Introducing Sno-Caps – The People’s Cap-And-Trade (2014 MIT Award Winner)

Introducing Sno-Caps – The People’s Cap-And-Trade (2014 MIT Award Winner)

Hello, this is James D’Angelo and welcome
to the Bitcoin 101 Blackboard series. Today, we’re going to be introducing something
that we’ve been working on for a number of months. It’s called Sno-caps or the People’s
cap-and-trade. Really, what it is it’s pitting Bitcoin’s
Public Ledger versus this enormous problem, this really tough and intractable problem
called the Tragedy of the Commons. This is a personal journey. It’s something I’ve
been very close to for a good chunk of my life.
Because of that, I’m going to rewind and talk about when I first learn about tragedy
of the commons which happen to be in university but ironically, it wasn’t in class. I first
learned about TOC or tragedy of the commons in my frat house because our kitchen looked
exactly like this one, right here. What exactly is tragedy of the commons? Well,
if you put 15 guys in one house all sharing rent, problems immediately start to arise
in the common areas; the kitchen, the living room and in particular, your frat house bathroom.
This is just a very mild example of people writing notes because the toilet paper was
always gone. You might look up TOC in the dictionary or
Wikipedia. We thought it would be important to look at the definition of just one particular
case and this is the tragedy of the frat house bathroom.
This is an “economics theory, according to which frat boys too busy with their homework
and partying, behaving in such a way that no one on earth will want to use their bathroom.
It was such a TOFHB that none of the sophomores could even shower at home.” Too disgusting,
too dirty and anything you left in the shower would immediately get stolen.
If you read deeper, you’ll find that TOC happens elsewhere, as well. It’s a big problem
with email and spamming, Wikipedia falsehoods, vandalism, office refrigerators both in terms
of cleanliness and stealing, clogged hallways, et cetera, et cetera. Remember, it’s just
a big problem of commonalities, common spaces, things that everyone can use.
But our example talks about the frat house. Let’s talk about exactly what was going
on in that frat house. Because of TOC, housemates immediately started getting angry at each
other. Pointing fingers and making signs that looked a lot like this.
“Sadly, your mother doesn’t work here so clean up your own mess.” We all know
the results of putting up signs like this, it does nothing. They don’t work. Immediately
you had a situation where between 15 guys, trust had started to erode.
Housemates hid their toilet paper and food. They locked their doors because they were
hiding stuff in there. They stole things when they went into the bathroom because things
were stolen from them. They started to actually not be able to use
certain areas of the house. They had to eat in restaurants and shower in gyms. Here is
another little sign, “Do not use, I spit in this and someone keeps using it. Thanks.”
We know what happens, someone turned around and used it, or they peed in it. Pretty disgusting
stuff as things start to erode. Every time you talk about this with people, you still
get this big BS, which is that “You can make a difference.”
Well, if you just started to clean up, others would see what you’re doing, respect that
and start to clean up themselves. That’s just not true, no matter how many signs you
make, no matter how much cleaning you do, you cannot make a difference in a frat house.
What really happens is because the dirtier housemates harden with all the finger pointing
and the cleaner housemates start to evolve. This became the new me.
You become this pig where you’re just dropping your pizza everywhere, you got your laundry
over here and indeed because of common spaces and the mess in common spaces, you become
worse than if you were living alone. After graduation, I often worked as a conservationist
so here I am in Gabon. This is elephant poop over here. This is a three-toed sloth here.
We got dropped off at our camp when we were trying to return to the wild.
One thing that was for sure is that the work involved lots and lots of rivers. Here is
the Amazon River; here are actually the beginnings of the Amazon river and the Andes of Peru.
As result of working a lot with rivers, you see a lot of TOC.
As we know, it wasn’t so long ago, definitely this century, when rivers were still magical,
adventurous places. Mark Twain based Huckleberry Finn in the rivers. Kids would go swimming
all the time in the rivers. People spent their lives in and around rivers.
Indeed, at that time, this river seemed infinitely clean. There seemed no way to mess up this
river paradise, but as we know, things have changed.
This is a little video, right here, in Kathmandu, Nepal. It’s pretty painful to watch. But
we see that we’ve treated our rivers in the last 100 years like we treat our frat
house bathrooms. This isn’t something that just happens in
Nepal, okay. Here’s the Mississippi river. But right here in Boston, we’ve got the
Charles River which they’re trying to clean up desperately but still very, very polluted.
What we see here is all the types of pollutants that are being dumped into rivers. Here’s
a factory here; here’s the toilets, septic tanks; here’s fertilizers being spilled
into the river; animal wastes, chickens and pigs; here’s the run off from automobiles
especially when it rains; and here’s the refineries down in the gulf coasts.
There’s really no great surprise. When you get down to the end of the river and to the
Gulf of Mexico, the fish aren’t doing so well and neither is the fishing. But what’s
important to understand is there’s a real tragedy here because you have a dilemma.
If you’re actually working on the river and say you’re this factory, right here.
You decide to do something really good with your waste. You decide instead of dumping
it into the Mississippi, that you’re going to put it through some sort of plant and clean
it up. Then, you’re going to reuse that water.
The trouble with that is that’s expensive. Now, okay, if you’re the only factory doing
it, you’re now going to be at a competitive disadvantage to your neighbours who now have
the advantage of not having to pay for treating their waste.
This is the heart of the problem. If you decide to do the right thing, you’ll find yourself
having to charge more for your services than any of your competitors along the river. That
is where the real tragedy comes in. If you’re in a frat house or if you’re
working on a river, pointing blame is easy, trust begins to erode and anger increases.
You start playing this big blame game. For me, I saw this very clearly.
Working as a local environmentalist, I started to see some problems with what I was doing.
If I was spending my day trying to prevent poaching of gorillas or trying to prevent
invasive species from ruining the jungle; but with climate change, global climate change,
there was the possibility that all of Gabon, which is now a forest would end up in short
order looking a bit like the Etosha Pan in Namibia.
Here’s me on my computer actually thinking about that. I got very scared. We live in
a world of strange ironies brought on by this tragedy of the commons. You have tragedy of
the local commons like the tragedy of the frat house bathroom. You see how it’s almost
like a big fractal. The small problem and the big problem are
exactly the same. First, I’ll clean my bathroom and then I’ll take care of the earth. Yes,
right, we know that’s not going to happen. When you start to consider things like global
climate change, you’ve really got the same problem; tragedy of the frat house bathroom
times a billion, 2 billion, who knows what, times a lot – a really big problem multiplied
by really big numbers and growing. We’ve all seen these images. Global carbon
emissions, 1751-2014, we sort of see it taking off during the industrial revolution and then
increasing exponentially into modern times. Indeed exponential; anytime we see something
exponential these days, here’s the growth of Facebook or the growth of Google or growth
of any of these big tech firms. Anytime we see this sort of exponential thing,
we realized that there is sort of an exponential growth to tech, especially with this capitalism
meeting technology. Here, we have growth of electricity usage,
here’s the growth of the telephone, the refrigerator, the stove, the radio, the car,
clothes washer, clothes dryer, air conditioning, colored TV, computers.
These are years down here 1960, 1945 and we see that these are all growths that are exponential
and the interesting thing about all of them, each one of them is that they put out a lot
