Feedback welcomed, conceptual questions on blockchain

hi all,
I’ve been thinking about the possible use of blockchain for smaller settings. Like a local exchange/trading system (LETS), or a network such as Edgeryders. Key elements that blockchain provides is a distributed nature, a public ledger, and a permanent ledger. Yet in practice, as shown in the Bitcoin network, ultimately because of the computing resources needed to validate the distributed ledger, centralisations occurs (e.g. on a handful of Chinese computing clusters). For me the key to agency, to power of action is that tools should be controllable at the level of use. So if a group uses e.g. blockchain that blockchain should be run by the group using it. Otherwise your specific usecase might be corrupted, made impossible or hindered by the more generic use forms surrounding it.

Was reading this explanation of blockchain the other day, which made me think about blockchain in the Edgeryders case. On how to recognize contributions towards a project before it becomes part of a transactional stage (like when it becomes an undertaking of the company) yet after it has left the realm of occasional contributions.
The article was A Letter to Jamie Diron

It posits blockchain as simply a way to create distributed software tools. And adds that this is usually cumbersome (in terms of effectiveness and efficiency) compared to more centralized tools, or where a middle man has a role. Except when that distributedness is what you need to be able to do something at all, because you are otherwise locked out or because otherwise you are hindered to do it well. That is the case for the type of network that Edgeryders forms. But also e.g. LETS.

So I was wondering about how to translate some aspects of a network like Edgeryders or something simpler like a LETS to a blockchain setting.
One is how to deal with negative accounts. In a LETS most ‘tokens’ come into circulation simply by having a transaction. You and I both have nothing. You do something for me, and I reward you with some tokens. Now I have -x you have +x, and we have brought x in circulation.

Mining in a blockchain is a reward (in tokens) for doing the calculations needed to verify the ledger. It is artificially made ever harder, needing ever more effort, to get a reward. This is meant as a way of ensuring loyalty, as it creates real costs. In a LETS or other defined network such as Edgeryders such effort doesn’t need to be made ever harder to maintain loyalty, as there is a real net of social relationships existing that can be the carrier of such loyalty. So one could imagine all members of a LETS or network contributing computing power needed for the consensus about the ledger. With lower powered nodes doing the computing (e.g. a Raspberry Pi sitting next to your router). Running a small node could be seen as your membership-fees of sorts.

Questions resulting:

What are viable ways to deploy blockchain for a ‘defined user group’ e.g. Edgeryders without relying on infrastructure run by others / globally (e.g. Ethereum)

Are negative wallets possible in a blockchain, or made to be possible?

Is there a way to strip out the ‘forced’ increasing difficulty of consensus building about a ledger (which in Bitcoin is leading to detrimental centralisation of nodes), and have the needed computing power equally distirbuted over all users?


Roughly, proof of stake (PoS) algorithms for confirming the transactions in a blockchain seem to be the way to go here. They do not require any significant amount of processing power for “finding” the next block, instead they require cryptographic proof that blockchain nodes possess currency tokens (“have a stake in the game”). The idea is that those who have the currency have an interest to keep the transactions honest, instead of allowing theft, double spending or inflation to occur, all of which would erode the reputation and / or monetary base of the cryptocurrency.

I don’t see why you couldn’t implement negative account balances in your own blockchain – it’s a distributed database and ultimately can be made to store … anything :slight_smile: In LETS with negative balances, all balances have to level out to zero at all times, which is a nice invariant to be checked by nodes when confirming the next block.

But note that negative balances (“debt”) might socially not be the nicest way to express value relationships. Any debt is an asset for the creditor, and you could choose to only show these (positive) values. While not blockchain stuff, we do it like that in PayCoupons: coupons come into circulation only with our circular barter deals, after which everyone holds a positive balance of somebody else’s coupons and can redeem them anytime later. The fact that I am in debt if somebody holds my coupons is not prominently shown (only under “coupons in circulation”, a metric for trustability as a trading partner).

In proof of work algorithms, not that I know of – easing difficulty would invite the 51% attacks. In proof of stake, there is no forced increase of difficulty, as no large amount of computing power is needed here anyway.

Ethereum intends to switch to proof of stake within one year or so, away from their current proof of work implementation for mining. So there are seemingly good reasons for that. Among them, the hilarious energy consumption of proof-of-work mining.


Matt, your clarity and learning never ceases to amaze me.


This does not seem like a very safe idea. Because:

  1. Occasionally inflation, theft and double spending do occur in fiat currencies (or any other currency or trade currency). This proves that having a stake is not enough of an incentive. Free riding etc.

  2. And anyway deflation is not necessarily a good idea.

Right. The topic deserves a more thorough discussion. Your points are regular points of criticism of PoS algorithms, and as far as I know the PoS chains use some additional mechanisms to mitigate the issues.

