Urban Technology at University of Michigan Week 68
64 fragments on the intersection of digital currency and urban life
The year 2021 has been a year of acronyms infiltrating the news. BTC, ETH, NFT, DAO… the terms can be hard to parse and their precise workings are cloudier than miso soup, but when it comes to this particular trend, one thing is clear: crypto is gaining steam, not losing it, and the phenomena seems unlikely to disappear anytime soon, even if the environmental downsides are stark. So what does it mean for cities?
💬 Hello! This is the newsletter of the Urban Technology program at University of Michigan, exploring the ways in which technology can be harnessed to nurture and improve urban life. If you’re new here, try this 90 second video introduction.
⚡️ Interested in this stuff and also a designer, coder, or other proactive spirit? Apply for a Prototype Grant, due Monday, Nov 15. ⚡️
📜 Walking Through DAO Town
We don’t really care about the NFT art market. We’re not excited by financial speculation. We are interested in the topic of crypto only insofar as it has kickstarted a vast array of experiments in collaboration and trust mediated digitally, which means mediated by a means of (potentially) scaling beyond your own tribe (more on this below). To adapt a quote from Cedric Price, crypto [might be] the answer, but what was the question?
Some candidates: how do we collaborate with strangers in the 21st century? How do cities become more trusting? How do organizations become more effective and require less emotional labor? What’s the alternative to exploring digital tools for enabling different types of people to work together efficiently?
The answer to these questions is often variations of “people should be better/nicer/smarter/more open.” And that’s true… but how do we accomplish that? For one, a good start would be improving public education so that more people have an understanding of civics, but that’s going to take generations. Even if public education were massively funded right now, the beneficial results mature at a biological pace. We should invest in public education regardless, just like we should decarbonize cars, buildings, and the grid. Our interest in crypto is not as a solution and certainly not as “the” solution, but as an emerging logic that bears careful inspection.
Today we write an exploration without conclusions. So without further delay, here’s where we’re at, in the style of Julian Bleeker:
What is the bridge between the digital phenomenon of cryptocurrency and the physical world?
To date, perhaps one of the clearest bridges has been the use of Bitcoin on the early Dark Web as a payment for illicit goods and services. While we acknowledge this as an example of clear digital→physical impact, it’s clearly not something we want to see expanded!
On the bright side of the internet, a group of crypto folks called PizzaDAO organized a pizza party at 300 locations in 60 countries.
This kind of sounds like other meme-driven food “projects,” if you will, like a YouTuber who sells burgers all across America or a Tik Tok star who turned his fame into a chain of insanely overpriced steak restaurants in seven counties.
What’s different about PizzaDAO is that they collected ~$1M to fund their efforts by selling digital trinkets (aka NFTs), but there’s no legal entity to hold the money and no bank account to hold the funds.
This means no accountability via courts or other legacy legal means, but/and it also means the community of PizzaDao was able to form itself, raise funds, and mobilize a global pizza party in a matter of months.
DAOs, huh?
“Distributed” means there’s no central sovereign or legal entity that controls things. It’s truly reliant upon the will/votes of members and is protected from capture and hacking by the decentralized model of the ethereum blockchain.
“Autonomous” means that the rules are enshrined in code so that, for instance, if a DAO decides that votes should be decided by a majority of 57.2% of members, that rule is enshrined and automatically upheld by the digital “smart contract” that enables the organization.
Because DAOs are built on cryptocurrency, the organization’s function and its treasury are consolidated.
This is important because doing things in the real world requires resources, whether they are collected from members or via revenue from selling things.
Pizza is not a classic means of city making, but on the other hand it is a tried and true element of community building.
Enter the Tungsten Service Cube. This esoteric object is a 14.545” cube weighing some 2,000 lbs and is the largest cube that Midwestern Tungsten Service could make. Make they did, and then put it on sale as an NFT (non-fungible token).
A group called TungstenDAO (more on this later) acquired the cube for $247,000 worth of ETH (2nd-most popular cryptocurrency).
Since the cube is too heavy to ship, the NFT is presented to gain access to the physical object, like a safe deposit box key presented at the bank.
With a DAO—aka a collective—owning the NFT—aka the key—they are able to coordinate among them to determine use of that key. The difference between a one-to-one relationship (one key, one holder) to a one-to-many relationship (one key, community of holders) is its own interesting tangent to be explored. Imagine a car key that only works after hours if two people consent simultaneously… like a nuclear launch protocol for preventing drunk driving.
Again, that’s “easy” to build without the blockchain, but it relies on entanglement with and dependence upon a centralized body, and likely a private company at that.
Is the curious case of TungstenDAO the first example of crypto being used to block and enable access to the real world?