of CO2. If you really doubt that it’s human created,
all you have to do is look at the things that produce CO2 and see their exponential growth.
Here’s the cell phone, VCRs, and here’s the internet which actually uses up a lot
of electricity – all the drives turning at Google and all these search engines, et cetera.
Growth is often exponential; tech growth in particular is often exponential. You go around
and do your thing because you care. You start lowering your carbon footprint, you drive
less, take public transportation, use less gasoline. Do all these stuff and what do you
see? Well, you actually see that the destruction is continuing and it’s continuing exponentially.
Your individual work is not even a blip on this growth curve.
You start to realize that the biggest BS ever when it comes to frat houses is actually the
biggest BS ever when it comes to global climate change. You cannot individually make a difference.
I just doesn’t work. What really happens is you end up paying extra.
To be more environmental, often times, it means you have to process your waste. You
have to do extra things or avoid certain things. You end up paying the cost.
And the question is “Will you go broke while everybody who’s exploiting the environment
is running off with the bags of cash?” Just like the frat boys getting angry at each other,
you got people getting angry and scared, pointing fingers at government, yelling left and right.
You got the democrats drawing cartoons, making fun of the republicans. But does all that
finger pointing make people better? Well, actually it doesn’t. It sort of leads to
entrenchment of ideas; it leads to conservatism of what you’re being made fun of for and
we’ve seen that through time. So here are polled republicans believes that
climate change is really a problem, that it’s really occurring and over time; so here is
2008, 2007, so there’s probably like 1990s. You can see that it’s gone down. They’ve
entrenched in their ideas, while democrats have gone up somewhat
This is a real tragedy. This is the tragedy of the commons. You see some groups hardening
and other groups are changing but what’s interesting here is the republicans have given
us the strongest practical tool to fight climate change and that is cap-and-trade. This goes
back to the 90s, to George Bush Sr. proposed and signed a cap-and-trade bill in 1990.
The amazing thing about it is it really, really worked. The big problem then was sulphur dioxide
which was causing acid rain. Here you can see the signing of this bill and the reduction
of sulphur dioxide into the atmosphere. It worked gangbusters. As a result, cap-and-trade
has become the centrepiece of all environmental negotiations.
If you look at what they were proposing Kyoto or Copenhagen, it’s all about developing
some form of global cap-and-trade where you actually cap or limit the amount of carbon
that each country can produce and you can start to trade the ability to emit carbon
or pollute between the different countries; realistically creating a tradable value around
emissions. This is such a great idea. Unfortunately, that’s where the good news
ends. Ever since 1990, lots of problems have started to come out based on cap-and-trade.
cap-and-trade has proven costly in two main ways. One is it’s expensive to regulate
so you’ve got to send out all these regulators to go about and measure the amount of carbon
that’s being produced. That’s fairly expensive especially for governments
who don’t do that thing very well but it also creates the same idea that we were talking
about. If certain countries do not sign on for the cap-and-trade, then it becomes expensive
for your country to be doing a cap-and-trade when the other countries are not. If you’re
limiting your emissions and they are not, you find yourself in a disadvantaged situation.
You get a competitive disadvantage. We see here, when we’re trying to recover
from this big, economic meltdown of 2007-2008. Well, the last thing anybody wants to hear
is sort of this new expense of building a cap-and-trade program.
This is really what we just said. Countries which adopt end up with an added expense and
as a result they can be the ones that go broke while the other countries start doing really
well because it’s just plain cheaper not to pay for your pollution. In all these environmental
accords at Kyoto, Copenhagen, there’s lots of anger; people pointing fingers. It becomes
political. If becomes divisive. You’ve got the USA pointing their fingers
at China. You have the citizens of the US getting angry at the American government;
Chinese angry at the Chinese government and every possible combination in the middle;
big tragedy of the commons, a big blame game. And as we saw in the chart, republicans have
begun stepping back from anything to do with cap-and-trade and really anything to do with
climate change. But are they wrong? This cartoon here shows, how much should the government
commit to stopping climate change? The big republican guy over here says, “I’m
a big fan of unrestricted and free.” Free meaning two things here but possibly the idea
that he doesn’t want to pay for a cap-and-trade program. That’s why this little character
down here calls him a cheapskate. We can see the big problem here because climatologists
learning from the beautiful success of 1990, with George Bush, they’ve really grown to
love this enormous top down solution. George Bush just signs a little piece of paper and
they’ve got their cap-and-trade. The big government comes in and tells everybody
that if they pollute, they’re going to have to pay for it. I will cap and you will trade.
Here is big business over here. We don’t even see the people because they’re not
involved, the climatologists’ solution to public policy.
This is what climatologists have been doing since 1990. They’ve been following that
same road, hoping for the same result. As we’ve seen with the belief chart spreading,
it’s not looking as immediately obvious that that’s going to happen anytime soon.
But what’s interesting is that there are even bigger fundamental problems with how
this is done. If the government is forming a free market, well, that’s kind of an irony
in itself. The government controlling the market makes it not free in general.
So the cap-and-trades that we hear about all the time kind of exists on a trapeze above
the people’s heads. You have the big government, way at the top, passing down the options to
trade carbon to the big polluters, really the big companies. There are no people involved
in this trade, at all. So, they formed a cartel above the heads of
the voters. We begin to see the problem with that, right. Individuals cannot go online
and start trading their own carbon emissions. By law, they’re left out entirely.
Okay, so here is the government telling them stop trading, “We are the free market,”
the government and sort of the irony of it all is that they’re upset having these petty
people involved in their project. But what they found is that if you leave the
voters out, if really the only thing you’re offering to voters is belt tightening, basically
more expenses, they’re going to get disenchanted with your cap-and-trade. This is a big problem,
because as we know, the strongest social forces in history are incentivized masses.
If the people can all profit or get involved in the market economy, we find that it changes
everything. Here’s this kind of humorous picture of a highway in North Korea and here’s
one in South Korea. If you’re an environmentalist, this is the one that terrifies you.
But what is really shown in this drawing is how incentivized people get out and actually
do something and can change the way the world works. You can sort of think of this as the
current cap-and-trade schemes over here. This one here is isolating all the people from
being involved. No people can actually trade here. You can
sort of see the benefits if you can somehow allow the people to start trading the carbon
themselves. When we look at the old way of doing it, we see that we’ve got a lot of
disenfranchised voters and as a result, all ideas of cap-and-trade seem to be falling
apart. That’s not good. Okay, now that we’ve set up all these problems,
we have now come to our mission. We need something that we can launch ASAP. Carbon emissions
are not going away. They’re increasing exponentially. We love the idea of cap-and-trade but we want
a truly free market. So, no cartels, small groups make for bad markets. We want something
that is available to everyone on earth. We don’t want to have to beg and plead with
our cheap and fickle governments. It’s not only not wrong to want a smaller government,
