Blockchain for Social Growth

The Ressolid project has been concocted over Summer and Fall 2017 - one year ago. It has been presented in a "Start-Up Weekend" in late November 2017 in Luxembourg by a team of 4 people.

While the team has, aside from the project originator, completely morphed, the idea lives. In one phrase, Ressolid aims to leverage blockchain technology and the "moat" provided by the GDPR in order to increase the strength and the number of social bonds. For a gentle introduction, see this post from a few months ago.

This post presents the project's "Greenpaper" in its version from November 2017 (geared at the "Start-Up Weekend").

Elevator pitch

When two persons meet, whether they set out to do great things together or pass each other by depends on trust: “Can I trust this guy? Is he really able to do what he claims to?” It would help if a reputable source could vouch for him and his past achievements.

Imagine the other person could instantly give you access to only those records from his personal data that would back his words with facts as recorded in a tamper-proof database. You’d be able to decide whether he is indeed as great a coder or interior decorator as he claims to be and as you are seeking.

Now imagine the same thing happening every time two persons meet and decide whether to shake hands or mistrust each other. The number of new interactions that might not have happened otherwise!

The Ressolid project aims to harness blockchain technology and the new “Data Protection Regulation” in order to offer its members the tools for turning their personal data into assets – give everyone their personal oil field or gold mine.

General Overview

This paper is part of a set of documents describing the Ressolid project and its expected outcome, the Ressolid organization.

The Problem

When looking back a decade, the pace at which technology advances is dizzying. As a consequence, the humankind has, on aggregate, never had it better. We live longer, healthier lives than at any other time in history; the number of people living in absolute poverty around the world has never been lower and the number of victims of war and violence is also at its lowest

Yet while we keep thinking about economic growth, our societies are beset by confusion and turmoil. Globalization led to shifting patterns of employment, an increase in inequality and was accompanied by a relative increase in the importance of money itself.

Money, by flowing ever more freely among a huge global trading population, offers access to an ever-increasing range of goods, services and life-experiences. Think that the numbers of the global trading population were boosted in recent times by the rise of China. Consequently, the perception that happiness depends on possessing more money becomes ever more prevalent and amplifies the discontent generated by unequal money distribution.

Technology, too has been corroding existing social bonds. The new, globalized world has swept away the tight-knit communities of the past and enticed us to reach out to all and sundry. With “social networks” such as Facebook and Twitter we can now engage in shallow interactions with on-line avatars of far-away people that we have never met in the past and will possibly never meet in the future. These "social media" interactions are sometimes destructive: the numerous reported cases of online mobbing are testimony to the fact that “on the Internet, nobody knows you are a dog” (or a torturer, for that matter)

It might sound wonderful until one realizes that due to limited time and a limited ability to connect with others, we stretched thin our capacity to nurture and maintain meaningful relationships with people from our vicinity. It has been noticed that the increased “lubrication” offered by social media has acted as a giant social centrifuge, allowing people to congregate with like-minded peers while ignoring their neighbours if they happened to hold a different view.

This disconnect begs some questions: are we living the happy lives that the overall prosperity and the advances in technology should have enabled? And how to manage the trade-off between meaningful, fulfilling social interactions with people living nearby and the opportunity, which technology offers, to reach out and connect to people far away?

The Vision

Enter the Ressolid project aiming to create a new type of organization in order to foster social growth. As will be explained farther, this type of organization has only recently become possible thanks to recent advances in technology and regulation.
Our analysis led us to a number of fundamental assumptions:

1. The strength, prosperity and overall degree of happiness of a society depend on the number of successful, mutually satisfactory relationships and interactions between its members .
2. Such interactions in turn depend on the general level of trust between actors (individuals and institutions).
3. The concept of money [1], as store of value and medium of exchange, is essential yet has to be carefully implemented; the benefits it brings are non-linear and may turn into drawbacks.
4. Novel technology can and should be put to use with the explicit objective of increasing happiness and prosperity in our society.

The Ressolid organization will augment the number and quality of interactions between social actors, in its geographical areas, by increasing the general level of trust among its members. Trust is our main concept, core value and also the cement of society [2]. Moreover, as Kiyotaki and Moore observe, “[…] given that time’s arrow can’t fly backwards, in economic relationships the question of trust is critical” [1]. While admittedly hard to define, it is generally accepted that trust involves a course of action that leaves one vulnerable to abuse or exploitation in the expectation that the other party will not take advantage of this [11].