Access is such an urban fundamental that anything potentially altering how access works should perk your ears up.
Even if you think NFTs are a pump-and-dump flash-in-the-pan, what starts as a joke can become an experiment, can become an idea, can become a norm, so it’s worth taking seriously for at least a minute.
Programmatic access to physical space is one of the value propositions for smart locks, which is currently an estimated half-billion dollar market in the US. That's small but not nothing.
Whereas an August door lock functions only thanks to a centralized, privately owned company who maintains its own proprietary servers, the Ethereum blockchain provides a way for programmatic access to be made available with transparent and verifiable rules, with minimal overhead.
Use of a system like this lines the pockets of the company and its investors. There’s little incentive to make the cost drop to zero.
Programmatic, digital access control is pretty interesting because of how it enables models of trust that would be cumbersome and costly to manage via physical keys.
For instance, a town might issue digital keys (in the form of tokens) to all of its residents via something like a TownDAO and allow those tokens to be used to open the door to the library after hours.
Or because Ethereum has the capacity for basing behavior on simple logic, the library might decide that it’s safer when there are multiple people present in the library so that no rogue actor can get in and mess the place up unwatched, or that it’s not reasonable to pay for late night heating for just one user at a time. Sure, that’s possible too. TownDAO’s could write smart contracts that only allow the door to open when four or more people request access together.
What new spontaneous interactions would such a setup inspire? How might such systems enable more creativity with how public goods are stewarded and nurtured?
TownDAOs or crypto cities is a current fixation of a small but growing corner of the crypto community with notable sponsorship of the high priest (and also inventor) of Ethereum, Vitalik Buterin.
Here’s a photo of the first piece of DAO-owned land outside the metaverse:
Source: Mirror.xyz Important aside: crypto is reproducing the gender imbalance of the tech industry more broadly. Who’s bringing a gender lens to these questions?
Back to crypto + land. The 40-acre slice of Wyoming seen above is owned by CityDAO, which took advantage of the state’s very proactive Decentralized Autonomous Organization law that came into effect in July.
CityDAO wants to enable more diverse and experimental land use while achieving a more environmentally sustainable community. Details are scarce. Urbanists and crypto-skeptics are probably tempted to treat this as hubris, but it’s more interesting to me to view it right now as naiveté and a work in progress.
CityDAO is not alone. A likeminded group is experimenting with DAO-owned property in Texas, albeit with more humble aspirations.
Yet another group, Nouns DAO, is discussing funding real-world projects with the treasury they’ve built by selling NFTs and are excited about a skatepark.
That sounds a little like a previous era of digitally-enabled crowdfunding, like we discussed in the prior newsletter, but here’s the difference. Where a crowdfunding platform soliciting typical currency (“fiat” as the crypto folks insist on calling it) would be proud to collect tens or maybe hundreds of thousands of dollars, NounsDAO currently holds the equivalent of ~$69M USD in their treasury, or about enough to build ~100 units of housing in California.
Every community has a mix of bombasts and visionaries, and when it comes to crypto it’s hard to tell the difference between the two. But communities also have thoughtful folks. Here’s an example from the NounsDAO Discord:
Source: NounsDAO Discord CityCoins is a company (?) who has created the first crypto coin for a city, the $MIA in Miami.
Listen to this episode of the podcast Not Investment Advice for a good discussion about $MIA.
Miami is not alone. Multiple other local crypto coin projects are underway. By miraculous coincidence, as I type this post I’m also listening to a community discussion for a local coin project out west. This also means that the pace of change on these ideas is ⚡️ right now.
In the first month of mining $MIA, some $8M USD equivalent was set aside for the City of Miami as the city’s “cut” of coins mined.
How will the city use that money? A portion may be used to pay the Mayor’s salary, but that’s about the least interesting use I can think of. How would you want to spend it?
Isn’t this the same thing as a local currencies like the Brixton Pound, asks Dr. Anthony Townsend? Yup, but with the added possibility of speculation!
Speculation = bad, but lowered administrative overhead = good, which is why the Brixton Pound has elected to transition to a digital currency.
Q: how can crypto speculation be brought under control? Will it happen naturally as crypto markets mature?
DAOists often say that they are excited about crypto, NFTs, and DAOs because it gives them the possibility of having a bigger say in what happens in the world around them. This is extra weird when you consider the current crypto community skews white and wealthy, and is thus more likely to be have franchise available to them. Lower admin overhead = cheaper/easier voting = more use of voting to collect input and opinion = more community input. That’s one way of imagining it.
And imagine you will have to do, because crypto is still insanely complex to use! But know what was hard to use 20 years ago? The web. 100 years ago the difficult-to-use-new-thing was cars. Fundamentally useful technologies motivate improvement over time. In other words, if crypto gets easier to use it will be because it’s perceived as useful and important, which will eventually loop into a virtuous cycle of improvement.