it’s unrealistic to think that the separation of beliefs is suddenly going to coalesce and
everyone is going to want a huge governmental approach to carbon emissions. It just seems
unlikely. Because of all the troubles with fairness
in the big international accords, we want to come up with something that is fair. If
we can come up with something that is unarguably fair even better, because all the arguing
is really part of the tragedy. Whatever we do clearly must have real regulation.
Some party is abusing the limits or caps that are in place, there must be some global recourse
in the system to those who are abusing the caps and limits of carbon emissions.
Finally and most importantly, we want to fight back against the tragedy of the commons. We
believe the way to do this is through the strongest social force in history, incentivized
masses. This has everything to do with ownership.
If we can insert ownership into the problem of carbon emissions, we can change the game.
Fortunately, this is now possible. It’s not a sure thing but it is now possible.
This is only possible because of the 2009 launching of Bitcoin with its beautiful public
ledgers. So, with no further ado, we propose a new idea, a new approach. We call it Sno-caps
and it’s the people’s cap-and-trade. Here’s the little elevator pitch using public
ledgers, Bitcoin’s public ledger. We can launch a global cap-and-trade today that sidesteps
government and gives equal shares of carbon emissions to everyone on earth. And it’s
important when you deal with such a big idea to start looking immediately at the difficulties
of building such a project. One of the first is say you launch the market
today and you gave everybody on earth equal shares. Well, the price is going to be next
to nothing or nothing at the beginning and someday if a big adventurist could see the
benefit in this and go and buy up all the shares. Here’s a fish who ate all the other
fish in the pond. Then, they would control the entire market
for the emissions. So you really don’t have a good market. This whole idea of early market
manipulation’s a problem but you’ve also created the same problem.
If they buy all the shares, everyone sold for next to nothing, you end up with all disenfranchised
people. They’re no longer excited about the idea, at all. This is difficulty number
1 of 4. Our solution to this is something that you
could have never done before, Bitcoin’s public ledgers. We’re going to make ownership
lifelong. And all carbon emissions will be loaned to the big polluters.
Here are the big companies over here and here’s the individual citizen with lots of carbon
emission rights over here. In our system, you can never completely sell your rights.
You will always be able to pull your lease bucket anytime and release it to someone else.
If you’ve entered into a lease contract with Wal-Mart and you want to switch it to
Whole Foods, you can do that at your beck and call. You are the landlord of your specific
rights. You have lifelong rights; very big change to how things are done and only possible
because of Bitcoin’s public ledger. What you really end up with is a “cap-and-lease”
and not a “cap-and-trade.” Individuals are now given atmospheric ownership which
is an idea that’s been talked about for a while but it’s never seemed realistic
to do. Governments didn’t know how to deal with enormous amounts of leases.
You make the individuals, the citizens, this earth’s new landlords. This is key because
as we know throughout history, ownership changes everything. If you can give people individual
ownership in a specific market, then that market changes entirely.
We’ve seen that with patent ownership, so with pharmaceuticals or anything else you
can make a patent of. The amount that drives invention is just phenomenal. People are going
in for themselves and as a result ended up making products that help the rest of the
world. We saw it also with Magna Carta which is in
clause 39 suggests that people have rights to their own property. There’s no question
that the ideas of this created the industrial revolution fomented all of the growth of England,
made England this enormous power. Just by simply providing individual ownership.
But why I think it’s actually one of the more interesting ones since I’ve sold a
lot of music in my life is this idea of music ownership. If you write a song today, your
rights in the United States will stay with you for 75 years after your death.
Just like what we’re proposing, you get a lifelong ownership. With music, you actually
get 75 more years so your family will profit off of your song, 75 years after you die.
Music is also very similar because it’s very hard to track.
Can you play music in a bar, you’re playing music in a club and the bars and clubs actually
pay for that. It’s not something they want to do. They hate paying for it and the bills
are fairly high. We see a lot of stories about this.
It isn’t the government that goes in and makes them pay for the music. It’s actually
two big companies that you might have heard of. You have BMI and ASCAP. These guys are
the music police. These are third party organizations who chase down every single one of my songs
on every radio, every club, everywhere on earth.
I get a statement every few months showing me where that’s played, very similar to
carbon. It could happen everywhere; very similar to carbon, they’re counting it and tracking
it and billing the individual companies for it.
Again, this isn’t a government program. The government will support it simply by the
fact that it agrees that you have those rights, these 75 years, which are arbitrary. These
are arbitrary things creating real wealth and creating real individual incentive to
produce music and control those musical rights. As we try to develop ownership, it’s key
to see that it’s not unique. This is a very key idea throughout history and has been ignored
recently as climatologists are looking to cap carbon. It’s something that needs to
come back. Again, as we mentioned, before Bitcoin, it
was absolutely impossible to do. Imagine forming a government branch to track ownership of
7 billion people on earth and all their ownerships and leases of carbon and all that bouncing
back whenever they want. That program, itself will be trillions and trillions of dollars,
just impossible. But public ledgers which came out with Bitcoin
in 2009 are the ideal solution for providing something like this. One private key, so this
user has one private key, is all that’s needed for him to make thousands and thousands
of leases. He can go around and change his private key and lease out again and again
and again. He or shewill always have ownership of his
private key and he or she will always have the ability to pull those leases back. Nothing
like this has ever existed before. If we start thinking about the cost of setting something
like this up, it turns out to be ridiculous. These are companies already out that provide
this service for free. What, you want 7 billion lease contracts? We just set it right up.
There’s a very small transaction fee on each transaction and blamo, you’ve got the
whole system; leases, selling itself, paying out to the right person all working autonomously.
You can do this today with counterparty; Master coin is talking about another company called
Etherium. It’s supposed to come out in a few months, all based on these smart contracts.
Computers are very good at taking one idea, of maybe one contract, and multiplying it
by billions and handling it with no problem. Contracts, it turns out are very easy for
computers to negotiate. We step into difficulty number 2. And this
is a major difficulty, and while the last one was kind of solvable. This one, we’re
not so sure about, right. Signing up the entire world isn’t easy.
Right now, we’ve got 7 billion plus people on earth but the big problem is not all of
them even have IDs. Here’s a recent article that just came out a couple of days ago about
220 million children on earth who don’t exist. What it means is they don’t have
any IDs. Growing up for them is very tough in this
countries just because a lot of high schools and schools require you to have some sort
of identification to get inside the system. But the systems are so bureaucratic, corrupt,
et cetera, that it’s very hard for them to get IDs. Fortunately, there’s a really
big push to change this. We’re trying to give the world access to
IDs. Now, you don’t need to have an ID if you don’t want one. If you just don’t
want to exist on earth, you could probably get away with that. But if you want an ID
and you want to be part of the global citizen of the global economy, et cetera, this option
