Blockchain and Elections

Recently Donald Trump stated he lost the popular vote in the USA 2016 presidential elections due to the enormous scale of fraud with unregistered voters and multiple registered voters. He proposed improvements that would make the voting process more reliable. By introducing a voter identification (a means to prove that the person is rightfully eligible to vote) and additional measures the process of the allowance of voters should become more trustworthy.

In the 2018 local municipal elections in Amsterdam, one of the  participating political parties, Forum Voor Democratie, raised  questions about the accuracy in which the citizens votes were counted. As they went to inspect a site where the voting of counts was in progress, they were shocked by what they witnessed.

These stories of voter/ voting irregularities and fraud regularly appear in the media. As the examples above illustrate, they are not limited to countries with a questionable reputation in respect to the democratic and election process. A potential improvement could be introducing a blockchain ledger as part of the election process. A blockchain public ledger should contribute to a more fair, transparant way of voting and casting electronic ballots and this would strengthen the democratic process. There is no centralised authority responsible for determining what is true or what is false because multiple distributed parties come to consensus. The result of this consensus (in our case verified and approved votes)  is added to the ledger and is immutable (there is no way of modifying the data once it has been recorded).

In this article I will go shortly how such a voter/voting blockchain ecosystem would look like, without going too deep into the technical details.

The working of the blockchain ledger

The transactions (digital representations of cast ballots from voters) are being recorded on a blockchain ledger. The advantage of such a ledger is that the information of the recorded data is transparant (for everyone to be viewed) yet the votes are securely recorded, non-editable, verified and anonymous (not retraceable to the identity of the voter).

As described earlier the differenties parties come to consensus about the votes and therefor need intensive -decentralised- computer processing power enabling the election process. They should be financially rewarded as an incentive to supply the necessary processing power.

With many cryptocurrencies like Bitcoin and Ethereum these financial rewards come from a process called mining. The situation with an election is rather different than with a system based on payment transfers or smart contracts. Elections only happen once in a while but when they run they cause heavy network load and therefor need intensive computer processing power. The costs associated with network traffic and computer processing power are the digital variant of the organising costs of conventional elections with paper cast ballots.

Because of the special character of elections a mining construction as used by crypto currencies does seem  less useful and not applicable: the ledger will be hit with sudden, incidental ‘spikes’ in time because  the voting process takes time in a limited amount of time (typically a 12-24 hour time frame) and has irregular -long- intervals, depending on a nation’s constitution regarding when the elections take place. Another question who would be the most appropriate party to deliver the blockchain infrastructure. If the government does it is another step to centralisation (we will go deeper into this later). Other (commercial) parties look like a better alternative as they are much more capable of delivering the needed services in a timely and secure manner.

Voters

The voter population varies over time. New voters are added because of citizens that gain legal voting rights (because of age, residence permit after immigration). On the other hand voters die or lose their legal rights to vote (emigration, imprisonment). The only institution that can determine the correct voter base is a -national or local- government. So like conventional voting there has to be a process in place that a/ attends the rightful voters for an upcoming election, b/ gives instructions on the election process and c/ informs the voter about access to the electronic election system in order to use their electronic cast ballot. A/ and b/ will depend on the ways the government communicates with its citizens and are outside the scope of this article. I will concentrate here on c/, the access to the election system.

In the Netherlands the DigiD system acts as the government’s identity management system. It is my estimate that by now every developed nation has a similar identity system. I see no way that an independent source, related to the blockchain ledger will be capable of delivering something comparable. Therefor DigiD could operate as a gateway to the electronic election environment (just like it functions now as a gateway to the Tax and Custom Administration or healthcare institutions). So this is gateway needs to be there in any situation, whether there is a blockchain in place or whether the data is being recorded in a centralised database system.

As described earlier the voters should have access to cast their vote for a limited period of time for a certain election. This is rather critical from a point of processing power. Even within this limited period there will be spikes noticeable within this limited period. Most voters for example will enter the system and cat their vote before or after working hours.

Election, voting and votes

For example we have election X. There is a blockchain ledger in place. The government has provided its citizens the rightful communication about the election X’s rules. Through its identity management system it will grant access to the rightful, granted voters. An election can come into a variety of forms: it could be a simple referendum style, where the voter only has to choose between ‘yes’ or ‘no’ or ‘A’ and ‘B’, it could be a more complex form where one or more candidates has to be chosen from a list or even a combination of referendum and candidate choosing. There will be the need for an application with data and interface specifically designed to support an election event.

