IPF$: The Interplanetary Financial System - A Deep Dive

The tipping point for the colonization of North America was the humble beaver pelt, funding expeditions, wars, and journeys into the unknown; All for the fashionable hats made from beaver felt that Europeans found so fashionable. | The Architecture for our new world The Hudson’s Bay Company sent men in canoes into the Canadian and American wilderness, voyageurs, who risked life for the opportunity of riches. The same can be said for Opium and the East India Company, or the Dutch East India Company and Silk; In every case of great (albeit ethically questionable) exploration, a private corporation was set up to exploit natural resources, and it was those resources that funded civilizational expansion. These explorations represented the building blocks of modern capitalism, and in the case of The Dutch East India Company, the origins of the free market. This Exact phenomenon is happening to space. Expedition costs are decreasing exponentially, it is only a matter of time before we discover the 21st-century “space beaver pelt”, the resource (be it hydrogen 3, platinum groups, or likely tax avoidance) that will fund our expansion into the heavens. On the note of tax avoidance, the EU estimated that over a similar 10 year period, the top six Silicon Valley tech companies underpaid taxes by nearly the cost of the Apollo program (Approximately $100 Billion USD in unpaid taxes compared to the $146.7 Billion dollar Apollo program adjusted for inflation, $25.4 billion in 1973 ). Fair Tax Mark Research via CNBC source The fact space exploration costs are decreasing, it becomes not difficult to imagine Silicon valley companies moving off-earth, simply to avoid paying taxes. In fact, moving off the Earth in the long term would likely represent a significant investment from a tax and IP generation perspective. This creates an interesting question, what will interplanetary finance look like in the 21st century, and how will it work? How will the tech giants of today move billions of dollars from Earth to their safe haven on Mars? In this article we’ll explain: Why current digital infrastructure will not work for interplanetary trade Interplanetary digital infrastructure Our Proposed architecture for interplanetary digital currency and exchange New technologies and black swans. #Current Solutions Civilisation has moved beyond barter (for the most part) as ferrying around beaver pelts and London good delivery bars between planets simply makes no sense from a transaction cost perspective. The interplanetary trade infrastructure that will be put in place will surely be digital, and one that we hope will be completely decentralised using Web 3.0 technologies like blockchain and DAOs (Decentralized Autonomous Organisations). We argue that such systems will be trustless to further reduce that transaction cost. Why can’t we simply use existing technologies? Given our short history of digital technologies, money printing, hacking, cyberwars, and back-doored encryption leads us to prefer a decentralized solution. Decentralized systems become extremely important as we begin to imagine securing computer systems that may communicate with extremely high latency (up to 20 minutes) between Earth and Mars. While centralized solutions like NASDAQ work well here on earth, where brings latency between traders down to milliseconds. How would this work between planets where we have to wait up to 20 minutes to place a stock order? the race to zero Modern stock exchanges are highly centralized and operate in one political jurisdiction (something a major tech company on Mars trying to avoid taxes or stealing startups’ technology might object to). Decentralized exchanges like Uniswap operate on a decentralized computing network (Like Ethereum or Polkadot) and use cryptocurrency and tokenized assets to settle transactions. Decentralized exchanges are far more preferable to those centralized, but poses further problems. Cryptocurrencies like Ethereum and Bitcoin would simply not work well with interplanetary transactions. In fact, we couldn't find a system where they would work. Synchronizing Bitcoin nodes between planets would be impossible today as the time to exchange blocks or download a copy of the chain would be extremely slow. By the time an interplanetary blockchain node has synchronized, new blocks would have been generated elsewhere and we would have to catch-up. Given that light takes almost 8 to 20 minutes to travel between Earth and Mars, it would take around 1 hour to even negotiate a session with a node on Earth. Even simply establishing a secure connection may involve the exchange of a few network packets to negotiate a secure encrypted communication channel, which could take hours. Given that we have lost days simply synchronizing a blockchain node here on earth, we need something better for our friends on mars. #Proposed Infrastructure One main issue with the successful development of a dual planet (and multiplanet) civilization will be its communication infrastructure. People leaving their families on Earth will want to stay connected, others may still want to follow Keeping Up With the Earthlings. Such an infrastructure would be crucial to the stabilization of the Martian economy, the coordination of resources, and the psychological wellbeing of Martian settlers. Finally, comms infra will also be crucial for trading, as people will want to move money between the two planets for various reasons: Maybe Martian loans are cheaper, maybe they want to trade local assets remotely, maybe they want to avoid taxes etc… The best solution here would be to establish a high bandwidth deep space network. Based on the current research this would involve a few satellites with powerful lasers to move information to the speed of light (which is still pretty slow!). Spacex is