Organic Crypto Money vs. Debt Zombie’s Fiat: Lessons of Biomimetics
Two scientists who founded a lab for thought experiments in Hamburg, continue their series of publications on what crypto community can learn from biomimetrics.
Money is a mystery.
Some claim money is an invention by man. But has man really ever invented anything original, something that did not exist before in nature? Technology at its most fundamental level is an imitation of nature.
The more we learn about nature, the more we are struck by the dazzling complexity hidden beneath the silhouette of the macrocosm. We look at a cell and we find a factory. We look at DNA and we find a database. We investigate the metabolism and we find an economy. We investigate the brain and we discover a computer.
Like zooming into a fractal, every scientific discovery reveals another world that strangely mirrors our own. Money, as Dostoevsky famously said, is coined freedom. But money is also slavery.
The future of humanity is inextricably linked to the future of money. To understand money we need to first understand biology.
Machine learning trained on biology
Let’s illustrate the nexus of monetary and biological realities by looking at Numer.ai, a hedge fund founded by mathematician Richard Craib that crowdsources machine learning algorithms for stock market prediction. Every week, Numer.ai releases an encrypted dataset that obscures the origin of the data but preserves the relevant structure.
The data scientists participating in Numer.ai then enter into a tournament to find out whose algorithms will make the most accurate predictions extrapolated from the dataset. The programmers behind the victorious algorithms are rewarded with Bitcoin.
From the most accurate prediction algorithms, a meta-model is constructed that is designed to cover the totality of the stock market. Selected algorithms will be deployed in those niches of the stock market where they have proven to be spot-on. Taken together, the meta-model amounts to a super-intelligence for anticipating stock market trends.
Guess who has spawned the most successful algorithms. The Financial Times reports:
"The current leader on Numerai’s tournament board is a user called “NCVSAI”, who works in genomics and biostatistics, according to Mr. Craib. He has earned $5,563 since starting to submit predictions earlier this year, but as the hedge fund grows Numerai intends to ramp up the rewards."
The winner is: Someone whose pattern recognition skills have been honed by doing computational biology! It seems those algorithms that were pioneered in modeling living systems are best suited for financial predictions. This, in turn, means that the financial system is itself alive.
Recently, Numer.ai has issued a cryptocurrency of its own called Numeraire in order to fine-tune the competition-based crowdsourcing mechanism underlying their investment strategy into a more cooperative enterprise. The Numeraire, issued exclusively to those data scientists already registered with Numer.ai, will increase in value corresponding to the overall success of the hedge fund.
By influencing the behavior of its holders, the Numeraire is intended to act as “programmable money.” Money, in this sense, has an innate potential to incentivize collectives of human beings. Conventional fiat currency has turned out to be terribly ill-suited as the underlying behavioral program for humanity.
Digital cryptocurrency, paradoxically, is far more organic. Literally.
While fiat has turned the economy into an undead debt zombie, cryptocurrency is here to resuscitate it. This life-giving property of cryptocurrency stems from its kinship with the energy currency of the biological cell – ATP.
Inside bacteria and the cells of higher organisms, there is a relentless rush of activity and transformative processes. Despite, many of the biochemical details of how organisms produce and consume energy still being the subject of debate among scientists, major components of the cellular metabolism have been identified.
Astonishingly, the frantic happenings inside a cell can be likened to the way an economy works – in more than just a figurative sense. Economists constantly argue about how certain economic phenomena and indicators may be interpreted and what may be done in order to induce a desirable macroeconomic development such as an increase in GDP or a higher employment rate.
But few economists will argue that money – in its capacity as a universally accepted medium of exchange – is the attractor that holds everything together. In school, we learn that economy is about the allocation of scarce resources.
Philosopher, economist and systems theorist Kenneth Boulding suggested another definition. For him, the economy is the study of exchange.
Framed this way, the events inside a biological cell become the subject of economic analysis. Biochemical reactions become transactions and the metabolism becomes a transaction network. It has been suggested that a transaction network has three main components: a currency, a settlement layer with a degree of finality and a ledger to record transfers of ownership. Let’s see whether we find these things in biological systems.
Going digital means going back to nature
ATP is the universal “energy currency” of the cell. Let’s have a look at how ATP is synthesized in a cell in a very simplified way. First, we take up nutrition that is made up of molecules that contain energy stored in their chemical bonds, e.g. carbohydrates or proteins. The food is digested and broken up into smaller parts via a very complex cascade of biochemical reactions.
All of this occurs inside specialized compartments of our cells, the mitochondria. During this process, energy is released that is used to “coin” the cell’s energy currency, ATP molecules. The ingenious solution found by nature enables this currency to be used to pay for virtually every biochemical reaction, by catalyzing or speeding up the production of desired cellular parts, ranging from new DNA strands to structural proteins that provide the scaffolding for our cells. Like capital, ATP accumulates where it is needed.
Without delving into the details of enzyme kinetics, it suffices for our purpose to assume that at the cellular level a settlement layer is provided in the form of specialized enzymes that are able to catalyze only one specific reaction.
If you pay ATP to a given enzyme for building up a certain molecule, you have to pay another enzyme for degrading this molecule once you don’t need it anymore as well. Building an atomic submarine costs a lot of cash, but decommissioning it isn’t cheap either. In both cases, workers with specialized skills need to be paid or they go on strike.
All of the cellular transactions paid for by gigantic amounts of ATP (between 50 – 75 kg per day, you roughly produce as much ATP as your own body weight) are recorded in the so-called epigenome.
The epigenome is a vast decentralized network that consists of real-time gene regulatory and metabolic information. Ignoring the molecular details of this system, it is still safe to say that the epigenome can store orders of magnitude more information than your DNA.
It tracks and keeps the balance of your ATP account so that you produce just the right amount and spend at just the right places to keep your system carrying on in everyday life. Of course, the balance of an Olympic athlete is different from that of an office worker. But, ideally, it keeps both of them able to carry out their job.
So there you have it: Your body is a transaction network. Vice versa, the economy is alive. With the arrival of Bitcoin and Blockchain, we finally have a cure for the ailments of a techno-biological ecosystem chronically out of balance.
As pointed out by Nick Ayton, the concept of debt is alien to cryptocurrency. Just like most ATP-catalyzed reactions, Bitcoin transactions are irreversible.
Cryptocurrency, as programmable money, will bring about within society the same collaborative behavior already exhibited by the sub-units of a complex biological system.
Within the fractal-like structure of our reality, fixing the economy goes hand in hand with deepening our understanding of what it means to be human. “Crypto” means hidden. In truth, it’s a revelation.
Claudio Flores, M. Sc., and Danilo Flores are the founders of Kybernesia, a lab for thought experiments and biomimetics based in Hamburg, Germany. They adopt a non-reductionist approach towards technology and nature.