Cryptocurrency has faced many problems on its rise to popularity. While it offers a new way of transacting and helps to ensure privacy, many security issues and concerns of hacking have come to life. In addition, critics have condemned cryptocurrencies, specifically Bitcoin, for its lack of federal regulation and tendency to fluctuate in value. Just this week, a new problem came to light, the problem of free-riders.
According to a new paper shared with CoinDesk on Monday, free-riders are people or businesses that profit from the “under-provision of public goods.” The paper, which is written by Ethereum founder and crypto genius Vitalik Buterin in collaboration with Microsoft Researcher Glen Weyl and Zoe Hitzig, a Ph.D. candidate in Economics at Harvard University, the issue is plaguing cryptocurrency more and more as more people take advantage of these public goods. The three authors believe that this system of benefits does not properly incentivize funding for blockchain projects. Luckily, this group has offered a solution.
The solution, or more accurately the method, which is called “Liberal Radicalism: Formal Rules for a Society Neutral among Communities”, offers a code to alleviate the problem. Their methods aim to allow groups which are working on blockchain projects to allocate funds for the continued maintenance of goods and services and avoid the concern of free-riders. The concept behind the program is relatively simple but is much more complex to apply. To keep it simple, the method works by increasing the funding of projects as they achieve more participants. Thus, as more participants join, funding increases, which also shows an increased interest in the problem at hand.
In more complex wording, the paper describes the method as follows. “Individuals make public goods’ contributions to projects of value to them. The amount received by the project is (proportional to) the square of the sum of the square roots of contributions received.”
The paper is viewed as a step in the right direction for the authors and others in the cryptocurrency community, but it also contributes to other views. In particular, the paper continues collaborations between Buterin and Weyl, who through various other blogs have attempted to promote their shared interest best described as an interest to harness technology to decentralize power and authority. To this sense, Hitzig believes that “this set of ideas goes from the ground up — we offer solutions to localized, real-world problems, and then demonstrate how these proposals fit into a coherent political philosophy that solves important aspects of the crisis of modern liberalism.”
In the mind of Hitzig and his fellow collaborator, modern liberalism is at a huge crisis point due to the ineffective relationship between capitalism and democracy. In addition to being an economist, Hitzig is a poet. In relation to the crisis, he also said: “These tensions are increasingly manifesting in discontent with existing liberal democratic systems and the rise of authoritarian populist alternatives on both the left and right.” Both collaborators are hoping that their paper will set forth ideas to solve these problems, in addition to the public goods issue previously mentioned, while also creating a more collaborative, cooperative, and decentralized society.