Q: How do we get people as excited about voting as they are about crypto?
Q: What enhancements to equity and justice could be achieved if voting evolves beyond using computers to submit your vote e.g. paper voting fast forwarded?
Aside: we’re not engaging in questions of digital divide in this post, but that’s also very important to acknowledge. Closing the digital divide is a human rights issue for the 21st century and not unique to crypto or digital government services or any number of other important topics.
Our exploration of municipal revenues two weeks ago was inspired by wanting to understand how form follows finance, predicated on the notion that if crypto and cities topics converge, it will result in some combination of changes to both the form and finance of municipal operations.
The vaunted research organization RAND Corporation is not always a source of optimism, but in this case it might be.
RAND researcher David Ronfeldt offers a model for thinking about the unique capabilities of different types of governance entities in a paper called Tribes, Institutions, Markets, Networks: A Framework About Societal Evolution (1996).
Each of these four forms of governance entity has its own strengths in Ronfeldt’s telling. Here’s a diagram:
Source: Figure 1—Tribes, Institutions, Markets, Networks: A Framework About Societal Evolution (1996) Institutions (like governments) create public goods, require command and control power structures, and are at risk of corruption.
Networks create collective goods, require consultation and coordination, and are most at risk of deception or, perhaps, confusion.
Ronfeldt’s description of networked organizations is essentially a write up of DAOs, but when the paper was written, the web was still new and the seminal Bitcoin white paper from 2008 was more than a decade away.
Here’s a relevant snippet characterizing the challenges of networked organizations: “compared to hierarchies, networks involve high transaction costs, require dense communications, need high levels of mutual trust and reciprocity, are vulnerable to free riders, and make for slow, complicated decision-making processes as all members try to have their say.”
At that time, there was no good model for how a networked organization could solve these issues, but with email, the web, widespread broadband, and now crypto as financial (currency) and an organizational (DAO) tool, there’s a legitimate answer.
Even if you think the headline-catching windfalls being made off of cryptocoin are BS, the fact that crypto is providing an infrastructure for networked, non-hierarchical groups to organize around advocacy and interest rather than profit or power is a really exciting development.
Ronfeldt called out civil society as the likely primary beneficiary of networked organizational schemes. That doesn’t match the current reality of crypto, where financial speculation seems to be the most prominent outcome.
Buuuut…. the examples above are hinting at another possibility. Advocacy on behalf of free pizza or access to a cube of metal seems, at best, like a distraction from the many challenges at hand, but what happens when the same mechanisms are turned to more necessary issues?
Q: what happens when the community-oriented power of co-ops and clubs is separated from the day-to-day friction of managing finances or maintaining a legacy legal entity such as a non-profit. Is this a way to see more co-ops in the world? What are Coasian economists thinking about DAOs?
An obvious statement: the logic of crypto is one of abundance; the logic of the concrete world is one of scarcity. The logic of community and social capital is a mix of both. Melding these is going to involve a significant quantity of discomfort.
As with anything that touches your daily life, all of the above is strewn with risk. In this moment of having not enough evidence on which to base strong opinions, our biggest question is how evidence may be gathered while minimizing risk of harm. Legal scholar Rebecca Williams offers a sensible approach:
Links
3️⃣ Robin Sloan explores Web3, which is the loose term for crypto and the platforms built on top of it. As usual, it’s worth a few minutes of your day to see through Robin’s peculiar eyes.
📑 Venture capital firm A16Z has dropped a 34 page “agenda” for Web 3. Still trying to make sense of the fact that this was released as a PDF and not, say, a Web3 object.
📗 Ethan Lou, author of Once a Bitcoin Miner, will speak with Vass Bednar of McMaster University on Nov 24 about his research into the lives of people at the coalface of the crypto economy. Registration required.
🏡 File under: more examples of the danger of financializing real world assets. Zillow used their vast droves of data to flip local real estate, and some say manipulate markets.
✈️ While it has nothing to do with crypto, here’s a sketch of AR embedded in airplane windows. Looks fun. More, please.
These weeks: Bryan moderated a panel at SCNY Urban Tech Summit at Cornell Tech (more on this in a future newsletter). Charlie continues to build up the infrastructure needed to operate a degree program. The College had a community assembly, which was a nice chance to share more widely what we’re working on. There’s a memo that was not being written which is now being written. 🏃
I always look forward to reading these weekly articles! It's genuinely wonderful to see this particular exploration of the intersection of blockchain technology and urbanism. I'm so excited to see how the inaugural cohort of Urban Technology will change the world :)