Wild Systems

Here’s how the Dutch are embracing blockchain in the polder

Smiling broadly and rattling with enthusiasm, the 33-year-old Rylana Doesburg shows off a QR-code on her phone: an angular pattern of black and white squares. “Thanks to this picture, last month I was able to buy rompers, a winter coat, and Christmas presents for my daughter.” For three months this single mother from Zuidhorn, the Netherlands, has made use of the “child package” from the municipality.

It’s one of the many funds from which Doesburg can draw, though admin-wise, this is the simplest. As soon as anything about her income changes, all her other allowances require her to dive into the paperwork to see whether she’s suddenly receiving too much or too little. “A few weeks ago I had some work in a factory nearby, but I’ve already lost the job,” she sighs. There was no more work. “Now I have to figure out all over again what I’m entitled to and fill in all the forms again.” Doesburg is grateful for the subsidies that the Netherlands provides for people in financial need – but she is also afraid of becoming lost in the jungle of regulations as soon as she makes any misstep. “If I make one mistake, there’s a chance I’ll have to pay everything back.”

The bright spot in that mountain of paperwork is the QR code on her phone. Scanning the image at one of twelve associated shops in Zuidhorn allows her to buy things for her three-year-old daughter. Each time such a scan occurs, an anonymized command is sent to a blockchain database which instantly checks whether all the conditions are fulfilled: does she still have enough credit? Is the shop recognized? By an agreement, “ethers” (cryptocoins) are transferred from the municipal treasury to the merchant, a transaction that is instantly converted into Euros via a special bank.

“Before, I had a lot of hassle with government coupons. Now the money is in my bank within a day,” says a bicycle-maker who has sold three children’s bikes to impoverished customers since the introduction of the new system.

Doesburg and the bicycle-maker don’t really know what the blockchain is, nor that there are “ethers” involved. Nevertheless, the system runs on the innovative technology that some are welcoming as “the greatest information revolution since the internet”.

A system controlled by the masses

The blockchain is attracting worldwide attention. In Radical Technologies, urban planner and designer Adam Greenfield describes it as one of the first contemporary technologies so radically different that intelligent people struggle to comprehend it. For those who want to try, a short explanation: the blockchain is an administration controlled by the masses. Nobody owns it, and a network of interlinked computers constitutes the currency algorithmically.

That has big advantages. Right now, people exchange data online by sending each other copies. This article was written on a laptop, then emailed to the editor-in-chief, and after that sent to the editing team. These were all copies of the original. That works great, but for more complicated data exchanges, it can become outright clumsy. For instance, transferring €100 involves making sure that the receiver gets the money, and the sender no longer owns it. If that €100 continues to exist in more than one account, it’s an error; if it’s not an error, we call it fraud.

Right now banks, notaries, governments or other middlemen are responsible for this kind of control. The blockchain promises to sideline them. Not a central authority, but the collective computer power of the user base, checks everything is accounted for on the blockchain. Transferring ownership to someone else via the blockchain involves sending an order into the system: These orders end up in so-called “blocks”. Every ten minutes a network of computers checks those blocks and, once approved, they are added to the chain. From that moment on, the order is irreversible. In this way, the blockchain creates a long chain whereby perfect strangers can transfer ownership without recourse to a third party. “The blockchain makes trust available in digital form,” as the Ministry of Economics neatly summarizes it.

Not only in Zuidhorn does that stir up the imagination. Dutch innovators are heavily invested in this development. The Dutch Blockchain Coalition brings together government, business, and academic figures to research the possibilities of the blockchain. Besides that, under the name Blockchain Pilots, a hip platform launched by the Dutch government, thirty experiments in various municipalities and ministries are underway. The Association of Dutch Municipalities (VNG) has already participated in the pilot scheme for a year and a half.

“What I see here, I have never seen anywhere else in the world. The Netherlands is further on than famed blockchain-hubs like Dubai and Singapore,” says Vinay Gupta, working on blockchain app Ethereum, which allows users to create binding contracts without the intercession of a third party. He made the statement in the Ridderzaal, where a large blockchain conference took place last September. Dutch minister of foreign affairs Stef Blok made an appearance, and Prince Constantijn opened the event. According to the prince, promising technologies coexist in the startup environment with bubbles, hype, and mistakes. “But ultimately you’re left with the real gems: the new Googles and Amazons.”