developing their own Deep Space Network, its prototype is called . Starlink Because a direct connection between Mars and Earth may not always be possible (let’s say a moon, or sun, or enemy space jammer is in between) it might be needed to establish some kind of resiliency by having the ability to jump through another planet in between. The architecture will look a lot like a Mesh Network and likely use a Mesh based architecture for resiliency. Today high frequency RF to communicate between planets, but NASA is looking at to increase bandwidth. We imagine that in the long term, will likely be used, due to their high available bandwidth. The difficulty in incentivizing, building and maintaining communications networks was part of the main reason we built . we use using lasers X-ray lasers Nodle Once we establish a ground and space communication system, new use cases will become possible, and new issues will emerge. Given that it takes several minutes for the light to travel between both planets, the user experience for connecting securely to the Earthly Internet would be far worse than dial up. This is where we introduce the concept of Content Delivery Networks (CDNs): we duplicate the data to the closest point of the user, so they can access the data faster. This very same concept is used by most companies like Google, Apple, Netflix and Facebook to make your browsing experience faster. We can imagine that Netflix may want to launch a Martian service to take advantage of the large VC market that has moved to Mars. As instant video streaming would not work well between planets, Netflix would have to establish an extremely high bandwidth connection between the two planets (probably through their own satellites) and duplicate the data locally on Mars and vice versa (For example for media content produced on Mars). This has the added effect of significantly reducing the amount of bandwidth consumed between Earth and Mars (as each movie has to be sent only once). Almost every service we use between Earth and Mars would require a local CDN-like system to make the experience seamless. It is quite amazing that data has become so valuable, many companies today are looking at launching their own satellite networks. (If you have not read “How the World was One” by Arthur C. Clarke, stop what you are doing and read it. Also essential reading is the legendary WIRED article, “ ” by Neal Stephenson. ) Mother Earth Motherboard #Proposed Solutions using Current Technology (circa Q3 2020) Now that we have our space data network in place, we want to begin trading! Our world today is living on a multi-currency system, and there is no reason for this to change anytime soon. For this reason, we expect Mars to use a different currency than here on Earth, even if the Earth inhabitants might settle on a global international currency. It also makes sense economically, as we expect the Martian economy to be different than here on Earth, as different goods or materials may be easier or harder to get. We imagine that Martians would want to separate themselves from currencies that can be like The Dollar, and may likely have an asset-backed “basket currency” similar to the Singaporean Dollar. Singapore even profits from its currency which they invest back into startups and their economy through their sovereign wealth fund. printed in perpetuity We assume for efficiency, that Martians would build a cryptocurrency based system. We could consider both Earth and Mars would run a shard of a bigger interplanetary network. (You can think of a shard as an element of a bigger network.) These shards would then settle using a much slower data system between planets, very similar to how central banks settle between banks. Additionally, having a planet-wide blockchain network (sharded or not, that’s a debate for another post) would be useful to automate most of the local economy. This would also be a great way to be more efficient in terms of governance and citizen involvement. Governance will be crucial for the successful development of a Martian colony, where tensions between people, separate outposts, and Earth might be strong. This is a part of the reason that was founded, as we believe governance can be researched further and improved upon in a trustless fashion. The Governance Research Institute We imagine the most likely scenario is that several separate blockchains are deployed (one for a Chinese Base, one for the Saudis, the Indians, Elon Musk, and each of the Silicon Valley funds that move to Mars to avoid paying taxes on the trillions of dollars that have been generated from the IP around colonizing Mars.) Each blockchain will interconnect, and likely have a decentralized exchange to automatically settle transactions between the colonies. Example Let’s imagine Alice is on Mars, staying at an independent base and would like to acquire some goods from Bob living on Earth. To do so she would have to do the following (probably automated) steps: Alice needs to move the required amount of Mars currency back to an Earth-based account. This would likely go through a currency exchange that would trade her own local Mars currency for an Earth equivalent. Alice would use the new Earth currency she now has in her Earth account to proceed to the exchange with Bob who lives on Earth. Alice would then pay some delivery service to get it shipped to her via the next spaceflight scheduled. Alice may eventually convert back what’s left of her money. The core component of this system is the exchange, which manages the conversion between the different currencies. Just like today, it would be an entity that knows the current exchange rates and applies its own fees. The trick here would be that Alice would be unable to know the real exchange rate between the planets in realtime (due to latency). Sadly, we cannot expect to be able to do so with