Value Alignment

The challenge and process of ensuring AI systems pursue objectives that align with human values, even as those systems become more capable and autonomous. Value alignment addresses both technical and philosophical questions about encoding human preferences into AI behaviour.

Semantic Classification

Content

• The challenge and process of ensuring AI systems pursue objectives that align with human values, even as those systems become more capable and autonomous. Value alignment addresses both technical and philosophical questions about encoding human preferences into AI behaviour.

Virtual Economy

• Facilitating economic activities and asset exchange.

• Leveraging the VirtualEconomy, EconomicPolicy, and Marketplace entities from the ontology.

• Example Linked-JSON snippets:

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        "@value": "Represents the economic system within the metaverse, including trade, ownership, and currency exchange."
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Economic Opportunities

• The interconnected virtual economy allows for new forms of economic activity and value creation.

Saving with it

• The Bitcoin community believes that Bitcoin is the ultimate money,a ‘store ofvalue’,chance to separate money fromstate,increase equality ofopportunityand ubiquity ofaccess,while others view it as ‘ratpoison’,or a fraudulent Ponzi scheme.ponzi2021aldenA notable exclusion from the negative rhetoric is Fidelity, the global investment manager, who have always been positive and have recentlysaid:it“Bitcoin is best understood as a monetary good, and one of the primary investment theses for bitcoin is as the store of value asset in an increasingly digital world.”
• The following paraphrases Eric Yakes, author of ‘The 7thProperty’. Again, this is an Austrian economics perspective, and like much economic theory the underlying premise iscontestedmaurel2012keynesian:it“Paper became money because it was superior to gold in terms of divisibility and portability BUT it lacked scarcity. People reasoned that we could benefit from the greater divisibility/portability of paper money as long as it was redeemable in a form of money that was scarce. This is when money needed to be “backed” by something. Since we changed money to paper money that wasn’t scarce, it needed to be backed by something that was. Since the repeal of the gold standard, politicians have retarded the meaning of the word because our money is no longer backed by something scarce. So, what is bitcoin backed by? Nothing. Sound money, like gold, isn’t “backed”. Only money that lacks inherent monetary properties must be backed by another money that maintains those properties. The idea that our base layer money needs to be backed by something is thinking from the era of paper money. Bitcoin does not require backing, it has inherent monetary properties superior to any other form of money that has ever existed.”
• The 2022 ARK Big Ideas report again provides some useful market insight. They posit that demand for the money features of Bitcoin could drive the price of the capped supply tokens to around 1M pounds per Bitcoin as inFigure4.5.Take this with the usual pinch of salt, as Ark have been performing notably badly lately with their predictions.

• Potential market exposure to Bitcoin as a money
• Perhaps more than any of these takes, it is worth considering the current public perception of the technology as a money and store of value. This twitterthread from professional sportsman Saquon Barkley, to his half million followers on the platform, captures the mood. He is one of a handful of athletes now being paid directly in Bitcoin.
• it“I want my career earnings to last generations. The average NFL career is 3 years and inflation is real. Saving and preserving money over time is hard, no matter who you are. In today’s world: How do we save? This is why I believe in bitcoin. Almost all professional athletes make the majority of their career earnings in their 20s. With a lack of education, inaccessible tools, and inflation, a sad yet common reality is many enter bankruptcy later on. We can do better. We need to improve financial literacy. Bitcoin is a proven, safe, global, and open system that allows anyone to save money. It is the most accessible asset we’ve ever seen.”
• This ubiquity of access is what probably most distinguishes Bitcoin. Previously it could be argued that only the most wealthy could access the ‘means’ to store their labour without loss of value over time(through inflation). To be clear, inflation is an important part of the money system, somewhat within the control of the central banks, and approximate to taxation. It applies equally to all holders of the moneys upply. Asserting that money should be replaced by a ‘hard asset’ such as Bitcoin, in the place of the more controllable utility of money, is likely both a fantasy, and wrong minded. This conflation of money and property is a confusion caused by Bitcoin’s proximity to money, and it’s‘ money like’ network, and is extremely commonplace.
• These narrative takes are all rooted in the popular idea that Bitcoin isa ‘hedge against inflation’; an increasingly fragile take, as the price plummets with global markets. The Bitcoin community seems somewhat confused about the nature of money, which is predictable because we can see in these sections that money is pretty confusing. Money is the fluid, elastic,cagan1958demand and thin ‘working credit’ layer on top of historical human production, which provides transaction convenience, and tools for credit. Value is effectively swapped in and out of this layer through the actions of central banks, controlling inflation into acceptable margins. Simplistically this is done through manipulation of interest rates (the easiness of credit), quantitative easing (buying of assets) and quantitative tightening (selling of assets). To give a quick high level view of central bank activity we can use the PESTLE framework:
  • Political:
    • Government policies and regulations can impact central banks by influencing monetary policies.
    • Political stability and government credibility can impact the confidence in central banks and currency.
  • Economic:
    • Economic growth and inflation rates influence central bank decisions on monetary policy.
    • The level of debt and balance of payments can impact a central bank’s ability to control monetary policy.
  • Sociocultural:
    • Consumer behaviour and demographics can influence demand for money and credit.
    • Attitudes towards saving and borrowing can impact the economy and central bank decisions.
  • Technological:
    • Technological advancements can change the way money is distributed and managed, such as the increasing use of digital currencies.
    • Technology can also influence the accuracy of economic data, affecting the decisions of central banks.
  • Legal:
    • Central banks are subject to laws and regulations, such as those related to banking and finance.
    • Changes in laws and regulations can impact central bank policies and operations.
  • Environmental:
    • Environmental factors, such as natural disasters, can affect the economy and central bank decisions.
    • The focus on sustainability and reducing carbon emissions can impact the decisions of central banks.
• Fiat money is primarily it not a long term store of value, as Austrian economists perhaps believe it should be. This function is left to assets. The Austrian thesis of ‘hard money’ (which cannot be ‘debased’ by government action) seems somewhat naïve when one considers that credit exists anywhere in the world (ie, the creation of paper money through loans) then this would be used to buy up a hard money asset in the long run, causing a scarcity crisis. This is what happened to gold in the middle of the last century.
• Fundamentally, Bitcoin isn’t money (in the traditional sense) because it’s not an IOU, which money certainly is. It’s a bearer instrument, novel asset class, with money like properties, as identified above. As said again and again it functions most like a ‘property’ which can be invested in by anyone, with all the attendant risks of that property class to the holder. Lyn Alden says it sits somewhere between a saving tool, and an investment, acting as “programmable commodity money”.
• Andrew M. Bailey says it“in an ideal worldwhere governments honour the rights of citizens, they don’t spy, they don’t prohibit transactions, they manage a sound money supply, and they make sound decisions, the value of bitcoin is very low; we’re just notin an ideal world”
• Another potentially important differentiating affordance is censorship resistance. There’s really nothing else like it for that one feature. With that said Bitcoin is only a viable ‘money like thing’ when viewed in the layers described in this book, and elsewhereBhatia2021.The base chain layer is an apex secure store of value. Whatever layer 2ultimately emerges is the transactional layer which could replace day today cash money, while the hypothetical layer 3 might be useful for complex financial mechanisms and contracts operating automatically, and also provides the opportunity for using the security model of the chain to support other digital assets, including government currencies through stable coins. All these things have a natural home in borderless social spaces.