For example, the blockchain nodes (“computers with cryptotoken values”) which are eligible to confirm the next block are determined with a random element to it, not just by their size of stake. And I think there are always several of them to confirm the next block and they vote, with some mechanism in place to determine what is the right block to choose if there is a disagreement among the nodes. I have not looked at any implementation details though, so this is already the edge of my knowledge …

Well deflation is certainly not a good idea the way it is done in Bitcoin, as far as use value of the currency for economic exchange is concerned … it’s still quite zero :laughing:

I guess my point was that, if I find a way as a blockchain node to make more cryptocurrency tokens out of thin air by my own will by just putting them on my account in the next block, that inflation would not be considered a good thing by others with a stake in the same currency. Because it devalues their share of crypto tokens and all the benefits go to me …

Thank you for this pointer, I’ll read up on this.

Well, balancing out to zero should be true for any ledger, shouldn’t it? Although one of the entries will maybe read ‘came from outside / thin air’ or ‘went to the outside / poof’.
You’re right that in a LETS the ledger total will be zero within the group of members. Except for when people with a negative balance leave the LETS by redeeming their negative balance in fiat currency (a way out many seem to offer, allowing you to leave without leaving a debt of good will let’s say), when a ‘went oudside’ entry is needed.

Very striking notion, yes. I’ve seen the effect in LETS. Esp LETS that bring together members that are in debt elsewhere, having a negative account comes with emotional baggage. I’ve also seen the opposite: where a member had been (planned and announced) saving up a large amount of LETS units, to use for when he would be moving his artist studio and needed lots of support from LETS members to get it done. Some started attacking him about his ‘hoarding’ and planning to ‘lord it over them’. Not a fair assessment of what he was doing, but real emotions nonetheless.

Looks interesting, created an account. Interested to know more.

It’s not so much about easing difficulty, as it is about not increasing difficulty, is it? Proof of work is designed as make-work that uses up real and increasing resources. Resources, energy, that could be spend for the user group itself maybe, while letting proof-of-work be only real work.
If you run all the nodes of a blockchain within a defined user group (not as general infrastructure such as ETH or BTC), then part of the prevention of corrupting the ledger lies in the social relationships within that user group. In a LETS, or a group such as Edgeryders that is entirely within scope of all members.
While large blockchain implementations, like ETH or BTC theoretically allow any user to validate whether the ledger has been corrupted, that by now requires an amount of equipment and energy that puts it beyond reach of any user, other than a handful of Chinese computing clusters, and a cave in Iceland. I have a copy of the blockchain on my laptop, but no real means to verify it, the very thing that is its foundation. Basically requesting me to put my trust in ‘middle men’ all over again. Even many BTC wallets stopped incorporating the full blockchain but refer to a server (outside the users scope) somewhere to get your balance. That’s even worse as now a completely unverifiable gatekeeper is introduced as well. These new middle men and gatekeepers aren’t in the recognizable form of an institution or person but completely ephemeral and without redress mechanisms, by design. Hence my earlier remark about agency lying in being in actual control of a tool. Such as running a blockchain within the boundaries of a given set of relationships, e.g. a LETS or Edgeryders.

Thanks again for your thoughts Matt, very worthwile.

Re Deflation/inflation

For me one of the things that make BTC less interesting as a means of exchange is the cap on the amount of tokens that can get into circulation (21M?), and how the rate of them getting into circulation is decreasing as PoW difficulty is increasing.
This makes it more rational to hold on to the BTC I have and treat it as sunk costs, as the potential upside (by deflationary pressures) is always larger. While it may take a long time, or never happen, for my BTC holdings to be redeemable for a year’s wages, it just may happen.

In a LETS, or e.g. Matt’s PayCoupons, tokens are created at the point of transaction and are essentially a representation of transactions that network members want to happen, and more importantly, only wanted transactions exist that way. The power of creating tokens is evenly distributed, and a transaction that is wanted by both sides is never hindered to take place.

BTC in comparison is hardly egalitarian: it provides very lopsided leverage to early entrants, and many transactions seem to be focussed on merely getting hold of tokens in the first place.


Just adding two pointers re. blockchain concepts:

Checking the ledger does not require significant computing power. If you have a copy of the blockchain and run the official Bitcoin wallet, that is what it’s doing as you are participating as a node in the network. And every node, even if not mining, is always checking the ledger and voting to accept or not accept new blocks depending on if they do the accounting right given the ledger’s history.

Only PoW mining requires that crazy computing power.

These are two different things in Bitcoin. The mining rate is pre-determined in the software and goes roughly like “50 BTC mining reward for each new block for 5 years, then 25 BTC for each new block for 5 years, then 12.5 BTC … and so on”.

PoW difficulty on the other hand is based on miner competition within the last 10 or 14 days and adapted automatically up (or down!) depending on how much hashing power the miners in the network provide. It can really also go down, because when the BTC exchange rate deteriorates, mining will not be profitable anymore for some miners depending on their electricity costs, and they will cease mining for a time.

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