As these prerequisites are in place the election X can start. Within the given timeframe the voter logs in to the application and casts his vote/ votes for the election X. This vote takes the technical shape of a transaction where the choice or choices are being recorded to the public ledger taking into account the security and privacy of the voter.

When using a blockchain with a public ledger another effect occurs. Because the transaction information is online and real time available, the need for exit polls is no longer there. The benefit is that when reaching the time limit of the election (the possibility to vote has come to a close), the result of the election is immediately available. However this also means that voters might be influenced by preliminary ranking and adjust their votes accordingly as the information of the voter data is available in real time. This is very different from conventional voting where only a rough indication is available during the election time interval through exit polls.

A blockchain based election can be organised, yet it will difficult to directly abolish the conventional, paper ballot casts directly. There will have to a transition period to let the voters get used to the new system. This transition means however that another issue will arise: how to avoid double voting (one vote electronically, one vote the conventional way). There are different methods to deal with such scenarios but it is something that has to be taken into account.  

Conclusions

Elections using a voting system on the blockchain does little about Trump’s problem. If the government does not have its administration in order than the voter base will remain unreliable. Within the reality of a nation state the government is the only institution able to provide a correct voter data administration. A special ID does more look like introducing a symptom than take away the root cause, but a deeper discussion is outside the scope of this article

A general challenge as we look into the possibilities using a blockchain for elections: a blockchain fares best when there is the smallest need for centralisation or a central institution, the so called principle of MVC (Minimal Viable Centralisation). Decentralisation  is difficult to realise within the setting of a government based election system: the government manages the identities, manages the election procedures and the consequences of the results of elections. So there is little room for decentralisation.

The blockchain itself could be set up and maintained by the government, but that would be another stepping stone towards centralisation. The specific characteristics of using the blockchain (long intervals, but with intensive spikes) would make it more attractive to host such a blockchain with a commercial organisation that can spread the use of the blockchain more efficiently and economically (compare it to commercial parties who deliver cloud based solutions).

An electronic voting system in general (with or without a blockchain) obviously has tremendous benefits over conventional ballot casts. The need for manual counting ballots disappears, although other concerns about security and hacking will become manifest (in which the blockchain could play a favourable role compared to centralised database solutions). The organisation of elections will become so much easier. New forms of elections and voting come into reach and could be the start of a democratic reform process. The old paradigm of representatives of the people deciding for the citizens would become superfluous to a certain extend. The opinion of the citizens could be monitored interactively and immediately.

It looks almost certain that disruptive changes in the election process will be imminent. At least  these changes will allow the voters to vote electronically. The election process however will largely remain centralised because of the enormous influence of the government in almost every part of the process. The use of a blockchain is therefor less obvious within an electronic election system. Yet the strength of using a blockchain would be the accuracy, security and reliability of the registration of votes versus a centralised solution. The manual counting of votes (with all its perks and potential mistakes) disappears, yet the immediate precise publishing and availability of voting results on a blockchain might lead to side effects that were not present in a conventional system, like the immediate availability of voting results.

Review: Saifedean Ammous – The Bitcoin Standard

In ‘The Bitcoin Standard‘ author Saifedean Ammous takes its readers on a tantalising journey into the world of money. The goal of the journey is to explain why Bitcoin could be the next phase in mankind’s hunt for sound money. Sound money can be freely chosen by people on basis of market interaction and not by government imposition.

After some general characteristics of money Ammous gives a historic overview describing why over periods in time certain objects or materials could attain the status of money. Exogene factors (like the arrival of colonists  on the island of Yap where the indigenous population developed a money system with large, difficult to move stones) or through endogene factors (the Roman era where the caesars made fatal decisions about reducing the percentage of precious metals in coins) ultimately led to the dismise and disappearance of certain types of money.

Other types of money could thrive for long periods in time and history. They would keep their value and use as method of payment or financing transactions. An example is the Bezant, the currency from the Byzantium empire that functioned over a millennium as money. Ammous explains that the salability of money (money holds its value over time), store of value (the material of which money is made, does not degrade over time) and stock-to-flow ratio (money is difficult to reproduce and inflate) are essential keys to why money can become successful. Over time the most successful and valuable money has unarguably been gold. It  fits all above mentioned characteristics perfectly: it holds its value over time and does not degrade. Through mining new gold becomes available in relative small quantities to the total amount of gold stock, so the market never gets overflowed with gold.

In the 19th century new technologies in the field of telecommunications (telegraph) and transport (trains) became available and would lead to significant changes in the use of money. The 19th century ‘invention’ of the nation state, saw the rise of the central bank as the ‘bank of banks’ within a nation. Central banks became the collectors and preservers of the nation’s gold stock.