Bitcoin’s Role

• Store of Value: Despite recent falls against the U.S. dollar, Bitcoin has maintained better value against the peso.
• Protection Against Inflation: Bitcoin is increasingly viewed as a hedge against inflation, attracting individuals and companies.
• Global Adoption: High inflation countries, like Nigeria and Argentina, are turning to Bitcoin. Chainalysis ranks Turkey and Argentina just below Nigeria in cryptocurrency adoption.
• Monetary Sovereignty: Amidst a banking sector liquidity crisis, Bitcoin is seen as a bastion for monetary sovereignty.

Digital Value Transmission

Emerging consensus

• The recent hype cycle ignored the legacy definitions described above andinstead focusing almost exclusively on Ethereum based peer-to-peerprojects. It can be seen that the description is somewhat in the eye ofthe beholder.
• It’s possible to frame this Ethereum Web3 as a hugely complex andinefficient digital rights management system (DRM). DRM is somethingthat users of the internet are increasingly familiar and comfortablewith. It’s somewhat debatable whether decentralising this is worthwhile.The thesis of the developers of the technology seems to be that withoutit, control of ‘value’ will accrete over time, to one or more hegemoniccontrolling entities. It’s a strong argument, but there is asubstantial counterargumentemerging that users just don’t want this stuff. The nervousness oflegislators in the USA to the attempt by Facebook/Meta to enter thispeer-to-peer value transmission space is telling in terms of theperception of who is driving Web3.
• Throughout 2022 there was much furore on the internet over what Web3might be, and who it ‘serves’. Enthusiasts feel that products such asSign-In withEthereum(EIP-4361) might give users choice over their data sovereignty, and ameme to this effect is seen in Figure2.3.In practice though users are expecting to use badly written, buggy,economically vulnerable ‘crypto’ wallets to log into websites. Thequality of this wallet software is improving of late with the so called“wallet wars” seeing commerce grade offerings from Coinbase and sharesplatform ‘Robinhood’. These two companies alone have over 100 millionusers. It’s likely that these wallets will evolve to offer the fullspectrum of Web3 functionality. With that said it doesn’t seem to makemuch sense yet on the face of it. There are in fact examples of thetechnology completely failing at censorship resistance. Popular ‘Web3’browser extension Metamask and NFT platform Opensea have both recentlybannedcountriesin response to global sanction pressure. This failure to meaningfullydecentralise will be explored further in the distributed identitysection.

A meme showing differing approached to logging in on a website.

• Of their 2022 ‘Big Ideas’report,ARK investment LLC (who manage a $50B tech investment) said thefollowing (Figure2.4),which connects some of the dots already mentioned, and leads us into thenext section which is Blockchain and Bitcoin:
• it
• “While many (with heavily vested interests) want to define all thingsblockchain as web3 we believe that web3 is best understood as just 1 of3 revolutions that the innovation of bitcoin has catalyzed.
• The Money Revolution
• The Financial Revolution
• The Internet Revolution”