should be available to you. So we see more and more people entering into
the economy, having an online presence via Facebook. Facebooks now got 2 billion registered
users and growing. But we’ve also seen companies like Circle now start to look at this as a
possibility, as well. They haven’t even launched yet but they’re
talking about trying to incorporate the world citizens into a financial system. And this
company has a lot of financial backing and hopefully they’re going to take on, leading
the charging to this abyss. What’s clear is that you can start to build
the system with the people who’ve got IDs. You can get people registered as much as possible.
Over time, a system like a cap and lease can grow as people get involved in the system.
As soon as they get involved, well, they can lease at the same rate that everybody else
on earth is leasing at. It gives them an incentive of financial incentive to actually get their
identifications. This might be a nice thing for them.
Now, were here with difficulty number 3. This is a problem right? If network effects takes
time, any big network, Facebook, Google, Bitcoin itself takes a number of years before it develops
to a point where it’s really changing the way things are working on earth.
A system like Sno-caps would likely take a minimum of 5 years before it really starts
dropping carbon in any significant way, at all. That would be the hope.
The trouble is in those 5 years, we’re losing, so we’re actually polluting like crazy.
We’re putting up carbon dioxide in the atmosphere which stays up there for a thousand years.
We’re going to be paying the price for that in time.
We’re left with the situation of sort of the rabbit, which is Congress. They could
come down tomorrow and slap on the cap-and-trade. They could provide amazing regulation tomorrow
or our system which is sort of the tortuous solution which would take a while, 5 years
maybe longer. The only good news about this is it doesn’t
seem immediately obvious that Congress is going to be doing anything in the next 5 years.
We’ve gotten close to producing some legislation but Congress has known about global climate
change. They’ve know about carbon emissions for 30 to 50 years. The inaction there just
continues. We’re not close to having any major policy
today. Remember, there are also issues with this enormous top down approaches anyways,
they leave the people out. These systems that we’re kind of hoping for are imperfect at
best, as they are. We might be better off with letting a system
grow and build service at grassroots. And then, letting government come in at the end.
It’s always nice to have some help from all parties involved, government included.
When government comes in at the end and not at the beginning, it often is much stronger,
the legislation is better, the regulation is better and the support is more effective.
It might behoove us to actually let the network build which incentivizes voters, which incentivizes
congress and letting government come in much stronger at the very end.
We’ve looked at three of the four major problems. This last one is the real problem.
This is the real monster problem right here, the biggest of them all. It has to do with
regulation. Public ledgers have no police. Public ledgers
just exist on computers. They don’t have any regulation. They don’t have any strong
arm to go about and make sure that what you claim to be trading, selling, or whatever
on your public ledger is actually happening. As it says here, public ledgers have no police.
Well, congress has the ability to pull the strings of police to actually move manpower
to get things done. This is why climatologists love Congress. The Congress can just be this
big bully and beat these people up and say this is what happens when you don’t pay
for your carbon emissions. Without regulation, well really, it’s game
over. You don’t have the cap-and-trade. You have just a trade. You have no real cap.
You haven’t really stopped anything. We’re really in search of the new idea or
a new force to change the ways things work. This is the old problem; we really need a
new ‘POW’, a real whammy. It will be nice if the thing we’re looking at is already
been shown to work on some level. And indeed the thing that we’re going to
talk about has worked already on a number of massive online sites and it works quite
well. What we’re talking about is REGULATION BY REPUTATOIN. If we go back to the previous
slide, all of these sites have some form of policing done by reputation itself.
eBay is a great example. If you’re selling a product on eBay or buying a product, you
look very carefully at how many positive reviews and positive feedback they have. You’re
unlikely to make a purchase or sale unless you’re looking on the order of 90% or above
because anything less than that, you start to see there’s some risk.
This is true with the selling on Amazon and even reviews on Amazon. This is true with
YouTube, where people will only watch videos if they’ve got enough thumbs up or enough
view counts, et cetera. The same is true with Twitter, Facebook and LinkedIn.
We’ve really seen a modern revolution of regulation by reputation, such as the business
world has really taken note. Here’s an article “6 Steps to Managing Your Online Reputation”
which can be really damaging for a company. If your restaurant is on Yelp and you’ve
got lots of bad reviews, you’re going to find your customer base is dropping.
Here’s a little joke down here. “Where do you hide the dead body? Answer: on the
third page of Google results.” Basically referring now the fact that most people will
find their search in the first page or two and rarely do they even go to the third. They
usually figure out what they’re looking for in the first couple of pages.
If your bad news is on the third page, well that’s probably okay but if they typed in
your company’s name and it’s there on the first page, you’re in trouble. So, a
Google search can be your best friend or your worst enemy.
And we’ve seen this really coming to play with more and more new companies where they’re
really relying on this reputation to insert an online presence into things that had no
online presence before. So here’s negotiating hotel rooms in individual
people’s houses. Something that seems so sketchy 10 years ago has now become so big
that Airbnb is valued at billions and billions of dollars.
The same is true with Uber. You can walk out in the airport and some person in a regular
car will pick you up. All these things we used to be really afraid of are regulated
by online reputation schemes. If we think about something like carbon emissions,
if a company or a product is being made with sort of sloppy carbon emission standards,
we could start to see responses from other companies.
So whole Foods will not buy your product if it’s got certain ingredients. In fact 54%
of the food sold at Wal-Mart, you will never see at Whole Foods because of their rules
and regulations based on information they have on that product.
These are very powerful market driving features as we’ve seen Whole Foods has really grown
to a powerful market force in the last dozen years.
This is a really important thing. This ability to regulate by reputation is a major sea change
with how humans are interacting on earth and how products are being delivered and sold.
There’s a chance that we might be able to do some regulation of carbon emissions just
by dealing with this very modern concept of online reputations.
As we’ve already looked at the 4 major difficulties with coming up with such a scheme, let’s
look at some of the advantages that would really help drive sort of the market adoption
or the user adoption of such a cap-and-lease, or cap-and-trade scheme.
These are the big advantages of Sno-caps. We’re just going to run through this list
today because in our next video, we’re going to detail each of these individual advantages,
highlighting exactly how they could work to build the massive global adoption that is
required for building a carbon emission’s cap-and-trade.
Remember, Sno-caps incentivizes the masses. Each person on earth could end up profiting
by leasing their own rights, their atmospheric rights of carbon emissions. You’re actually
giving every individual on earth the chance to profit. That’s a fairly big incentive.
We’ve already spoken how we’re going to at least start by using a modern approach
to regulation, this idea of reputation. We’ve also mentioned how inexpensive this could
be. Remember if we’re running this contractual system on Bitcoin’s public ledger, the expense
of running this system is just the initial programming.
It’s important to realize that Bitcoin was also launched for free – so this possible