Central banks printed paper money that represented the value of the available gold reserves and they could deliver gold to the owner of a piece of paper money on request. Because this was common procedure among all nation states, international trade benefited: the amount of printed money was tied to a nation’s gold stock reserve and internationally it meant fixed rates for exchanging money among nations.

This period of this stable money system came to an end in 1914 when countries like the United Kingdom abandoned this golden standard. From now on the central banks could (and would) print money that had no direct correlation to the stock of gold. The paper money could no longer be redeemed by the central bank for the equivalent of gold. The downside of being able to print fiat (=trusted) money with no back up of sound money is that the fiat money tends to lose its value over time. Especially in the Interbellum (the period between the 2 world wars from 1918-1939) this would lead to disastrous situations where endlessly printing and devaluating money could completely ruin economies (most prominent example being the German economy in the late 1920’s – early 1930’s). Ammous signals another dangerous development, the nation state’s governments as an interventionist in the macro economic playing field. Mainly following the theories of John Maynard Keynes, governments and central banks made decisions about devaluation/ revaluation of their local currencies versus other currencies and intervened in local economics by inflating the quantity of money in the hope that the local economy would receive a push.

Ammous totally destroys the vision of Keynes in that respect. Keynes not only had no clue what would be the -long term- result of interventions and was completely in the dark about why certain economic phenomena (like recession) would occur. Ammous  turns instead to the Austrian school of economists for answers how an economy should work and how economic phenomena can be explained and dealt with.

As much of our society and economic thinking and acting by government institutions is still drenched in Keynesian thinking, the results of this have led again and again to disastrous situations for the citizens and entrepreneurs of nation states: government’s decisions have lead to dramatic consequences as recently as the 2008 financial crisis.

For Ammous, Bitcoin “offers the modern individual to opt out of the totalitarian […] Keynesian socialist states”.Our economic models have to be reinvented again and the invention of Bitcoin could in the opinion of Ammous substantially contribute to a new era where Bitcoin has the potential to  function as the new form of sound money: it is extremely well salable and scalable (1 Bitcoin can be subdivided in 100.000 satoshi), does not degenerate over time and its supply is capped at 21 million Bitcoin. Bitcoins are being mined like gold and the last Bitcoin is expected to be mined in 2140.  The ultimate catch is that production of Bitcoin is not in the hands of governments but is in the hands of the people. The development of Bitcoin was heavily ‘set in stone’ with its first release as Satoshi Nakomoto noted in 2009. Nakamoto is the anonymous inventor of Bitcoin, who after a few years of intensive development went on to other projects.  Since Bitcoin became operational, making fundamental changes are very difficult because they need the consensus of the Bitcoin community.

Ammous does a splendid job of explaining the delicate relationship between all parts and parties involved in the Bitcoin model, where miners are being rewarded with Bitcoin for their intensive processing work (largest computer network in the world) and nodes are necessary for the more straightforward process of updating the ledger with a batch of new transaction that is being conmpiled every 10 minutes and added to the ledger.

Along the road of explaining how Bitcoin could become the new standard in money, Ammous demonstrates very outspoken opinions, that leaves the reader sometimes with a hit-and-miss feeling. Some of these rants are amusing and recognisable. For example when Ammous describes government organisations that can only thrive by their powerful masters, creating layer on layer of worthless bureacracy leading to depression and anxiety by its mainly unskilled workers. Other rants, for example about the relationship between the downfall of our culture, music and art and the state of the economy I found less appealing as Ammous neglects all artistic work from the 20th century.

Ammous is a Bitcoin maximalist: he goes to great lengths to explain why Bitcoin probably will survive as the only valuable cryptocurrency in the long run. He is not extremely worried by security hacks of Bitcoin, a successful hack would automatically mean a collapse of its value and price, so from that perspective there is little incentive to hack Bitcoin.

All  later developed cryptocurrencies Ammous considers them merely copycats of the original, lacking the delicate balance found in the original of Bitcoin. As an example he mentions the Ethereum DAO hack, where the developers decided to intervene in the blockchain and rewrite the ledger, something that would have been impossible on the Bitcoin blockchain. In Ammous’ opinion the potential and practical use of blockchains without Bitcoin (or any crypto for that matter) is practically absent.

All in all ‘The Bitcoin Standard’ is a must read for anyone who is interested in if and how Bitcoin might change our way of thinking of money. It gave me new and interesting insights on the subject. Ammous concludes with a positive message with the prospect that humans can now finally be in charge of money creation themselves and economies run by real people instead of shady governments that act less and less as true representatives for the citizens of the nations.