ARK slide on Web3. Rights requested

• This new hyped push for Web3 is being driven by enormous venture capitalinvestment. A16Z are a majorplayer in this newlandscape and have released their tenprinciplesfor emergent Web3. Note here that A16Z are (like so many others)probably a house ofcards.
• Establish a clear vision to foster decentralized digital infrastructure
• Embrace multi-stakeholder approaches to governance and regulation
• Create targeted, risk-calibrated oversight regimes for different web3 activities
• Foster innovation with composability, open source code, and the power of open communities
• Broaden access to the economic benefits of the innovation economy
• Unlock the potential of DAOs
• Deploy web3 to further sustainability goals
• Embrace the role of well-regulated stablecoins in financial inclusion and innovation
• Collaborate with other nations to harmonize standards and regulatory frameworks
• Provide clear, fair tax rules for the reporting of digital assets, and leverage technical solutions for tax compliance
• This list seems targeted toward the coming regulatory landscape, andcould be considered at odds with the original tenants of an organicallyemergent, decentralised internet. Indeed principles such as ‘furtheringsustainability goals’ seem downright incongruous. The community theyclaim to wish to support here are openly critical of these majorinstitutional players and their motives, with even more pointedcriticisms coming from outside of theWeb3. This book and lab steer wellclear of these companies and their applications.
• Dante Disparte, chief strategy officer of ‘Circle’ venture capital, saidin testimony to a US senate hearing; that Web 1 was ‘read’, Web 2 was‘read write’, and that Web 3 will ‘read write own’. The importanttakeaway here is not so much this oft quoted elevator pitch for Web3,but the fact that legislative bodies now consider this technology aforce which they need to be aware of and potentially contendwith.
• Jeremy Allaire, again of Circle’, talks about the recent legislativeorder in the USA as follows: it“this is a watershed moment for crypto,digital assets, and Web 3, akin to the 1996/1997 whole of governmentwakeup to the commercial internet. The U.S. seems to be taking on thereality that digital assets represent one of the most significanttechnologies and infrastructures for the 21st century; it’s rewarding tosee this from the WH after so many of us have been making the case for9+ years.”
• We will see in the following chapters that participation in this newWeb3 is contingent on owning cryptocurrencies. It’sestimated thatabout 6% of people in the UK own some cryptocurrency, with skews to bothyounger demographics, and smaller holdings. The legislative landscape inthe UK is comparatively strict withquestionable“know your customer / anti money laundering” (KYC/AML) data collectionmandated inlaw.Users of UK exchanges must provide a great deal of personal financialinformation, and undertake to prove that the wallets they arewithdrawing to are their own. From the perspective of the UK SME itseems this seriously limits the potential audience for new products.Europe meanwhile has recently voted through even more restrictiveregulation, applying the “transfer of fundsregulation”to all transactions coming out of exchanges, enforcing a database of alladdresses between companies, and reporting transactions above 1000 Eurosto authorities. They have narrowly avoided enforcing KYC on alltransfers to private wallets, but have capped transactions at 1000Euros. The recent “Markets in Crypto Assets(MiCA)legislation imposes overheads that may make it harder for smallerbusinesses in the sector to operate within the EU, but is has beencautiously welcomed by established players (Figure2.5,who have been hungry for clarity. It is certainly far short of the ‘ban’seen in China, and the regulation be enforcement in the USA.

“Regulatory clarity attracts capital & entrepreneurs from around the world.”

• European Parliament approved EU’s crypto assets framework, MiCA
• Enforcement clock starts in June, with 12-18 months for rules to kick in
• MiCA offers license tailored to crypto asset services and stablecoin issuers
• Regulation refrains from covering decentralized finance or non-fungible tokens
• Stablecoin issuer rules boost consumer confidence, potentially increasing institutional comfort
• Transfer of Funds regulation passed, imposing stronger surveillance and identification requirements for crypto operators
• Regulations described as world-first and end of Wild West era for crypto assets
• MiCA represents a crucial step forward for crypto industry, providing comprehensive set of rules
• Crypto firms must be licensed by the EU and comply with money laundering and terrorism finance safeguards to serve EU customers
• Concerns about weakened privacy due to reporting standards in the name of customer safety and national security
• Binance CEO supports MiCA, calling it a pragmatic solution
• EU’s MiCA could become a global template for international companies
• UK, now outside the EU, is setting similar stablecoin and crypto asset service rules
• Germany is bringing forward legislation allowing the ‘tokenisation’ oflegacy instruments such as stocks, though it’s far from clear what thevalue of this would be, except perhaps lowering risk for custodians. Itseems that this EU position has prompted the UK government to seize thepotential competitive advantage offered, and there will be more on thislater. Japan meanwhile has gone so far as to make anannouncementabout supporting the technologies at a national level.
• It’s a complex evolving narrative, and clearly contradictions arecommon. Right now there seems little appeal for stepping into Web3. Intothe confusion, this book advances a narrow take, and toolset, whichmight extract some value from the technologies, while maintaining a lowbarrier to entry.