rewriting of all international finance is just coming along by itself. But it’s incentivizing
many, many people. It produces incentives that are also very
inexpensive to launch, likely launched by one person who’d just press go on his computer.
We’re hoping to do a similar thing with Sno-caps.
As a result, we can launch today or as soon as the software gets done. The key here is
there’s no need to wait for Congress. There’s no need to create new science or make more
insulting cartoons for the skeptics to change because they’re not going to change. They’re
hardened. The only way they’re going to change is
if they start to see something working or if they’re incentivized to join the system.
So, “no waiting for Congress” really means “no waiting for all the skeptics, the Koch’s
brothers, et cetera.” We can do it for very cheap and we can launch without having to
convince everybody to jump on at the beginning. The next one, inside of the system, we have
two powerful feedback loops which drive adoption, which we’ll talk about in the next video
and regulation. We’ll get new forms of regulation not just the regulation form here. We’ll
get new forms of adoption that are not just based on the initial incentives to the masses.
These things can be accelerated by feedback loops which drive capitalism and all the exponentially
UP functions that we’ve been talking about. Wouldn’t it be great if we could use an
exponential function to drive carbon emissions down? That’s what we’re looking at here.
Another thing that’s very, very important if you’re going to launch a cap-and-trade
scheme, is that it be transparent. A lot of countries and a lot of individuals in every
country are very skeptical. They’re going to want to tear down your system but if you
could show that your system is fully transparent, you’re going to eliminate a lot of that
skepticism. And the beautiful thing of a Bitcoin public
ledger that it’s never existed before is 100% transparency. You’re going to look
in and be able to see every transaction. You’ll be able float a penny inside the system and
you’d be able to track it. That’s transparent, fully transparent – really,
really helps with global adoption because of all the cynics and all the critics and
all the naysayers. They’re going to be able to analyse the data. They’re going to be
able to make moves themselves and see those moves happening inside the system, 100% transparent.
And we’ve touched the planet already but this is a very, very important thing is that
our system is fully voluntary. Congress isn’t coming down and forcing you to do it. You
are choosing to sign in. Clearly, there are some big advantages of voluntary over forced.
If people do come in because of all the incentives that they get, they’re going to be much
more positive than if the government’s coming around with regulators telling them exactly
what they need to be doing and how much they need to be paying, with no incentives but
belt tightening for them. The other thing that’s really a key and
we’ve barely touched on, is that one of the big troubles with Kyoto and Copenhagen
is the idea of fairness. Should this country do more? Should this country do less? This
country has been developing and polluting for a long time so maybe we should let the
others catch up; big, big issues of fairness. Part of this is because they’re drawing
political lines and geographic lines. Our system tackles this from the opposite angle.
We offer equal access to every citizen on earth. That’s a form of fairness that’s
pretty hard to argue. Every individual in the system that can sign
on clearly has some issues with internet access and ID access and all that stuff right now,
will have equal abilities in the system to benefit. So very fair. Everyone gets a share
or everyone gets 10 shares so it’s just an equal amount of shares.
Another really important advantage is by actually putting a cap-and-trade out there that anyone
can use, you are providing an option where in most places there is no option.
If you’re living in most places in the United States, there is no cap-and-trade in your
area. There is nothing even close to being announced.
If you’re living in most countries on earth, there is no cap-and-trade. If you’re government,
now, all of a sudden you’ll have not only the option of choosing this one but you’ll
be able to look at it and maybe model it and develop your own. Or you’ll have the ability
to say “well, I didn’t design it”, so you’d have some plausible denial, “but
we’re going to use it” so that you aren’t responsible for all the fairness issues and
all that. For some government people, it’s better
to have systems they can just sign on to that are already built, that aren’t perfect.
Then start arguing all the time about what fairness is and these things get really, really
complex. In these conventions, where all the countries
and all these political leaders, the documents just grow, grow, grow, grow, grow and the
systems become so convoluted and complex that people just don’t know what they’re talking
about anymore. Because we’re designing the system based
on one user, one share, it’s as simple as it gets. It’s very easy to understand but
it provides an option for anybody out there who’s looking to get involved in a cap-and-trade.
Sign on, start trading and have some fun. So that’s all we’re going to cover in
this first part. The next part we’re going to actually go through each one of these individually
and really look at how they could spur adoption and really start lowering carbon emissions
on earth. This would be great. Without Bitcoin, it would
be absolutely impossible. Public ledgers have changed the game and we’re just hoping to
apply it to this really intractable problem of frat house bathrooms, the tragedy of the
commons. The beauty is carbon is countable so we can
see how we’re doing. We can see how individual companies are doing. We can see how individuals
are doing. As a result, it is an ideal thing to actually trade and if you can cap it, people
will definitely trade. Before we go, we normally say, “Please like,
comment, subscribe, et cetera on YouTube.” That would be great. Do all that.
But there’s something more important you can do right now. We were kind of late in
the game into this great MIT Climate CoLab challenge and we’re going to post the link
below. But if you really like to serve idea; if you
really see the black chain, being able to tackle carbon emissions or at least give it
a shot because it’s so inexpensive, we might as well try. Please sign on here and comment
here. If you do like, please go over here because
right now, even though we came in late, we’re number 2 of about 40 submissions. We’d love
to get to the point where we really get recognized. There’s not a lot of prize money here but
there is some recognition and some help with developing a program like this.
And though something like this is fairly easy to code, it will still take a little bit of
work. It needs some attention at the beginning to really get the ball rolling.
It would be really great to get that attention. Again, like, comment, subscribe but we’re
going to post the link to the Climate CoLab which will look something like this. Please
click over there and do what you can over here.
Again, if your comments aren’t positive, that’s fine as well, we’d love to hear
them here. But if you do enjoy it we’d love to hear it here. And there is no thumb down.
I think there should be some sort of thumb down here. It’s a very positive site so
you really don’t have the option if you do click, you’ll click over here.
As we know, Bitcoin comes so far from left field that it takes a lot of people a long
time to understand. The same is true with an idea like this. This is so far from left
field if you know nothing about public ledgers and their ability to rewrite how we do trading,
ownership and contracts. So even the idea will take a little while
to develop, take a little while to settle in but with little luck, we might even be
able to make initial launch later this year or early next year. Then, let Metcalfe’s
law sort of climb in. We’ll start maybe first year with one trade
and move up and if it does move up, well, that would be great because then we could
drop CO2 emissions down. We can make the planet a little but safer for my son who is now two
and a half years old. Okay, so, remember, please like, comment subscribe
but even more importantly, hop on to this page. You’re going to have to log on and
give it some support over here and make some comments over here. The People’s cap-and-trade
MIT Climate CoLab contest. Thanks again and we’ll catch you at our next video.