Trust is built upon two types of behaviour which it also reinforces through a positive feedback loop:

• Predictable, stable behaviour and
• Cooperative behaviour [2].

Predicting another actor’s behaviour in turn depends on interpreting trustworthy data, including data about his or her past behaviour. Consequently, trust is built upon reliable data. In this sense, Ressolid concurs that “data is the new oil”.

Therefore, the Ressolid team believes that enabling people to store, manage, and have their own personal data certified will allow them to use it in order to create new teams, engage in new ventures with former strangers , and generally discover that there are so many more ways to interact with people living next to us.

Through such interactions, the Ressolid organization will enable:

1. New social bonds which will be created among “neighbours” who were previously strangers to one another, while existing bonds will be reinforced.
2. New productive efforts and ventures which will generate additional economic value (thus increasing prosperity).

Throughout this paper, numerous references will be made and comparisons drawn to present or past ventures. The reader will inevitably ask herself “if something similar exists already, why a new project?” or “if something similar has been tried in the past and failed, why would it succeed now?” Because gaining trust is central to the Ressolid endeavour, we’ll try to answer all such questions that may arise with honesty.

We are convinced that the set of ideas that have been selected and combined to undergird the socio-economic system driving the Ressolid organization will contribute greatly to Ressolid’s value proposition, even though by definition that is hard to prove (as so often, "the proof of the pudding is in the eating"). In addition, the project also benefits from two competitive advantages over many past and present enterprises:
i. The EU General Data Protection Regulation (GDPR)
ii. The blockchain technology

The GDPR is a major game-changer for all business actors all over the world, and all the more so for data-centric businesses. It forces companies to rethink the way they handle personal data and it raises a fundamental challenge especially to the Internet giants such as Google, Amazon, Facebook, etc. whose actual “product” is the data of their individual users. Their business model is based on extracting as much value for themselves as possible from that currently-free data. Whereas the incumbents will be forced to profoundly rethink their business model, the Ressolid Information System will be built from the ground up as one of the first systems of a new era, where people are masters of their personal data.

In turn that has only recently become realistic, thanks to the impressive advances of the blockchain technology. The most ambitious social project since long is made possible by features like:

1. Tamper-resistance.
2. Strong time-orientation.
3. Resilience through its distributed nature, and
4. Easiness to selectively certify and expose past certified data.

**We believe the blockchain technology is perfectly suited as a substrate for growing trust. **

Currently though, many blockchain ventures are imbued by a “revolutionary”, quasi-anarchist ethos that responds to the tragic erosion of trust in institutions deplored above. Many public blockchains are backed by an ideology of mistrust and suspicion toward traditionally “trusted” institutions, and direct their efforts to circumvent and replace them. As one of the original contributors to Bitcoin wrote: “In security contexts - and especially in cryptography - Trusted is an epithet. In fact it's almost an obscenity. Trusted means something or someone has the power to break your security by acting in bad faith.” [3]

We believe that, while the blockchain technology cannot transcend human fallibility, it can still bring a valuable contribution when complementing millennia of human law and custom [4]. Existing institutional structures at various levels of society can be made more effective and efficient through the software-mediated contribution of volunteers. Therefore, the Ressolid organization celebrates and embraces timeless social mechanics for trust-building and present day institutions and sets out to work within their framework.

Products and Services

The Ressolid organization will engage with individuals through an information system, with user applications on both desktop and mobile devices. These user applications will be designed to be as user-friendly as possible and integrate the latest advances in UI/UX technologies such as voice control and biometric authentication. The back-end system will use a permissioned blockchain platform for its network-layer, will combine blockchain with other storage technologies for its data-tier and will integrate on-chain smart-contract functionality with off-chain processing using the latest AI, machine learning and semantic technologies for the logic-tier.

Through its system, Ressolid will:
a) Act as a portable individual secure data-wallet.
b) Allow users to request the certification of selected personal data by the Ressolid organization, peers or certifying authorities.
c) Enable users to initiate new social interactions spontaneously , as the result of prior result-oriented or dimensional searches (with permission and while protecting other members' privacy), or thanks to suggestions or recommendations of the Ressolid AI capability
d) If all involved parties agree to interact, Ressolid will facilitate the transaction by taking whatever role is necessary: trusted third party, mediator, record-keeper, etc.