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

Broader and metaverse uses

• So far according to a16z NFTs break down into:
  • Profile pictures: These were discussed at the start of the chapter and have felt ubiquitous on Twitter over the last couple of years. The major projects will likely hold value, but the hype cycle will likely lead to all profile NFTs going in and out of fashion. There’s potentially a fresh wave of this same kind of low key identity hype possible in the metaverse, and indeed the two plausible both intersect and converge.
  • Art and Music: Art has also been discussed above. Peter Thiel, the billionaire venture capitalist who founded PayPal has invested in expanded NTF use cases. The first is ‘Royal’ which is experimentally selling limited NFT tokens which contractually entitle the holder to a portion of music artist royalties. Spotify are experimenting with music NFTs (and of course in the metaverse). This is an early adopter area, and again likely converges with our planned uses cases as more complex tooling appears. For instance Tim Exile of Endless.fm talks about digital assets extending to the building blocks of co-created music, and wished to build a music creator economy which distributes value to creators at the instant of the final value transaction with the consumer.
  • Gaming: As discussed there’s pushback from the gaming community, but huge investment from the likes of Lego, Blizzard, Epic, Ubisoft etc.
  • Gig tickets: Not only the straightforward use of transferable tickets for events as NFTs on a blockchain (which is impossible due to the cost right now) but also onward monetisation of ticket stubs as memorabilia. The NBA is already looking at this.
    • “The team sells the ticket for face value many many years ago, but when that stub is being sold now for much more many times over, the team gets none of that money,” York explained. “But with an NFT stub that changes. Let’s say a new rookie enters the NBA next season and he turns out to be the next LeBron James. That ticket stub from his first game, as an NFT, the team can put a commission on it — 20 percent or however much, the NBA decides that. In 10 years when it’s worth a lot of money, I or whoever owns that NFT, can sell it for say $100,000. The NBA can still collect 20 percent of that sale, because it’s all on a smart contract.”
• It seems so obvious that this will extend to the virtual events space in the metaverse.
  • Utility: These are broadly ‘membership’ style tokens, and this seems like a sensible fit. Peter Thiel (again) for instance launches a political funding NFT from Blake Masters to support his senate ambitions. To be clear, Thiel is a fundamentalist libertarian, and at the very least highly eccentric. This is not necessarily a positive for the technology.
  • Virtual worlds are a huge application for NFTs, and this seems like it would be a natural fit for our collaborative mixed reality application. In reality the $2B of sold so far is mostly ‘allocations’ in nascent ecosystems, being sold as highly speculative assets, without even a metaverse to use. The majority of that amount is the hyped ‘Otherland’ plots sold under the Bored Apes brand.
  • “Full stack” luxury brands. Nic Carter describes a mating of physical and virtual luxury goods. His is a useful article on the future direction, and he has also provided a primer on NFTs. There are many such examples already, such as [Tiffanys ‘NFTiff’
• cryptopunks](https://nft.tiffany.com/faq/) collaboration which will automatically generate royalties for Tiffanys and parent company Louis Vitton in perpetuity. Such products prove provenance, create new aftermarket opportunities, and unlock metaverse applications.
• It is completely reasonable to assert that these use cases could be accomplished without the use of NFT technology, and is part of the hype bubble.
• Twitter user Cantino.Eth offers an exhaustive roundup of what they think future uses might be. It’s a thread full of industry insider jargon) but it’s indicative of a shift in focus from speculation to ‘building’ asthe market conditions change.

https://twitter.com/chriscantino/status/1542930648750608387)

• Some of the more interesting (less arcane)use cases identified in the thread are summarised very briefly below,again with comments as to how this might pertain to our metaverse applications.
  • Hobby tokens, demonstrating interest in an activity. This is potentially a metaverse adaptation of badges on a blazer in the real world, and might serve to drive communities in a metaverse. The same is true for activism and political alighnment. It’s a great idea and worth developing.
  • Professional Networks and qualification badges, like a LinkedIn qualification panel, but in the metaverse. A cisco NFT in the metaverse for a CCNA qualification makes intuitive sense.
  • Badges to indicate membership of distributed projects within a metaverse. This allows users to identify avatars with shared goals in the metaverse.
  • Retail incentives, like brand loyalty stamps or rewards for participation in marketing, or early access programmes. This is a true in a metaverse marketplace as it is in a real world coffee shop.
  • Multiplayer communities with incentives to hit collective milestones. “Collecting as a team sport”. This again seems like a great and intuitive opportunity, but is perhaps less suitable for our more business focussed space. User content submission and automatic monetisation when reused by brands, bonded to an NFT contract.
  • Customer Cohort NFTs: early adopters of successful brands would be able to prove the provenance of their enthusiasm for a new product, and this might unlock brand loyalty bonuses. It seems this wouldn’t be a transferable NFT, and is more like the “soulbound” idea advanced by Meta.
  • Education and Customer Support, think an NFT of a great score on reddit community support forums. A trusted community member badge, but visible in the metaverse. This is somewhat like the web of trust model advanced earlier in the book.
  • NFTs as contracts is far more likely in the metaverse than it has proved to be in real life. This is how ‘digital land’ and objects will be transferred anyway, but with the addition of contractual conditionals with external inputs more subtle products may appear.