70 thoughts on “Introducing Sno-Caps – The People’s Cap-And-Trade (2014 MIT Award Winner)”

  • Im trying really hard to get past all this "global warming" stuff since the tradgedy of the commons in general is such a big problem for the health of the earth, and any solution you find to the imaginary problem of "global warming" will also solve thousands of real environmental problems, but boy is it hard.

  • CryptoCoinUser says:

    Note the threat assessment of CO2 itself has been highly politicized, and that many of the climate scientists are on the payroll of governments that are always seeking for more power to seize & peddle.
    What about local pollution, such as garbage dumping or coal soot?
    In general, "Tragedy of the Commons" is the favorite justification of Statistics to centralize yet more power, with very poor results.
    I think fewer "commons" and more private property is the ultimate answer for sustainability.

  • Joshua Johnson says:

    Just signed up on MIT's website.  Will vote!  What other types of TOC problems do you think this would solve?

  • dontmissaday says:

    The – + feedback loop in nature is what allows people to prevent TOC . When there no – people do what they want

  • This Global Warming/ Climate change stuff is hard to sit through. Not because it doesn't make sense, but because the Science surrounding it is pure bunk. It's all been politicized, So many interest groups have latched on….

    Scientific foundations are corrupted, Governments are corrupted, there are leaked emails of the top "climate Scientists" revealing that Data has been tampered for the desired results. 

    Sorry, all your other work is stellar, but when someone starts speaking about some bunk science as if it were True, it's hard to take you serious. 

    Using the environment as an example of a Tragedy of the commons I can understand, but Climate change? I'm sure there is more hard core Science that the Climate has always changed throughout Earths history, far before man has been around. 

