hierarchical, where monopolistic and oligopolistic tendencies thrive, will be promoted. Russia might issue its own state cryptocurrency. China, in theory, has heavily regulated its domestic cryptocurrency space, but in practice, it still wants to utilize the benefits of the technology, albeit within the sphere of China’s control and centralized infrastructure. Nation states and countries if they provide the infrastructure that solves the “last mile issue”, could permit blockchain technology to evolve, but it would be in a permissioned ecosystem, that will be highly censored and nationalistic. Another possibility is for thousands of cryptocurrencies to continue to exist, in an interconnected and inter-operable way (cryptocurrencies are already very easily inter-operable), for example using some sort of meta-protocol to easily move between cryptocurrencies. Such technology already exists and is called Atomic Swaps (although for it to be able to be used both cryptocurrencies must support the Lightning Network, so as a prerequisite for that they both need SegWit or another type of transaction malleability fix integrated). This is similar to how in nature different species develop equilibrium and symbiotic inter-species relationships, helping each other to find food, shelter, or otherwise improving each other’s odds of survival. What is clear, regardless of how the cryptocurrency and blockchain landscape evolves, blockchain technology will be used more and more widely in the future, as it offers huge benefits for companies, such as cost reduction, increased traceability, disintermediation, censorship resistance, data immutability, and other. New cryptocurrencies will continue being created and will keep trying to improve on various aspects of cryptocurrencies and Blockchain technology. However, there might soon come a time where new methods of such software evolving will be possible. One of the most likely cases of where/how it might happen is ransomware. Ransomware is a computer software which locks (encrypts) files on a user’s computer without their consent, and then requests a ransom to be paid in cryptocurrency to unlock the files. Such software also tries to spread itself to other computers using various methods, such as emailing itself to all contacts in the original user’s contact book, trying to look for network vulnerabilities to be able to spread to other computers connected to the same network etc. While at the moment such software is created by some particular developer or group of developers, and spreads without making any random changes in itself, it might be possible to develop ransomware which would make random changes in its code before spreading, therefore emulating biological evolution. Another method would be to create modular ransomware software which would function completely autonomously, and which would use the money collected from ransoms to hire programmers to improve it, as well as purchase hosting, VPN access, or any other services which might improve its chance to collect more ransoms. If it was modular, any improvement made by a particular programmer could be made in such a way that the programmer who codes the particular change would receive some part of the ransom money as well, thus incentivizing programmers to work on such software. While this method would be a little bit different from the biological evolution than the aforementioned method of random changes, it would still be closer to biological evolution than the current traditional methods of software development. If we ignore the current limitations of blockchain technology, the future might look even more promising than described above. Security of the Internet-of-Things is an issue. In the world of the smart city, with many IoT devices transmitting information, security will be of utmost importance. Technology has been evolving rapidly, but security has lagged. If IoT devices malfunction or are sabotaged – the results can be fatal. Self-flying airplanes crashing, mistakes during automated surgery, lift bridges opening at the wrong time, etc. It is predicted that the blockchain can resolve IoT’s security issues. As one potential solution, IoT devices could be embedded with Plantoids – a Blockchain-Based Artificial Life. Plantoids are autonomous entities which are completely independent and self-sufficient. An ecosystem designed for spontaneous Darwinian-like evolution. The non-visible part of a Plantoid is a DAO – a Distributed Autonomous Organization with a set of smart contracts that manage the Plantoid’s life cycle and reproduction. Environment has a huge impact in Darwinian-like evolution. Some male insects elicit dominance in their environment and assure the propagation of their genes. For example, bees and fruit flies influence the behavior and physiology of their female mates, when they inject semen into them. In the case of the female fruit fly, after she is impregnated, her rate of egg laying increases, her receptivity to mating with other fruit fly’s decreases, and her life span shortens. She also stores the male fruit fly’s sperm, thus guaranteeing future continuance of his genes. Darwin natural selection - survival of the fittest is at play in these insects’ mating ritual, ultimately controlling the fertility of unwanted insects. Plantoid entities in IoT devices are in many ways like insects; the dominant and most effective and efficient iterations will be the preferred choices to be embedded (impregnated) into IoT devices. Thus, these Plantoids, like those lucky bees and fruit flies, will propagate. Lesser Plantoids will be discarded, become extinct. IoT devices will need to navigate very hostile and fluid environments. Plantoid type smart contracts embedded in these devices would need to recalibrate and recreate themselves on the fly. A smart city of the future will not be smart, if its IoT devices continuously collide with each other, or even worse, crash into you. It remains to be seen which cryptocurrencies will fuel these smart contracts. But in Darwinian-like evolution, the one that facilitates the adaption of this technology wins. A cryptocurrency that is used in billions of IoT devices wields enormous influence. Evolution of cryptocurrencies and Blockchain technology has a lot of parallels with the natural world, and in many situations behaves and responds in patterns reminiscent to those seen in nature. As Blockchain technology is based on programming code and can therefore incorporate other innovations made in information technologies such as artificial intelligence, in the future blockchain technology will most likely follow the laws of natural selection even more closely than it does now and can perhaps even be a part of what we would call a “self-aware” or at least “fully-autonomous” artificial intelligence. We can see digital currencies to be the only form in which a computer can charge humans for their work. We would like to extend this work further to develop a holistic theory of evolution for crypto currencies keeping in mind Adam Smith’s invisible hand and build a framework for blockchain to analyze, monitor and enhance the future evolutionary changes in this space. I’ve recently published a book — Introduction to Blockchain with Case Studies and it’s available from Amazon worldwide, Gufhtugu Publishers in Pakistan and here is my Urdu Book (بٹ کوائن، بلاک چین اور کرپٹو کرنسی) on the subject as well. I tweet @ZeeshanUsmani