Defining money

• It is necessary here to briefly examine what money actually is in the world outside of metaverses, so we can understand it in the context of a virtual global space. In the previous section Bitcoin can be viewed in a couple of different lights. As a self custody digital bearer asset it can be viewed as ‘property’, like gold, i.e. not a liability on someone else’s asset sheet. Indeed this has long been one of the assertions of the community and it finds favour in law, possible most ironically in China, which of course banned mining. ‘Money’ though is a far more slippery concept to grasp. It seems very likely that Bitcoin is evolving as a “base money”, and it’s important to define that, but there are many other kinds of money within the online world which can potentially transfer value within virtual social spaces.
• Money is an economic good, that is generally accepted as a medium of exchange. This simple and specific description doesn’t do justice to the complexity of everything that humans consider to be money. Even the Encyclopaedia Britannica strays from this immediately in their definition:
  • “money, a commodity accepted by general consent as a medium of economic exchange. It is the medium in which prices and values are expressed; as currency, it circulates anonymously from person to person and country to country, thus facilitating trade, and it is the principal measure of wealth.”.
• In which it can be seen that the principle measure of wealth might not be money at all, but rather property, credit, etc. So are these things money? Is a promise on a ledger money? The assertion at the top of this section is challenged by different schools of economic thinking. Global debt is around an order of magnitude larger than base money, and most wealth is stored in illiquid land/built environment (some $300T), and yet the system seems to work fine. The debt theory of money offered by anthropologist David Graeber suggests that money is an abstraction of barter, and thereby ‘credit’, but credit clearly pre-dates money, and needs no barter, commodity, intermediary nor underlying asset.homer1996history This suggests that money is something slightly different.
• Money seems to have evolved for two principle purposes; trade outside of a village context, and inheritance.szabo2002shelling In doing this somewhat replaced and augmenting ‘credit’, which as said above, was a promise between parties based on future actions, and likely as old as rudimentary language itself. The anonymous Heavyside blog powerfully argues that it is the relative stability of money over time which creates a less discussed composite feature; that of ‘confidence’ in being able to defer labour into money, basically credit again.
• Money can be divided into two categories, which are fungible (interchangeable) from the point of view of the users. Base money is ‘commodity’ money which is backed by assets, or tangible physical (or digital) goods through the actions of a central bank ledger, and is around $30-$40T. Everything else is ‘fiduciary media.’selgin1996defense
• All fiduciary money is credit but not all credit is fiduciary money .Nobody knows the extent of the global supply of fiduciary media. It encapsulates all the new digital money platforms like PayPal, gift cards, offshore accounts and all manner of other vehicles, and is thought to be many tens of trillions ofpoundsborio2017fx.This somewhat muddies the waters since money that is backed by‘something’ blends away into money which cannot reasonably be assayed. This in turn undermines the assertion that money is backed. It seems that a combination of available raw materials and labour, central banks and their associated political structures,barsky1987fisher and global markets drive the value of money up and down relative to “stuff” in the shops. This manifests as ‘inflation’, which is ‘possibly’ the effect of not pegging money to an asset such as silver, or gold as in the past.hall2009inflation While the gross drivers of inflation seems to be accepted and understood, nobody seems verysurehow the various aspectsinteract.Dickson White wrote in 1914 about hyperinflation in France due to excessive money printing, and this driver and causal link persists as aprimary hypothesis for inflation and hyperinflation, a cautionary tale especially today after the huge fiscal responses to the 2008 global financial crisis and COVID.white1914fiat It may be that central banks actually have no decent response to global monetary pressures and areoverdue a paradigm shift, as explained by DanielaGabor (Professor of economics and macro finance at UWE Bristol):
  • “…last stage of a central banking paradigm, when it implodes under the contradictions of its class politics? Under the financial capitalism supercycle of the past decades, inflation-targeting central banks have been outposts of (financial) capital in the state, guardians of a distributional status-quo that destroyed workers’ collective power while building safety nets for shadow banking. The limits of this institutional arrangement that concentrates (pricing)power and profit in (a few) corporate hands are now plain to see. If the climate and geopolitical of 2022 are omens of Isabel Schnabel’s GreatVolatility that most central banks and pundits expect for the near future, then macro-financial stability requires new framework for co-ordination between central banks and Treasuries that can support astate more willing to, and capable of, disciplining capital. But such a framework would threaten the privileged position that central banks have had in the macro-financial architecture and in our macroeconomic models. The history of central banking teaches us thatpolicy paradigms die when they cannot offer a useful framework for stabilising macroeconomic conditions, but never at the hands of central bankers themselves.”
• All this makes it hard tofind a universally acceptedand explicable definition of money. The best approach may be to look atthe properties of a thing which is asserted to be a money. In his book‘A history of money’, Glyn Davies identifies “cognisability, utility,portability, divisibility, indestructibility, stability of value, and homogeneity.”davies2010history
• Stroukal examines Bitcoins’ likely value as a money from an Austrian economics perspective and identifies “portability, storability, divisibility, recognizability, homogeneity and scarcity.”stroukal2018can
• A helpfully brief and useful web page by Desjardins from2015describes some properties and explains them in layman’s terms below:
  • Divisible: Can be divided into smaller units of value.
  • Fungible: One unit is viewed as interchangeable with another.
  • Portable: Individuals can carry money with them and transfer it to others.
  • Durable: An item must be able to withstand being used repeatedly.
  • Acceptable: Everyone must be able to use the money for transactions.
  • Uniform: All versions of the same denomination must have the same purchasing power.
  • Limited in Supply: The supply of money in circulation ensures values remain relatively constant.

Money and Value

• Bitcoin As Money
• Money

Virtual Economy

• Facilitating economic activities and asset exchange.

• Leveraging the VirtualEconomy, EconomicPolicy, and Marketplace entities from the ontology.

• Example Linked-JSON snippets:

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Economic Opportunities

• The interconnected virtual economy allows for new forms of economic activity and value creation.

Saving with it

• The Bitcoin community believes that Bitcoin is the ultimate money,a ‘store ofvalue’,chance to separate money fromstate,increase equality ofopportunityand ubiquity ofaccess,while others view it as ‘ratpoison’,or a fraudulent Ponzi scheme.ponzi2021aldenA notable exclusion from the negative rhetoric is Fidelity, the global investment manager, who have always been positive and have recentlysaid:it“Bitcoin is best understood as a monetary good, and one of the primary investment theses for bitcoin is as the store of value asset in an increasingly digital world.”
• The following paraphrases Eric Yakes, author of ‘The 7thProperty’. Again, this is an Austrian economics perspective, and like much economic theory the underlying premise iscontestedmaurel2012keynesian:it“Paper became money because it was superior to gold in terms of divisibility and portability BUT it lacked scarcity. People reasoned that we could benefit from the greater divisibility/portability of paper money as long as it was redeemable in a form of money that was scarce. This is when money needed to be “backed” by something. Since we changed money to paper money that wasn’t scarce, it needed to be backed by something that was. Since the repeal of the gold standard, politicians have retarded the meaning of the word because our money is no longer backed by something scarce. So, what is bitcoin backed by? Nothing. Sound money, like gold, isn’t “backed”. Only money that lacks inherent monetary properties must be backed by another money that maintains those properties. The idea that our base layer money needs to be backed by something is thinking from the era of paper money. Bitcoin does not require backing, it has inherent monetary properties superior to any other form of money that has ever existed.”
• The 2022 ARK Big Ideas report again provides some useful market insight. They posit that demand for the money features of Bitcoin could drive the price of the capped supply tokens to around 1M pounds per Bitcoin as inFigure4.5.Take this with the usual pinch of salt, as Ark have been performing notably badly lately with their predictions.

