Vitalik Buterin released a new blog post on April 20, 2018, wherein he shared his thoughts on Eric Posner and Glen Weyl’s book Radical Markets. The book is majorly divided into five sections, each highlighting different reforms such as self-valuation of property, quadratic voting, a new immigration program, disintegrating large financial institutions to prevent monopoly and price manipulations in a free market.
Harberger Taxes and Ethereum Naming System
According to Vitalik Buterin, however, distributed ledger technology could potentially serve as the technical backbone for several of the concepts that were conceived of in the book. He wrote:
“The book interests me for multiple reasons. The intersection of interests between the Ethereum community and Posner and Weyl’s work is multifaceted and plentiful.”
Interestingly, the ideas presented in the book are being put in place by the Ethereum community and will be implemented in the future.
Radical Markets also proposed a new system to prevent private ownership of land and property. The authors anticipate that landowners would benefit if they were allowed to self-value their land and then pay a percentage of it as tax. The general public can then acquire property for one year by outbidding others but also risk losing the title at the next annual auctions if they were to be outbid.
The Ethereum community came pretty close to implementing a version of the harberger taxation system in the past. The characteristic trait of such a system was that the property, which, in the above case is a domain name, is allocated to the highest bidder for a period of one year before the bidding process is repeated.
However, Ethereum developers were quick to point out that such a domain naming protocol would have more drawbacks than benefits. A technology company that has a reputed position in the market would have to pay a high price for its domain name, for example.
Some companies that are legitimate owners but do not have a positive cash flow would also find it financially unviable to exceed a price threshold for the domain name. Furthermore, if a spammer gained access to a domain name of a reputed blockchain company, investors could lose their digital currency holdings.
Antitrust laws and decentralization
Posner and Weyl propose to split up large financial corporations that hold significant shares of rival companies in the same industry. The authors believe that for a free market to exist, it is necessary to prevent a single entity from having a monopoly, thus preventing price manipulation. Ethereum developers are also taking steps to incentivize decentralization of the validator nodes in the upcoming proof of stake consensus.
Vitalik pointed out that there is a similarity between antitrust laws and decentralization. The common aim, after all, is to prevent accumulation of majority resources in a single hand. Buterin proposed that validating nodes could be penalized if they commit an error. The penalty would be proportional to the number of nodes that have committed an error at the same particular time.
Highlighting the advantage of having such a system in place, he said, “This incentivizes nodes to set themselves up in such a way that their failure rate is maximally uncorrelated with everyone else’s failure rate, reducing the chance that many nodes fail at the same time and threaten the blockchain’s integrity.”