On the digital map

A tour of the Dutch municipalities experimenting with the blockchain teaches you that they’re pretty much all still in the “conceptual phase” or “still brainstorming”. Anybody who really wants to see how the blockchain can be put to work, so they say, should visit the rural municipality of Zuidhorn, under the smoke of Groningen. “Barely a year ago we also wanted to ‘do something with the blockchain’”, says Erwin Van der Maesen de Sombreff, the official who proposed the idea. What it should be or what they would be able to do with it, nobody really knew. “What we did know was that it’s coming, and it’s disruptive, especially for the government itself. We could simply wait, or we could embrace it and get a head-start,” says Van der Maesen de Sombreff. That head-start took the form of an intern vacancy for students specialized in technology.

From that point, things progressed quickly. After two students were found and given a budget to work out pilots and participate in an important blockchain competition – which they won – suddenly Zuidhorn found itself on the digital map.

Two months ago it became the first municipality to decentralize a serious governmental welfare role, the child packages. Again, that is. After several welfare provisions were passed over from the government to the municipalities, these provisions are now being decentralized to the citizens themselves. What until now was complex, taking the efforts of many civil servants, now takes place between citizens, entrepreneurs and caregivers, with minimal interference from the municipality.

Administators of the chain

In Zuidhorn, control of the child packages is now in large part in the hands of an algorithm, and citizens are themselves the administrators of their own link in the “chain”. And with it, owners of their own data. “The ideal of a sovereign individual is an important incentive for many people in the blockchain movement,” says Maarten Velthuijs, the 24-year-old student who began as an intern but now leads Zuidhorn’s blockchain project. He does it from his own foundation Forus, a contraction of for and us. Here, six predominantly young programmers and consultants work together with a wide array of freelancers. The telephone is always ringing: other municipalities and organizations want blockchain solutions too.

The fact that the small municipality of Zuidhorn wins blockchain competitions, is a symptom of the fact that we’ve embraced the radical ideal of change – so they say at the town hall. Many parties stand in the way, according to Velthuijs: “Rabobank would never develop bitcoin. Why would a bank invent a currency intended to sideline the banks?” Councillor of Economy and Innovation Fred Stol is in strong agreement: “You must be prepared to reconsider your own position. We are seeing the world change quickly and the government is no longer leading the way with these changes. Step by step, we’re all becoming part of the network, instead of looking down on it from an ivory tower.”

Smart contracts

Worldwide, concerns over blockchain applications increase. Nobody disputes the revolutionary power of the decentralizing technology, but some question the intentions of the developers. The United Nations, the European Central Bank and the International Monetary Fund warn, in various reports or by means of spokespeople, against the ideological views which lie hidden in the blockchain’s code. That’s not terribly surprising, since these organizations are themselves under fire from the blockchain movement.

The removal of powerful middlemen, such as the government or banks, is a long-cherished wish of online activists. “Since the arrival of the internet, anarchist ideals have been a part of hacker ethics,” says Tsjalling Swierstra, philosopher of technology based in Maastricht. Notable is that the blockchain movement primarily attracts anarchists of a particular stripe: anarcho-capitalists. Earmarked in academic literature as “cyber-libertarians”, tech-savvy folk who believe that the internet must be a free and unregulated market, guided by individuality and property rights.

“When the first blockchain technologies arose, I recognized immediately the far-right economic ideas of my time on Wall Street. Conspiracy theories about gold and the role of the federal reserve were dominant there,” writes David Golumbia in an email. For years he worked as a software developer in the financial sector. Now he works as a media professor at Virginia Commonwealth University. About the parallels between the right-wing economic views dominating Wall Street and new blockchain applications, he wrote the book The Politics of Bitcoin: Software as Right-Wing Extremism. It reads mainly as a warning for enthusiasts, those caught up in the hype but not on-board with the views in question.

“The blockchain harbors a number of intrinsically right-wing principles such as the attempt to remove ‘the middleman’. Proponents call these extra steps an unnecessary shackle and tedious bureaucracy; I call them legitimate control and regulation.” According to Golumbia, the broad embrace of the blockchain is part of a decades-long struggle to diminish the government. “The danger is that through the quick spread of blockchain technology, the underlying philosophy also spreads, and that philosophy is strongly opposed to democratic measures to address economic inequality.”

As an example he names the blockchain application Ethereum. With this app, people worldwide can make so-called “smart contracts” with each other without obstacles. The agreements are virtual, and are binding because they’re always supported by cryptocurrency that’s part of the system. An example of such a smart contract is a will: when my nephew turns eighteen and I pass away, then a certain amount of ether (internet currency) goes to his account. That works irrespective of national borders and without the help of a notary or the meddling of the government. “These types of contracts between people, without the intervention of others, is the sort of system cyber-libertarians have long sought,” says Golumbia. “It facilitates the free market but sidelines the government and all external controls.”