• Potential market exposure to Bitcoin as a money
• Perhaps more than any of these takes, it is worth considering the current public perception of the technology as a money and store of value. This twitterthread from professional sportsman Saquon Barkley, to his half million followers on the platform, captures the mood. He is one of a handful of athletes now being paid directly in Bitcoin.
• it“I want my career earnings to last generations. The average NFL career is 3 years and inflation is real. Saving and preserving money over time is hard, no matter who you are. In today’s world: How do we save? This is why I believe in bitcoin. Almost all professional athletes make the majority of their career earnings in their 20s. With a lack of education, inaccessible tools, and inflation, a sad yet common reality is many enter bankruptcy later on. We can do better. We need to improve financial literacy. Bitcoin is a proven, safe, global, and open system that allows anyone to save money. It is the most accessible asset we’ve ever seen.”
• This ubiquity of access is what probably most distinguishes Bitcoin. Previously it could be argued that only the most wealthy could access the ‘means’ to store their labour without loss of value over time(through inflation). To be clear, inflation is an important part of the money system, somewhat within the control of the central banks, and approximate to taxation. It applies equally to all holders of the moneys upply. Asserting that money should be replaced by a ‘hard asset’ such as Bitcoin, in the place of the more controllable utility of money, is likely both a fantasy, and wrong minded. This conflation of money and property is a confusion caused by Bitcoin’s proximity to money, and it’s‘ money like’ network, and is extremely commonplace.
• These narrative takes are all rooted in the popular idea that Bitcoin isa ‘hedge against inflation’; an increasingly fragile take, as the price plummets with global markets. The Bitcoin community seems somewhat confused about the nature of money, which is predictable because we can see in these sections that money is pretty confusing. Money is the fluid, elastic,cagan1958demand and thin ‘working credit’ layer on top of historical human production, which provides transaction convenience, and tools for credit. Value is effectively swapped in and out of this layer through the actions of central banks, controlling inflation into acceptable margins. Simplistically this is done through manipulation of interest rates (the easiness of credit), quantitative easing (buying of assets) and quantitative tightening (selling of assets). To give a quick high level view of central bank activity we can use the PESTLE framework:
  • Political:
    • Government policies and regulations can impact central banks by influencing monetary policies.
    • Political stability and government credibility can impact the confidence in central banks and currency.
  • Economic:
    • Economic growth and inflation rates influence central bank decisions on monetary policy.
    • The level of debt and balance of payments can impact a central bank’s ability to control monetary policy.
  • Sociocultural:
    • Consumer behaviour and demographics can influence demand for money and credit.
    • Attitudes towards saving and borrowing can impact the economy and central bank decisions.
  • Technological:
    • Technological advancements can change the way money is distributed and managed, such as the increasing use of digital currencies.
    • Technology can also influence the accuracy of economic data, affecting the decisions of central banks.
  • Legal:
    • Central banks are subject to laws and regulations, such as those related to banking and finance.
    • Changes in laws and regulations can impact central bank policies and operations.
  • Environmental:
    • Environmental factors, such as natural disasters, can affect the economy and central bank decisions.
    • The focus on sustainability and reducing carbon emissions can impact the decisions of central banks.
• Fiat money is primarily it not a long term store of value, as Austrian economists perhaps believe it should be. This function is left to assets. The Austrian thesis of ‘hard money’ (which cannot be ‘debased’ by government action) seems somewhat naïve when one considers that credit exists anywhere in the world (ie, the creation of paper money through loans) then this would be used to buy up a hard money asset in the long run, causing a scarcity crisis. This is what happened to gold in the middle of the last century.
• Fundamentally, Bitcoin isn’t money (in the traditional sense) because it’s not an IOU, which money certainly is. It’s a bearer instrument, novel asset class, with money like properties, as identified above. As said again and again it functions most like a ‘property’ which can be invested in by anyone, with all the attendant risks of that property class to the holder. Lyn Alden says it sits somewhere between a saving tool, and an investment, acting as “programmable commodity money”.
• Andrew M. Bailey says it“in an ideal worldwhere governments honour the rights of citizens, they don’t spy, they don’t prohibit transactions, they manage a sound money supply, and they make sound decisions, the value of bitcoin is very low; we’re just notin an ideal world”
• Another potentially important differentiating affordance is censorship resistance. There’s really nothing else like it for that one feature. With that said Bitcoin is only a viable ‘money like thing’ when viewed in the layers described in this book, and elsewhereBhatia2021.The base chain layer is an apex secure store of value. Whatever layer 2ultimately emerges is the transactional layer which could replace day today cash money, while the hypothetical layer 3 might be useful for complex financial mechanisms and contracts operating automatically, and also provides the opportunity for using the security model of the chain to support other digital assets, including government currencies through stable coins. All these things have a natural home in borderless social spaces.

Bitcoin’s Role

• Store of Value: Despite recent falls against the U.S. dollar, Bitcoin has maintained better value against the peso.
• Protection Against Inflation: Bitcoin is increasingly viewed as a hedge against inflation, attracting individuals and companies.
• Global Adoption: High inflation countries, like Nigeria and Argentina, are turning to Bitcoin. Chainalysis ranks Turkey and Argentina just below Nigeria in cryptocurrency adoption.
• Monetary Sovereignty: Amidst a banking sector liquidity crisis, Bitcoin is seen as a bastion for monetary sovereignty.