A more elaborate description of the platform architecture will be provided in an upcoming whitepaper. It should be noted that Ressolid will not have to invent everything as several technological initiatives have already been announced and contributed to the open source community, around the concept of “sovereign identity”. One of the most promising is Hyperledger Indy backed by the Sovrin Foundation.

The first set of added-value services proposed by the network will include secure data storage, classification and easy retrieval as well as data certification. The Ressolid model will manage a granular data-reliability model going from “self-certified data” through weak certification by acquaintances , internal Ressolid-backed certification and finally official certification through partnerships with public institutions and business organisations.

Ressolid will support security certificates issued by official PKI schemes (centralized trust model) but also spawn and support a complementary, decentralized “web of trust” similar to the PGP and OpenPGP schemes. Their philosophy based on extending trust at interpersonal level is totally aligned with the spirit of Ressolid.

Business Model

Ressolid proposes a novel business model by extending and combining concepts of “virtual communities” and “local currencies” . The Ressolid network will transfer value to its backers through two main channels: the provision of valuable services, life experiences and goods, and through the untrammelled convertibility of its internal currency, the ressol (RSL).

Ressolid aims to manage its internal money supply with as much application as a sovereign nation. Consequently, the RSL will both enable value creation and represent a store of this value like a national currency. In purely economic and monetary terms, the Ressolid community will interact with existing communities as a “virtual country” with a fluctuating currency whose exchange parity with existing currencies will depend on both financial and trade flows as well as the economic added value newly generated by the community.

The main challenge of this business model is building the “network effect”. Here, blockchain-based systems enjoy a structural advantage: the incentive provided by the internal currency [5]. In order to size up what “success” could mean, one only needs to look at Bitcoin or any of the first ten cryptocurrencies by market capitalization. As of October 2017, Bitcoin has attracted more than $100Bln (one hundred billion dollars) of investment but even the tenth (NEO) is worth more than $1Bln while providing no obvious use aside from that of a speculative financial instrument .

In addition, a community bringing people together with the goal of strengthening the social fabric benefits from psychological rewards associated with displaying social behaviour [6].

Market

Because any new venture needs to start somewhere, Ressolid has chosen Luxembourg as its first home, for a number of reasons:
a) Luxembourg is one of the most diverse and cosmopolitan societies in the world, with an extremely diverse population growing rapidly and a high population turn-over. Where families of 10 different origins and mother tongues live next to each other in a 10-flat building, we reckon the social potential of Ressolid can make a big difference.
b) Thanks to its past bank-secrecy laws, Luxembourg is one the best-placed countries when it comes to implementing the GDPR. To illustrate, several Luxembourg banks have already long ago performed the cartography of their client data distribution and have made the necessary changes in their internal organizations in order to ensure personal data protection. As a consequence, Ressolid will seek to enter into partnerships with Luxembourg banks in order to leverage existing trust relationships.
c) Luxembourg is one of the most “digitally aware” and “financially savvy” countries in Europe, sporting in particular:

1. A well-spread national PKI scheme which has considerably lowered the barrier for end-users to working with security certificates.
2. A not-for-profit, government endorsed infrastructure for deploying permissioned blockchain-based systems, called Infrachain.
3. The first nationally licensed cryptocurrency exchange, Bitstamp, which recently gained the agreement of the national regulator, the “Commission de Surveillance du Secteur Financier” (CSSF).
   d) Luxembourg is also a fertile ground for start-ups and venture capital, home to well-known names such as Mangrove Capital Partners (Skype, Wix) and to several incubators and has an agile government, supportive of digital innovation.

Team

As noted above, today’s western economies are dominated by a few technology giants. Microsoft and Apple were founded a little over 40 years ago. At their head, their initial founders have long relinquished control. The founders of 19 years old Google are not involved in its daily running anymore. A truly successful organization should not depend on any single individual, as outstanding as they may be. While Amazon and Facebook are still run by their founders, they will need to make sure that their internal governance system is strong enough to overcome the inevitable departure of their larger-than-life founders if they are to endure.

In this respect, the Ressolid organization will be designed around a system of clear and well-defined values. It will be possible to assess stated long-, medium- and short-term objectives against these values and measure whether their actual outcomes upheld them. The governance system will also include redress mechanics.

In this section, we list not the individuals that will staff the Ressolid project because they might change, and their number may grow or shrink. In exchange, we describe the roles we believe are central to the success of the Ressolid project.

