Legitimacy and Decentralized Systems


Why are some decentralized systems accepted and widely used while others wither? Why do some “hard forks” succeed while others fail? It all comes down to legitimacy.

Major General Andrew Jackson and his Soldiers claim a victory in the Battle of New Orleans during the War of 1812.

As an undergraduate engineering major, I recall being surprised by the so-called three body problem. In Newtonian mechanics, there are nice closed-form solutions to problems involving the motion of two interacting bodies, given their initial position and velocity. This isn’t true of systems with three or more points. How can adding just one more point to the system make it unsolvable?

N-body systems are chaotic for most initial conditions and their solution involves numerical methods—simulation—rather than nice, undergraduate-level math. In other words, it’s messy. Humans like simple solutions.

Like the n-body problem, decentralized systems are chaotic and messy. Humans aren’t good at reasoning about emergent behavior from the coordinated, yet autonomous, behavior of interacting agents. We build bureaucracies and enact laws to try to make chaotic systems legible. The internet was our first, large-scale technical system where decentralization and governance clashed. I remember people in the 90’s asking “Who’s in charge of the internet?”

In The Most Important Scarce Resource is Legitimacy, Vitalik Buterin, the creator of Ethereum, discusses why legitimacy is crucial for the success of any decentralized endeavor. He says:

[T]he Bitcoin and Ethereum ecosystems are capable of summoning up billions of dollars of capital, but have strange and hard-to-understand restrictions on where that capital can go.
From The Most Important Scarce Resource is Legitimacy
Referenced 2021-04-26T14:46:43-0600

These “strange and hard to understand restrictions” are rooted in legitimacy. Decentralized systems must be considered legitimate in order to thrive. That legitimacy is tied to how well the systems and people enabling them, like programmers and miners, are seen to be following “the rules” both written and unwritten. Legitimacy isn’t a technical issue, but a social one.

Wikipedia defines legitimacy as

the right and acceptance of an authority, usually a governing law or a regime.

While this is most often applied to governments, I think we can rightly pose legitimacy questions for technical systems, especially those that have large impacts on people and society.

With respect to legitimacy, Philip Bobbit says:

The defining characteristic … of a constitutional order is its basis for legitimacy. The constitutional order of the industrial nation state, within which we currently live, promised: give us power and we will improve the material well-being of the nation.

In other words, legitimacy comes from the constitutional order: the structure of the governance and its explicit and implicit promises. People grant legitimacy to constitutional orders that meet their expectations by surrendering part of their sovereignty to them. In the quote from Vilaik above, the "strange and hard to understand restrictions" are promises that members of the Bitcoin or Ethreum ecosystems believe those constitutional orders have made. And if they're broken, the legitimacy of those system is threatened.

Talking about “legitimacy” and “constitutional orders” for decentralized systems like Bitcoin, Ethereum, or your favorite NFT might feel strange, but I believe these are critical tools for understanding why some thrive and others wither. Or why some hard forks succeed and others don't.

In Bobbitt’s theory of constitutional orders, transitions from one constitutional order to a new one always requires war. While people seeking legitimacy for one decentralized system or another might not use tanks or missiles, a hard fork is essentially just that—a war fought to cause the transition from one constitutional order to another because of a question of legitimacy. For example, Vitalik describes how the Steem community did a hard fork to create Hive, leaving Steem’s founder (and his tokens) behind because the constitutional order he represented lost its legitimacy because people believed it could no longer keep its promises.

So when you hear someone talking about a decentralized system and starting sentences with phrases like “Somebody should…” or “Why do we let them…” or “Who’s in charge of…”, beware. Unlike most of the easy to understand systems we’re familiar with, decentralized systems are heterarchical, not hierarchical. Thus the means of their control is political, not authoritarian. These systems are not allowed to exist—they're called "permissionless" for a reason. They simply are, by virtue of their legitimacy in the eyes of people who use and support them.

This doesn’t mean decentralized systems are unassailable, but changing them is slower and less sure than most people would like. When you “know” the right way to do something, you want a boss who can dictate the change. Changing decentralized systems is a political process that sometimes requires war. As Clausewitz said “War is the continuation of politics by other means.”

There are no closed-form solutions to the n-body problems represented by decentralized systems. They are messy and chaotic. I’m not sure people will ever get more comfortable with decentralization or understand it well enough to reason about it carefully. But one thing is for sure: decentralized systems don’t care. They simply are.

A version of this article was previously published in Technometria Newsletter, Issue #6, April 13, 2021.

Photo Credit: Major General Andrew Jackson and his Soldiers claim a victory in the Battle of New Orleans during the War of 1812. from Georgia National Guard (CC BY 2.0)

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Last modified: Wed Apr 28 13:41:42 2021.