    Looking forward to the Next Video… Thanks for your work. 

  • Donald Dienst says:

    Overheard a year from now… Yea, they would only employ me if I lease them my families credits while I am with the company.

  • Thank you for that program I wish every body on earth think about that and do something ..If that happen we will be in safe . I hope you continue you show ..
    God bless you .   

  • corsomagenta says:

    Great video James. 2 questions: 
    1) what inspired the name "Sno" in Sno-caps (other than maybe you like the old movie theater candy)

    2) 1 person one lease; how do you ensure that there is no cheating on that = people gaining multiple leases, "dead people voting", newborns getting their leases, what age do newborns get to start leasing, etc.?


  • Channing Jones says:

    I agree with everything in this video except that carbon emissions are causing climate change. This is an idea that is being peddled by the power elites to fool the masses.

    I do agree though that our current energy technology is very polluting and needs to be changed. A much better solution though is to start using clean energy sources such as "conventional" renewables (which are already more economical than coal) and also research Cold Fusion and the Quantum Energy Field as even better energy sources.

  • Philip Salter says:

    I only watched half the video but it seems obvious where you are heading. How is your idea different from an altcoin that you want to force everyone to use? I don't see any benefits of blockchain technology for this project, because all you are adding is the 'decentralized' feature, which is not the critical point here! The real problem with this kind of worldwide deal is getting coorperation from all parties, and you propose no solution to this! I'll watch the 2nd half and reply to my comment if I change my mind. 

  • Luiz Paulo Magalhães says:

    Amazing, thank you for you work!

    I didn't understand 2 things though.
    1- How can be guaranteed that everyone will have only one share, is there going to have some kind of passport system of security or something like it?
    2 – What will be the profit of for-profit police companies? And are they going to be able to enforce something or only give data to the transparency?


  • Any "climate change" is caused by the sun.  Plant life needs carbon dioxide to live, genius.  Just like we need their oxygen.  God created it that way.

  • The solution to tragedy of the commons is private property and laws so you can stop/impose a cost to the people who pollute your property. Cap-and-trade is immoral, anti free market and force.

    Think about that.

  • I disagree with patents and copyright How Intellectual Property Hampers Capitalism | Stephan Kinsella Stephan Kinsella interviewed on Intellectual Property and SOPA by David Hutzelman

  • Odd to see so much (man made) climate change denial in here, I thought bitcoiners were more scientifically minded than this… Anyway great idea! Can't wait to hear more about it. What I'm interested to know about is why, at least in the beginning, would a company pay to lease someones shares? And how do you decide at what value the CO2 cap should be set at?
    Also a side note, this is really relevant to your channel but maybe not to the "Bitcoin 101" series?

  • I would be interested to see what else you bring on about this but I am skeptical of this working and for that matter skeptical if CO2 really got such a big impact on the Earth's climate/ has really catastrophic consequences. But time will tell on both things 🙂

  • im myself chernobyl survivor and all this globalc climate change stuff just eats my soul, im not saying humans are not releasing a lot of carbon into atmosphere, yes we do, but effects of it on climate are not sure if negative or positive, just little change in suns activity would do wayyyy much more climate change than all human activity, as it is did in past ice ages and warm periods. What all these activist crazy people should worry about is obvious stuff like nuclear waste, monoculture farming which devastates insane amounts of land, persistent chemicals which polute da shit out of everything and general stupidity, stupidity is clear winner problem which fucks everything up.

  • Fascinating. I'm quite hostile towards anything that gives government any power at all, and therefore cap & trade was quite an evil word in my circles… So this video was in dire risk of me turning it off and going away angry until the 3rd quarter of it where James mentioned the reputation system replacement. Now I like the idea, but it was really close there, I had my mouse hovering over the "back button" more than a few times before it got that far.

  • Matt McKibbin says:

    While i think that the actual impact on humans lives (negative or positive) due to carbon emissions alone is debatable, protecting the environment both air and water  and people from other hazardous materials is really important.  One of the solutions i always thought of to the tragedy of the commons was to just divy up the land in question equally. This might be able to do that!  You could have a coin or token on the bitcoin 2.0 protocols like counterparty or mastercoin for each hazardous chemical emitted.  Going over the amount based on population would end up giving them the incentives to reduce.

    Rothbard talks about privatizing the oceans in For A New Liberty.  I cant believe bitcoin technology might be able to make it happen.  Check starting page 314 in the book..  You would probably thoroughly enjoy it.

  • 14:53 this hit me with a ton of bricks! James, I sent you a little BTC tip to help support WBN. Better than paid content, which makes me want to pay for it 😀

  • Great set of comments (and lots of responses) on this reddit page
    And the MIT proposal page

  • Anarchist will say "Property is force", and libertarians will nitpick "who's initiating force?".  Either way, I just don't see a property handle on pollution.  Ledgers do not create property.  A title to your land, for example, did not create your property… your control of it did.  The registry just helps to avoid conflicts.  With patents and copyright, you have an author of the work and it's publishers working together to exclude others from using the copy-able work… a bit questionable already.  You seem to want to give everyone on Earth a share of "I'm not sure what!" of which they have no control over.  If I have a home built incinerator in my back yard… WUT!??  I go online and…  No, dude, it ain't going to happen.  More likely, I hide the incinerator.
    Keep in mind that when it comes to C02 and climate change, we're talking about the burning of fossil fuels.  It's a lot easier to get at before I buy the fuel than after.  You'd be dealing with just a few providers, rather than trying to get at the entire world population.

  • BTW, what kind of a jackass carries his trash miles to the local river rather than burn it in his backyard?  IDK.  I guess one who thinks he gets to own a river in common.

  • David de Kloet says:

    I wanted to support but I didn't want to register so I decided to login with my Google account. But after giving permission to read my Google account it still forces me to fill out a registration form :-/

  • reachforacreech says:

    just because everything would be made private property doesn't mean that everyone wouldn't collectively mess up there own space.this "tragedy of commons"(in this sense) is a one owns the sky.
    also pretty disheartening that people have been blinded and not seeing that global warming(global climate change is better term) is actually happening and are buying the corporate propaganda.