Financial Officer

Ressolid starts as a normal enterprise, an actor in the current economic environment. Thus it needs someone to oversee its finances and make sure that the money being spent do not exceed the money being earned.

Customer Advocate / Community Organizer

As said above, the user experience is considered a critical success factor. This is reflected in the importance of the role of “Customer advocate”. Among the 5 technology giants discussed above, Ressolid’s spirit is closer to the intense customer focus displayed by Amazon and Apple.

System Designer

The importance of the System Designer is linked to the other two critical success factors, the overall governance system and the architecture of the Ressolid Information System (IS).

Economist

The Ressolid value proposition is based, among others, on new social interactions and new economic transactions that would not have happened otherwise. In order to foster a working economic system, human societies have long relied on currencies as stores of value and media of exchange. As will be further explained, Ressolid will create a new virtual currency, the ressol (RSL), and manage it with the same application with which a sovereign country manages its national currency. History shows that this is not a trifling matter, which is why Ressolid needs a bright economist.

UI/UX Engineer

Together with the "Customer Advocate", the role of the UI/UX engineer is of course central in enabling a fast adoption rate.

Blockchain engineer

The blockchain engineer will be in charge of ensuring flawless implementation of the Ressolid IS.

Cryptographer / IT Security Engineer

Cryptography is an essential component of the blockchain technology and the value of the Ressolid proposition can only be realized if the IT security of the organization as whole is flawless.

Legal Counsel

Because it is an enterprise with novel goals, relying on new regulation (the GDPR) and on technology (blockchain) which is already throwing big challenges to the legal system, Ressolid needs a bright legal counsel with an entrepreneurial spirit and the conviction that the role of the law is to strengthen and benefit the society.

Communication, Partnerships and PR

The success of the enterprise will depend on it managing to attract members and partners and to create a seamless interaction with the existing socio-economic context. To this end, reaching out and communicating is crucial.

Integration Architect

The quality of the user experience will be greatly impacted by how well the Ressolid IS will be able to integrate in the existing technology landscape.

AI / Machine Learning Engineer

We reckon AI / machine learning will have a huge impact in all areas of our life and Ressolid will not make an exception. Harnessing AI, Ressolid will be able to deliver much more value.

Use Cases

In the next paragraphs, we are going to illustrate with three use cases selected because of their potential to enable transactions which might otherwise not have happened.

Skills and qualifications

Next time someone claims, say, to a Luxembourg employer that she earned a Master’s in Mathematics in 2012 in Daugavpils, Latvia, or a similar diploma from a Polish, Romanian, Greek or Bulgarian university, she’ll be able to instantly back her words with formal, blockchain registered proof at the tips of her fingers and in a language the employer understands rather than having to display a yellowed, dog-eared piece of cardboard written in Latvian, Polish, Romanian, Greek or Bulgarian, along with a dearly priced and long delayed certified translation.

Additional Ressolid functionality relying on statistical analysis will allow the employer to instantly gauge the comparative quality of the education dispensed at that Daugavpils higher-education institution faster and with higher confidence than by looking at a cardboard diploma. The employer’s confidence and trust in her qualifications will increase: she will get a job she might otherwise not had gotten, while the employer will fill the vacancy faster, more effectively.

Informal work

Imagine you have been engaging in the sharing economy by renting out a spare room or teaching German in your spare time. You might have been doing this either through plain old paper flyers (quite common in Luxembourg) or through an online platform. Unlike the paper flyers, the online platforms manage your reputation but compared with a blockchain they have at least two serious shortcomings: they do not incorporate a robust incentive mechanism and they do not have consensus mechanisms – thus ruining your reputation costs nothing for a grumpy customer and stellar reputations are also somewhat blunted by the easiness of awarding five stars to an average performance, if the customer is in good mood.

Yet the biggest shortcoming of today’s platforms is that you surrender your personal data and the fate of your reputation to the platform.

Personal IOUs

In the paper quoted above [1], John Moore illustrates with a visit to the dentist and asks the question: why did he need to pay the dentist with cash, which is in essence “the bank’s IOU”, instead of paying with his own personal IOU? One of the most interesting reasons is that the dentist cannot get Moore’s IOU to circulate; a personal IOU is hardly liquid.