Digital Value Transmission

Emerging consensus

• The recent hype cycle ignored the legacy definitions described above andinstead focusing almost exclusively on Ethereum based peer-to-peerprojects. It can be seen that the description is somewhat in the eye ofthe beholder.
• It’s possible to frame this Ethereum Web3 as a hugely complex andinefficient digital rights management system (DRM). DRM is somethingthat users of the internet are increasingly familiar and comfortablewith. It’s somewhat debatable whether decentralising this is worthwhile.The thesis of the developers of the technology seems to be that withoutit, control of ‘value’ will accrete over time, to one or more hegemoniccontrolling entities. It’s a strong argument, but there is asubstantial counterargumentemerging that users just don’t want this stuff. The nervousness oflegislators in the USA to the attempt by Facebook/Meta to enter thispeer-to-peer value transmission space is telling in terms of theperception of who is driving Web3.
• Throughout 2022 there was much furore on the internet over what Web3might be, and who it ‘serves’. Enthusiasts feel that products such asSign-In withEthereum(EIP-4361) might give users choice over their data sovereignty, and ameme to this effect is seen in Figure2.3.In practice though users are expecting to use badly written, buggy,economically vulnerable ‘crypto’ wallets to log into websites. Thequality of this wallet software is improving of late with the so called“wallet wars” seeing commerce grade offerings from Coinbase and sharesplatform ‘Robinhood’. These two companies alone have over 100 millionusers. It’s likely that these wallets will evolve to offer the fullspectrum of Web3 functionality. With that said it doesn’t seem to makemuch sense yet on the face of it. There are in fact examples of thetechnology completely failing at censorship resistance. Popular ‘Web3’browser extension Metamask and NFT platform Opensea have both recentlybannedcountriesin response to global sanction pressure. This failure to meaningfullydecentralise will be explored further in the distributed identitysection.

A meme showing differing approached to logging in on a website.

• Of their 2022 ‘Big Ideas’report,ARK investment LLC (who manage a $50B tech investment) said thefollowing (Figure2.4),which connects some of the dots already mentioned, and leads us into thenext section which is Blockchain and Bitcoin:
• it
• “While many (with heavily vested interests) want to define all thingsblockchain as web3 we believe that web3 is best understood as just 1 of3 revolutions that the innovation of bitcoin has catalyzed.
• The Money Revolution
• The Financial Revolution
• The Internet Revolution”

ARK slide on Web3. Rights requested

• This new hyped push for Web3 is being driven by enormous venture capitalinvestment. A16Z are a majorplayer in this newlandscape and have released their tenprinciplesfor emergent Web3. Note here that A16Z are (like so many others)probably a house ofcards.
• Establish a clear vision to foster decentralized digital infrastructure
• Embrace multi-stakeholder approaches to governance and regulation
• Create targeted, risk-calibrated oversight regimes for different web3 activities
• Foster innovation with composability, open source code, and the power of open communities
• Broaden access to the economic benefits of the innovation economy
• Unlock the potential of DAOs
• Deploy web3 to further sustainability goals
• Embrace the role of well-regulated stablecoins in financial inclusion and innovation
• Collaborate with other nations to harmonize standards and regulatory frameworks
• Provide clear, fair tax rules for the reporting of digital assets, and leverage technical solutions for tax compliance
• This list seems targeted toward the coming regulatory landscape, andcould be considered at odds with the original tenants of an organicallyemergent, decentralised internet. Indeed principles such as ‘furtheringsustainability goals’ seem downright incongruous. The community theyclaim to wish to support here are openly critical of these majorinstitutional players and their motives, with even more pointedcriticisms coming from outside of theWeb3. This book and lab steer wellclear of these companies and their applications.
• Dante Disparte, chief strategy officer of ‘Circle’ venture capital, saidin testimony to a US senate hearing; that Web 1 was ‘read’, Web 2 was‘read write’, and that Web 3 will ‘read write own’. The importanttakeaway here is not so much this oft quoted elevator pitch for Web3,but the fact that legislative bodies now consider this technology aforce which they need to be aware of and potentially contendwith.
• Jeremy Allaire, again of Circle’, talks about the recent legislativeorder in the USA as follows: it“this is a watershed moment for crypto,digital assets, and Web 3, akin to the 1996/1997 whole of governmentwakeup to the commercial internet. The U.S. seems to be taking on thereality that digital assets represent one of the most significanttechnologies and infrastructures for the 21st century; it’s rewarding tosee this from the WH after so many of us have been making the case for9+ years.”
• We will see in the following chapters that participation in this newWeb3 is contingent on owning cryptocurrencies. It’sestimated thatabout 6% of people in the UK own some cryptocurrency, with skews to bothyounger demographics, and smaller holdings. The legislative landscape inthe UK is comparatively strict withquestionable“know your customer / anti money laundering” (KYC/AML) data collectionmandated inlaw.Users of UK exchanges must provide a great deal of personal financialinformation, and undertake to prove that the wallets they arewithdrawing to are their own. From the perspective of the UK SME itseems this seriously limits the potential audience for new products.Europe meanwhile has recently voted through even more restrictiveregulation, applying the “transfer of fundsregulation”to all transactions coming out of exchanges, enforcing a database of alladdresses between companies, and reporting transactions above 1000 Eurosto authorities. They have narrowly avoided enforcing KYC on alltransfers to private wallets, but have capped transactions at 1000Euros. The recent “Markets in Crypto Assets(MiCA)legislation imposes overheads that may make it harder for smallerbusinesses in the sector to operate within the EU, but is has beencautiously welcomed by established players (Figure2.5,who have been hungry for clarity. It is certainly far short of the ‘ban’seen in China, and the regulation be enforcement in the USA.