A free market ideal

When Vice asked Ethereum founder Vitalik Buterin last year who inspired him, he immediately answered with names like Ludwig von Mises, Friedrich Hayek, Milton Friedman, Thomas Sowell, Murray Rothbard and Ayn Rand.

Those names rank highly on blockchain forums and cryptocurrency sites. Von Mises, Rothbard and Hayek seem particularly in vogue. Not insignificant thinkers, but they’re hardly undisputed elsewhere. They’re part of the Austrian Economic School, where at the end of the 19th century and throughout the 20th, neoclassical theories were formulated which later sowed the seeds of what we now call neoliberalism.

According to philosopher of technology Tsjalling Swierstra, there are great similarities between the views of blockchain enthusiasts and those of the Austrian School. Both show a strong belief in cybernetics, the systems theory which describes how biological and mechanical systems function best when constantly nourishing by internal feedback. The many separate components would supposedly function best if they were free from external interventions that could interrupt that process. Call it the scientific undergirding of Adam Smith’s “invisible hand”.

“Hayek was strongly influenced by cybernetics, it connects directly with the core of his defense of the free market: the idea that the state is always stupider because all the spread-out knowledge of a society can’t be centralized,” says Swierstra. The blockchain harbors the same conviction that central management and control will always lose out against a web of individuals pursuing their own needs in front of their computers. “In the philosophy of technology, you have to consider the free market ideal to be the precursor of the blockchain.”

It’s no coincidence that this technology has grown up during years of crisis, says René Penning de Vries, named “IT figurehead” by the Ministry of Economics: “A trust problem has arisen between centralized power and the populace. By giving control over their own data back to people via the blockchain, you can create a very different relationship and restore that trust.” He also sees risks: “This technology originates in a spirited, nerdy environment which is strongly oriented towards libertarianism. Many ministries and businesses a few years ago therefore saw it as a dark cloud above their heads. In the meantime, they’ve also seen the advantages, and it’s our task to research, alongside these authorities, how we can implement this technology in a sound manner in our society.”

The bugbear, according to him, is the monopoly of the Silicon Valley’s big five: Facebook, Apple, Amazon, Microsoft, and Alphabet (parent company of Google). “Right now, they dominate the internet. But if you had asked 25 years ago whether we wanted that, nobody would have said yes. Now we have to ask the same ethical and political questions about the blockchain.”

Redefining the blockchain

Embracing the blockchain necessitates a decrease in government power, Zuidhorn’s councillors affirm. The big question, according to them, is not whether that power shift exists, but in whose hands the power ends up. “If we’re talking about traffic lights, we as government officials remain responsible. And if someone runs a red light, we have to stop them,” says Stol. “But if we’re talking about the foundation or upkeep of a nursing home or a new football field, that’s something you can hand over to regular people.” There is already excitement about what, besides the child package, could run on the blockchain: naturally, other social funds, but also land registration and sustainability loans for solar panels.

Admittedly, says the Christian Democratic Appeal minister beside his political party colleague, these surroundings are ideal for a blockchain experiment. “Neighborly spirit and Christian values ensure that the community are happy to address problems themselves, and they take the initiative in doing so.” The councillors point out through the window, where the end of the village can be seen and long meadows extend towards the next village. “Previously we were led by the ideal of the market; we’ve also leaned heavily on the government. Neither has turned out to be beatific. People here want to work together. Without centralized power.”

In political-philosophical terms: power must return to the commons, to the community. “In a place like Zuidhorn where the population is reasonably homogenous and mutual bonds are strong, it’s easier to do that,” affirms Maïka De Keyzer, researcher studying “the commons” at the University of Antwerp. It’s unique, she says. “History teaches us that the removal of central authority doesn’t automatically lead to power for the collective. A small vanguard or a few individuals often know how to monopolize this power.”

According to her, the blockchain isn’t inherently left-wing or right-wing, but a new tool that assumes the form of the most dominant ideology in our society right now: individualistic free market thinking, she says. “If we want to embed the blockchain within the management of collective property, then we first have to think about that concept more broadly.”

Code is never neutral

The people that embrace new technologies project their own worldviews onto them. The first and most well-known blockchain apps are cryptocurrencies, online currencies citizens can use without reference to official monetary standards. An idea discussed already in 1976, in Friedrich Hayek’s The Denationalization of Money, wherein he set himself against central banks and argued that the state should not have a monopoly on currency. Libertarian thinktanks nowadays happily revert to this 41-year-old argument in their support of new tech initiatives.