Imagine the dentist going to a local shop and attempting to pay with Moore’s IOU. The shop manager is almost certain to refuse, but what might, just might make him consider accepting? Certainly knowing for sure that it’s not just the IOU of some random guy with rotten teeth, but that of a distinguished economics professor of the city, knowing his name, address, phone number, maybe even seeing his payslips (if Moore has given prior agreement), so that the shop manager is pretty certain that that “Moore” guy will indeed make good on his promise to repay.

Competitive landscape

As noted above, most ideas on which Ressolid is based have been, in a form or another, tried out separately for several centuries. However, because the utility-maximizing “homo economicus” beloved by economists is very different and almost incompatible with the social-norm-beholden “homo socialis” of sociologists [7], these ideas have seldom been combined in a practical implementation.

Virtual communities with a social goal have an illustrious ancestor in the cooperative movement and the initiative of Robert Owen in the 19th century [8]. Social and economic communities bound together by local currencies are not a thing of the past though. They are being constantly reinvented and a significant number are active today, more than 6 in the UK alone [9]: in Totnes (with Totnes Pound), Lewes, Brixton, Bristol, Exeter, Hull (which claims to be the first local digital currency) as well as the Ekopia community in Northern Scotland and its currency, the Eko.

Among technology ventures, one of the first to deserve mention is Second Life, a virtual world with an escapist, entertainment goal where interactions are between imaginary avatars rather than actual people. Second Life runs an internal economy powered by a virtual currency scheme with bidirectional flow which was analysed along the years, including by the European Central Bank [10]. The financial potential of such a setting is illustrated by the fact that “virtual- (rather than real-) estate speculation” in the Second Life world has managed to generate actual millionaires in the real, physical world (see source cited above).

When we come to using blockchain technologies to manage personal data, several initiatives have been announced. Recently, Civic has succeeded in raising $33 Mil through an ICO. However Civic has a very different focus as it targets specifically the identity verification process and has a purely commercial approach, aiming to facilitate the creation of a marketplace where different “identity verifiers” can charge each other for certifying user data. From a technical standpoint, Civic stores personal data on the users’ mobile devices and was planning to use the Rootstock application layer on top of the public Bitcoin blockchain.

In a different category is Time Republik, which appears to only offer a web application for now, is free to use and appears to operate on a business model similar to that of the internet giants where the user (specifically her data) is the product. Indeed, the data entered by its users and generated by the transactions belongs to the platform.

Conclusion

This “green paper” has set out in a condensed manner the main drivers, goals and means of a project, for establishing a novel organization, called Ressolid because its goal is to strengthen and increase the solidity of the social fabric. The Ressolid organization will take advantage of a specific context (the GDPR and, for starters, Luxembourg) and a revolutionary technology (blockchain) and design an innovative system.

The information presented here can be analysed using the “6W + 1H” method. We thus answer:

1. the “Why”: the troubled state of our societies, linked to the effects of inequality and technology
2. the “What”: the Ressolid project, whose outcome shall be the Ressolid organization
3. the “Whom”: the individuals living in a defined geographical area who become members of the Ressolid organization
4. the “Where”: Ressolid aims to launch specifically in Luxembourg
5. the “Who” / “With What”: the team building the Ressolid organization, their knowledge and skills
6. the “When”: (implicit: as soon as possible)
7. the “How”: the Ressolid blockchain-and-mobile-enabled Information System

The success of the Ressolid project will be measured by its adoption rate in its areas of deployment (the first of which will be Luxembourg). We reckon this will in turn greatly depend on the following factors:
i. the quality of the overall user experience
ii. the soundness of the Ressolid organization’s overall system of governance
iii. the soundness of the Ressolid Information System’s design and implementation

We believe the Ressolid organization will not only reinforce the social fabric but will also generate prosperity and happiness in its environment.

Many aspects of this project contain complexities that deserve a much more detailed treatment. Consequently this “green paper” shall be followed by a more technical “white paper”.

Bibliography

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[9] H. Sheffield, "New money: Do local currencies actually work?," TheLong+Short, 13 January 2017. [Online]. Available: https://thelongandshort.org/growth/new-money-do-local-currencies-actually-work. [Accessed 20 October 2017].
[10] European Central Bank, "Virtual Currency Schemes," European Central Bank, Frankfurt, 2012.
[11] K. Basu, "Identity, Trust and Altruism: Sociological Clues to Economic Development," Bureau for Research and Economic Analysis of Development Working Paper No. 118, 2006.