the existing technologies. There will likely be an arbitrage opportunity for whoever is able to synchronize the fastest, which is why the exchanges will have to increase their fees to account for the inherent arbitrage risk of the transaction. Some smart traders will likely use the time at which the line of sight between Earth and Mars is hidden by the sun to make a lot of money. Whoever can establish a connection the quickest between the two planets during this window of opportunity will profit greatly (Perhaps using a near Sun orbiting spacecraft relay or gravitational lensing). As technologies improve, we expect the transaction fee between Earth and Mars to be reduced due to risk decreasing. However, because our proposed monetary system relies heavily on cryptography and blockchains it would be possible to use something called atomic swaps to exchange the assets in a completely trustless manner, thus removing the risk linked to fraud, theft, or accounting mistakes. Due to the fact that we use cryptographic proofs, we can reduce the amount of risk of a transaction, thus reducing transaction fees compared to other types of monetary systems. This reduced risk is one of the main reasons we believe that future interplanetary trade (and many Earth-based transactions) will be decentralized. Because humans love to trade not only what they have, but even trade things they do not have, we expect interplanetary futures trading to be a significant part of Martian finance. (The Earthly Derivatives market is sometimes to be worth up to five times ). estimated global GDP This means that people on Earth will be speculating like crazy on Martian prices of hydrogen, water, and fusion companies (and vice versa). #Taking this further Since the invention of the airplane, the speed of human craft has accelerated more or less exponentially. We went from the Wright flyer to Voyager in less than 60 years. Assuming this continues, we will see starships flying and likely colonising the myriad of Earth like planets we have discovered. When the James Webb telescope launches, we will begin to find that Earthlike planets are in fact quite common, and they will beckon us to the heavens. This brings about a few interesting technological possibilities and problems, as we begin to increase the latency between colonies into months and potential years. How can we make trustless transactions between planets? Eliott and I had some drunken banter with an old friend in Paris last year. We came up with two solutions to offline (or very high latency) crypto transactions between planets: Trusted certificates: As you go marauding about the universe, you earn signed cryptographic certificates from trusted entities, similar to a credit score. When you seek to pay, you share your certificates signed by the trusted parties, then perform a challenge-response, verifying you own the certificates. We have outlined and open-sourced this decentralized certificate management system here. This isn’t very exciting, as payments still have to settle between people using the terrible slow speed of light. Quantum memory: This is far more exciting and quite impossible with current technology. Quantum memory is based on the reading once theorem which states that once a piece of quantum information is encoded, simply the act of reading it destroys the information. This means that you can encode payments you have been given into a quantum memory, and can only spend the transaction once. When a payment is made, the person receiving the payment would issue a change. This is the only we have seen that you can make truly decentralized, offline payment. There are probably some other ways to do this with extremely high latency, we would love to hear your ideas. #Potential Black Swans A few things could throw a wrench into the works, the most exciting being an (Something we love to think about). An is a fictional faster than light (FTL) communication device, popular in science fiction. Our current understanding of entanglement postulates that it operates faster than the speed of light, the transmission of information at FTL speeds remains impossible (something about observing the state of an entangled particle destroying the information). Ancible Ancible Yet given current advancements in quantum computing, and the highly classified nature of quantum cryptography, we like to think that almost nothing is impossible. Besides making for some exciting plotlines, such a device would wreak havoc on our infrastructure. FTL communications would allow massive arbitrage opportunities, allowing classical markets to be devastated. Since you have basically broken time, and time being relative, some interesting things become possible that are . According to the thought experiment, it’s possible to receive the answer to a message before the message is even sent. really hard to visualize Tachyonic Antitelephone All kinds of things begin to break, (which are explained nicely in ), and we really have no idea how to mitigate that from an interplanetary trade perspective. But it’s a ton of fun to think about. this video As civilization begins to spread amongst the stars, we really have no idea how distant colonies will interact. Settlements could be hundreds of years of travel apart. As our understanding of physics, information theory, and spaceflight continue to advance exponentially, no one can truly know what is possible. What we can say is that future systems will likely be decentralized, and operate without a root of trust, something we are quite excited about. If you are building the next generations' communications or civilizational infrastructure, we would love to chat. Thanks for reading. By ( Blockchain Architect at Nodle, Founder and Director of the Governance Research Institute) & ( Co-Founder at Nodle and science fiction author) Eliott Teissonniere Garrett Kinsman