The most famous cryptocurrency, bitcoin, does not try to camouflage the values which undergird it. The anonymous inventor – pseudonymously called Satoshi Nakamoto – wrote bluntly in November 2008, a month after publishing the blueprint for his cryptocurrency,  that his invention would be “very attractive for people with a libertarian worldview, if we can just explain it well. But I’m better with code than words.”

A closer look at the code reveals that the currency is programmed to cap at 21 million, which means that just as with gold, the total amount is limited. That isn’t a technological choice. It is simply an economic and ideological decision to protect scarcity. And that connects with the strong sentiment among libertarians that the abolished gold standard – which attached the worth of the dollar to a stock of gold – should return. Despite broad consensus among economists that the abolition of that standard was a good decision, the choices of a small group of right-wing economists prove decisive in how new blockchain apps take shape. The manifesto of the Bitcoin Foundation is sprinkled with critique of our current “fiat money” and contains a paean to the abolished gold standard.

That gold analogy is a constant theme. Bitcoins can be bought, but also mined. A reference to the unearthing of gold. Bitcoin is built so that all transactions in the collective ledger must be checked. This happens via an algorithm and costs a great deal of computer power. Those who provide that computer power get compensation: the chance to mine bitcoins. Just like real gold, the search for bitcoins becomes more and more difficult.

Cyber-activists are grasping back towards a sort of romanticism widespread among American libertarians: a deeply rooted longing for the time when America was an open plain where people could escape the yoke of European monarchies and build their own existence. “The bright side of libertarianism is that it has a very egalitarian style of rhetoric,” says Swierstra. “Everyone has a chance. But we know from history that communities can start out very egalitarian, but without collective mechanisms you very quickly get big power and income disparities. You have to devise collectively binding rules to solve that, but that’s precisely what libertarians don’t want.”

It’s striking that, just as in the real Californian gold rush in the 19th century, there are people who’ve built up a fortune of millions in the first hour, while late comers must hope that they can scrape up what’s left over. The greater your computer’s power, the greater the chance that you “mine” something. In practice this means that a handful of gigantic businesses, as a rule in China, now check almost all the transactions and earn from it. There is no longer any talk of equal chances. Those with money or knowledge dominate the software which in principle was supposed to give users equal influence.

Revolutionary technology

Is blockchain a facilitator of community or of cowboys in a Wild West environment? That discord is characteristic of the way in which political organizations worldwide look doubtfully at the blockchain. It’s revolutionary technology, but many want the tech without the revolution. The solution is frequently to choose for a “private blockchain”. The initially critical UN now use the blockchain to implement emergency food programs in a smarter, more transparent way. They use smart technology in a closed context. In this way, the system and the data remain property of the organization, and they get to determine who can and can’t participate. The blockchain for them is little more than an optimization technology.

Banks, meanwhile, embrace the cryptocurrency wave, enjoying the advantages of blockchain technology while retaining control for themselves. And so the disruptive character distinguishing bitcoin and other alternative currencies is lost. For cyber-libertarians this is a slap in the face. They dread the idea that their libertarian upheaval will be smothered in the cradle; that ultimately governments will keep pushing the buttons, and not a public algorithm.

Councillors Bert Nederveen and Fred Stol at the town hall in Zuidhorn chose consciously –and in contrast to many public bodies – to adopt a public blockchain. “We believe in this technology and so wanted to set up a public blockchain. So that the power really comes to lie with the community.” Of course, it was of decisive importance that the students designing it would do so from a foundation. “Of course we wanted to pay them decently, but also to avoid that money and commercial interests would become the goal,” says Bert Nederveen. “What we’re making here is for the community, and it has to remain that way.”

Behind the door of the office wherein the councillors tell their story, the revelry of an upcoming New Years’ party drifts slowly in. The 150-man town hall concludes each year with a big party, including a quiz, performances, and drinks. It’s only a question of how long that will keep happening here. Step by step, the municipality wants to do away with “the town hall” and start working independently via digital systems.

“From January 1, 2019, our staff will be sitting with laptops in the community centers, to serve the citizen directly,” says Stol. “As equals, and as members of a community. Without hierarchy, without hassle. That suits a community no longer led by a government.”

Cover art by Sheona Turnbull.

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This story was translated for NextNature.net. It was originally written in Dutch for De Groene Amsterdammer, and published on January 10th 2018.

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