  • Another great video, thanks James! I got the impression your conflation climatologist with climate activist isn't going to be very popular. My experience is that the former are much more interested in describing the actual problems and the latter are concerned with the solutions.

    I haven't read your white paper yet – does the system work for any GHG, or just CO2?

  • If you care about global warming watch this !  40 Mins of why what we are currently doing is not working & will not work and a workable solution that solves all sorts of other world problems – a MUST WATCH 

  • All i know is that Bitcoin Scrypt (BTCS) uses Scrypt like litecoin as opposed to SHA256 it also has a hard cap of 21 million coins. Bitcoin Plus (XBC) is proof of stake giving 10% interests the first year. Coins take 24 hours to mature and start minting it uses SHA256 and coins will have a hard cap at 55,350 price is at $1.13.

  • DigitalGalalxy says:

    Just to clarify, how do the shares work?  So, anybody who has an ID can register in a database, and that database attaches a private key in a "altcoin" to their name.  They control the private key.  Then, they use the "altcoin" to lease that to a corporate entity, who is also registered in the database.  A "music police" entity third party goes around, audits the corporations who cooperate for their carbon stuff, and charges a small fee. The public ledger makes clear how many shares each corporation has so there's no funny business, and the music police provide the audit. 

    My question (and I think I asked in the comments in the actual whitepaper submission, though probably not as directly) is "how do you motivate people to participate"?  Do the corporation have to pay for the "lease"? So they have to pay to clean up heir act nad pay to have a bunch of leases?  That sounds great but it's likely to drive away corporate adoption if it gets too expensive.  Do the corporations offer special discounts if a you "lease with them", as a way to buy in?  That way it's good for corporations and good for people.  

    Or is it instead a boycott threat?  Is it a "the leases don't cost anything, but you better participate or else we'll put you on a blacklist and post it online and you wouldn't want that now would you"?  That's bad PR,even though there's not legal action involved.  I wasn't quite clear on how you motivate both a)the corporations to cooperate, and b) the people to actually sign up.  Could you elaborate on this? 

  • i dont believe in human-caused global warming and i dont believe carbon dioxide is harmful.  I like your videos but i feel your environmentalist background has left you with some possibly ill conceived ideas about "carbon".  And also, I don't think we should be trying to make Bitcoin the solution to all problems..Bitcoin is the solution to the money problem.  Let's solve pollution separately please.

  • VanosEnigmA VideoMix Androgyny says:

    #Funny #illustration   #SlideShow   #Cartoon   #Comics  😉 Tragedy of the commons From Wikipedia, the free encyclopedia:

  • I know little about politics , economics and bitcoin's ledger but this is impressive. Even if this doesn't work from my perspective we went from no progress to a real chance for a global system against climate change. This could be the "roman sewage system" of the modern day on a global scale. It's so exciting how new and promising all this technology that is coming out looks. Thank you WBN and everyone who is involved.

  • Michael Johnson says:

    for difficulty #2 @ 23:38 Chris Ellis is working on Creating Affordable Decentralized Passport Services Using Available Cryptographic Tools and posted this on github find him on twitter @MrChrisEllis

  • Andrei Bannikov says:

    If you really think about it – CO2 is a food for plants and algae more CO2 greener the planet. Yes?
    Now – Oil, Gas and Coal is Nitrogen Carbon and Hydrogen – building blocs of biosphere trapped underground after catastrophic event. Don't you think Mother nature wants us to restore biosphere by returning its lost part back where it belongs? You are very good at understanding BC but you are clearly confused and newer learned bio chemistry.

  • Simply put, the most elegant solution I've yet seen for climate change. Inexpensive, global, participatory and incentivized. Great job.

  • Could you correlate Iron Mountain, Monkton and Plimer with the bent science of the IPCC bandwagon.
    Assuming James has no dog in the fight, nor do I.
    James is the best, love him!
    But Global Warming +, sorry Climate Change + or – , is invention by the usual suspects who brought us christianity, coca cola and 911.

  • Thank you so much for attending to my query.
    The one dimensional retort does no justice to the subject
    and I refrain from the logical fallacy of your question.
    We are being wagged by Iron Mountain and the free fall
    of three steel buildings.
    Once one accepts Euclid's axiomatic definition of the point
    the illogical result is the recurring decimal of Pi.
    The model is wrong, not nature as you said yourself in one
    of your superb clips.
    Then again one is inhibited by politically correct dogma from
    even scrutinizing reality in a public forum policed by salaried trolls
    'bots and hubris.

    One may be sure that one reading in climate study does not in law result.
    I would treasure the chance to correspond with you on a level field.

    Respectfully Peter Trainin.

  • brilliant stuff. I think the only big thing is if human morality were to somehow shift. Right now we're a fairly moral society (at least the 1st world). If for some reason that changes a lot of this might not work because it hinges on society being reasonable or having a certain amount of trust. I hope my point is coming across clear its difficult to put into words exactly what Im trying to say.

  • So what does this mean for the rural resident who needs to clean up his yard after the storm anyhow and chooses to heat his home for the winter with wood, while still selling his emission lease to the coal company down the road?  How the heck do you measure things like annual leaf burning or the guy that makes his own aluminum smelter and burns 10 gallons of waste oil a week?

  • Interesting, and involved the most important aspects — namely, a reputation-based system. However, not sure any cap-and-lease is necessary. If Bitcoin ends the nation state, the entire world should become wealthy quickly. Technology will advance exponentially, and with more wealth, more of the people in the world will demand that their consumed products be environmentally friendly. In other words, if u can afford it, u shop at Whole Foods. If u are on a budget, u shop at Walmart. So the solution is to advance liberty, resulting in greater wealth creation for everyone, thereby resulting in a shift in consumer demand to environmentally friendly products. Still, maybe tokens for not just carbon emissions, but for clean water, and any natural resource would work faster!

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