...crypto cities broadly are an idea whose time has come.

-- Vitalik Buterin

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It’s unclear how any decentralized system could work in the context of governance. By definition a government based on laws must have some central control, at least one court capable of issuing final and binding orders, at the very least to resolve disputes of interpretation. This does not seem reconcilable with any ’blockchain’ system I’ve heard of. Since transactions would have to be mutable anytime that such a court issues orders that require mutability, or if a later court decision overturned an earlier one.

Perhaps I’m not understanding the proposal but although it seems to offer solutions better than the preexisting to certain coordination problems in local governments, those benefits would only last until the first contrary court order is issued. If the proposal is really meant to replace the judicial system itself, that would be quite astonishing.

You can definitely have mutable state on chain. I think you're confusing the immutable nature of the transaction history with the mutable latest chain state.

But what if a court issues an order to alter the transaction history? (Or some other change that conflicts with any feature that requires consistency over time of said blockchain) In the US that surely is within the power of the supreme court as practically everything is, and probably the state supreme courts too.

That would be outside the power of an on-chain court (generally speaking), but I don't see why that's a big deal. You can give the court the authority to make new transactions, and I don't really see any case where it's imperative that the transaction history be altered rather than a new rollback transaction being issued.

Since in the US the top court is prohibited from being an ‘on chain court’ by its constitution, and will not recognize judicial authority in any lower court that disobeys it, and likewise for every other state and country I know of… why would we care about the decisions of an ‘on chain court’? 

Btw I’m not saying that I can see a case why that ever would be necessary but then again the folks whose opinions are considered as final judgement can make surprising decisions.

There's broadly 3 approaches I guess

  1. Ensure the on-chain system works even though you are disobeying the US court. a) Native assets on blockchains, privacy tech etc works like this, a real world court will find it very hard to reverse a blockchain because its proponents will want to run the fork they deem correct even if it is illegal. An excessive show of force can change this, but many crypto users are idealistic and will not give up. b) Real world assets and interactions that are tokenised can also work if the issuers are outside jurisdiction. For instance with Tether. Or an price oracle across 30 countries resolving a derivatives contract . Blockchains are great at regulatory arbitrage. c) There's tight coupling between individual transactions on the blockchain and everything else on the blockchain. You can't specifically reverse one transaction you deem illegal, you have to revert the entire blockchain (fork) and then threaten anyone who does not respect your fork.
  2. Create a blockchain that explicitly respects US courts as the final arbiter on its content. I think there's value in having this built.
  3. Have hybrid agreements were certain parts follow the law, and certain parts are delegated to the on-chain system and US courts find this acceptable. For instance check out MakerDAO's attempt at financing real world businesses. I'm guessing Buterin wants this.

It does seem that option 3 is what is being proposed. I agree that if some solution could be designed to make the whole idea acceptable to the legal authorities, then the further implementation seems entirely credible from a technical view. Though I really am not sure in that case why the additional complexity of an ‘on chain system’ is necessary, a centralized database would do everything proposed. And any further benefits would be negated by the central control and trust required for such ‘on chain systems’ to be realized. e.g. someone dissatisfied with any transaction could always bypass whatever technical implementation by going to the legal authorities directly, or appeal from the ‘on chain courts’ to the superior authority, etc.

You're right, on-chain being complexity is down-side. As someone who was in the crypto space, one upside I've seen is having a standard for data and computations that everybody agrees on and can interact with each other using. And sure, the exact same thing could run on a centralised database except no such thing exists yet - one company with a databse that allows literally anyone else including other businesses to create assets or contracts on it with low barrier to entry. So in practice each business creates their own db. I guess the differences might be neutrality and the fact that ethereum by itself is not maximising for profit, so businesses can feel more comfortable deploying their stuff on ethereum versus someone else's db.

Having a standard sign-in is also good UX, versus having 20 usernames and passwords in 20 different databases. Google / Facebook OAuth achieve that, but then crypto users are exactly the type who would not want a Google OAuth to provide sign-in for the entire interenet (and there are somewhat legit reasons for that).

After further reflection, these are pretty good reasons for preferring crypto to a central database, though I think in practice the costs of a central authority managing a database would have to be really high for serious people to prefer the on-chain solution. Which brings us to cost, the closest real world example I can think of to the proposal is the Reedy Creek Improvement District and even that is actually not quite as independent. Considering that it took nearly all the influence of a large company in 1966 to secure, and it was a close call at that, how do you imagine something similar could be secured in the present day, when the competition for land and access to real estate information is so much greater? Even the entire value of Bitcoin+Ethereum couldn’t buy that much contiguous land in any desirable locale in the US, without eminent domain authority. Let alone the special legal regimes. The alternative of converting any existing city in a developed country would be a massive political fight, probably the biggest since the 60s.

I don't personally know what it would take to get real estate on-chain, and I'm not too hopeful. Part of the reason why I took a break from crypto in the first place.

But I'd assume you would need local politicians in favour, for starters. I don't think national-level laws would need to be changed for this system to work, given that it's a hybrid system. Eminent domain authority could continue to exist. (I don't know anything about US law btw, just did a google search on what it is.)

Also the land doesn't need to be bought, just transferred from one system to another with the owner remaining the same. Either both forms of ownership of land (blockchain, legal) will co-exist in the same city, or the city government will nudge / coerce / automigrate people to migrate their land over to the new system.

In the end I think your last paragraph explains everything. The proposal presumes that a parallel legal system governing property rights would even be allowed in the first place. Considering that in every nation I can think of property rights are guaranteed by a constitution, or a crown or something else equally difficult to change, this seems to be about as likely as any other activist proposal getting a supermajority to change the constitution. In practice, if crypto property rights were ever to come about, it would have to be in either a city state like Singapore or Monaco, or in a watered down form where the ‘on chain system’ is a bit of sprinkling to make the city seem high tech and futuristic. Your right to not be too hopeful about on chain real estate. It seems to be better to start with some smaller, manageable, nexus of improvements.

It seems to be better to start with some smaller, manageable, nexus of improvements.

Agreed.

In practice, if crypto property rights were ever to come about, it would have to be in either a city state like Singapore or Monaco, or in a watered down form where the ‘on chain system’ is a bit of sprinkling to make the city seem high tech and futuristic.

Maybe there is non-zero benefit to on-chain real estate, it will depend a lot on implementation I think. On-chain dollars (USDC) has allowed people to do crypto loans and trading (DeFi). Perhaps on-chain real estate will allow people to borrow money against their land in 15 seconds too. Or provide insurance to others or hedge against their future rent costs.

Finance is pretty regulated today, this keeps average people away from both the risks and the rewards of the system. When you bypass that regulation there is potential for both good and harm.

Vitalik notes the main benefit of on-chain real estate as just transparency, in the article. Seems small but non-zero too.

P.S. Just remembered - if the origin story of on-chain real estate turns out similar to that of USDC, you don't need too much explicit support from polticians - just that they're not strongly against it.

Good points. Also it may be possible to build such a city on a remote island or in the middle of a desert. Jurisdictions may even compete for the privilege if $X billions of annual tax dollars could be guaranteed. If all the crypto billionaires pooled together to build a small city that may be enough capital.