“Regulatory clarity attracts capital & entrepreneurs from around the world.”

• European Parliament approved EU’s crypto assets framework, MiCA
• Enforcement clock starts in June, with 12-18 months for rules to kick in
• MiCA offers license tailored to crypto asset services and stablecoin issuers
• Regulation refrains from covering decentralized finance or non-fungible tokens
• Stablecoin issuer rules boost consumer confidence, potentially increasing institutional comfort
• Transfer of Funds regulation passed, imposing stronger surveillance and identification requirements for crypto operators
• Regulations described as world-first and end of Wild West era for crypto assets
• MiCA represents a crucial step forward for crypto industry, providing comprehensive set of rules
• Crypto firms must be licensed by the EU and comply with money laundering and terrorism finance safeguards to serve EU customers
• Concerns about weakened privacy due to reporting standards in the name of customer safety and national security
• Binance CEO supports MiCA, calling it a pragmatic solution
• EU’s MiCA could become a global template for international companies
• UK, now outside the EU, is setting similar stablecoin and crypto asset service rules
• Germany is bringing forward legislation allowing the ‘tokenisation’ oflegacy instruments such as stocks, though it’s far from clear what thevalue of this would be, except perhaps lowering risk for custodians. Itseems that this EU position has prompted the UK government to seize thepotential competitive advantage offered, and there will be more on thislater. Japan meanwhile has gone so far as to make anannouncementabout supporting the technologies at a national level.
• It’s a complex evolving narrative, and clearly contradictions arecommon. Right now there seems little appeal for stepping into Web3. Intothe confusion, this book advances a narrow take, and toolset, whichmight extract some value from the technologies, while maintaining a lowbarrier to entry.

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

Broader and metaverse uses

• So far according to a16z NFTs break down into:
  • Profile pictures: These were discussed at the start of the chapter and have felt ubiquitous on Twitter over the last couple of years. The major projects will likely hold value, but the hype cycle will likely lead to all profile NFTs going in and out of fashion. There’s potentially a fresh wave of this same kind of low key identity hype possible in the metaverse, and indeed the two plausible both intersect and converge.
  • Art and Music: Art has also been discussed above. Peter Thiel, the billionaire venture capitalist who founded PayPal has invested in expanded NTF use cases. The first is ‘Royal’ which is experimentally selling limited NFT tokens which contractually entitle the holder to a portion of music artist royalties. Spotify are experimenting with music NFTs (and of course in the metaverse). This is an early adopter area, and again likely converges with our planned uses cases as more complex tooling appears. For instance Tim Exile of Endless.fm talks about digital assets extending to the building blocks of co-created music, and wished to build a music creator economy which distributes value to creators at the instant of the final value transaction with the consumer.
  • Gaming: As discussed there’s pushback from the gaming community, but huge investment from the likes of Lego, Blizzard, Epic, Ubisoft etc.
  • Gig tickets: Not only the straightforward use of transferable tickets for events as NFTs on a blockchain (which is impossible due to the cost right now) but also onward monetisation of ticket stubs as memorabilia. The NBA is already looking at this.
    • “The team sells the ticket for face value many many years ago, but when that stub is being sold now for much more many times over, the team gets none of that money,” York explained. “But with an NFT stub that changes. Let’s say a new rookie enters the NBA next season and he turns out to be the next LeBron James. That ticket stub from his first game, as an NFT, the team can put a commission on it — 20 percent or however much, the NBA decides that. In 10 years when it’s worth a lot of money, I or whoever owns that NFT, can sell it for say $100,000. The NBA can still collect 20 percent of that sale, because it’s all on a smart contract.”
• It seems so obvious that this will extend to the virtual events space in the metaverse.
  • Utility: These are broadly ‘membership’ style tokens, and this seems like a sensible fit. Peter Thiel (again) for instance launches a political funding NFT from Blake Masters to support his senate ambitions. To be clear, Thiel is a fundamentalist libertarian, and at the very least highly eccentric. This is not necessarily a positive for the technology.
  • Virtual worlds are a huge application for NFTs, and this seems like it would be a natural fit for our collaborative mixed reality application. In reality the $2B of sold so far is mostly ‘allocations’ in nascent ecosystems, being sold as highly speculative assets, without even a metaverse to use. The majority of that amount is the hyped ‘Otherland’ plots sold under the Bored Apes brand.
  • “Full stack” luxury brands. Nic Carter describes a mating of physical and virtual luxury goods. His is a useful article on the future direction, and he has also provided a primer on NFTs. There are many such examples already, such as [Tiffanys ‘NFTiff’
• cryptopunks](https://nft.tiffany.com/faq/) collaboration which will automatically generate royalties for Tiffanys and parent company Louis Vitton in perpetuity. Such products prove provenance, create new aftermarket opportunities, and unlock metaverse applications.
• It is completely reasonable to assert that these use cases could be accomplished without the use of NFT technology, and is part of the hype bubble.
• Twitter user Cantino.Eth offers an exhaustive roundup of what they think future uses might be. It’s a thread full of industry insider jargon) but it’s indicative of a shift in focus from speculation to ‘building’ asthe market conditions change.

https://twitter.com/chriscantino/status/1542930648750608387)

• Some of the more interesting (less arcane)use cases identified in the thread are summarised very briefly below,again with comments as to how this might pertain to our metaverse applications.
  • Hobby tokens, demonstrating interest in an activity. This is potentially a metaverse adaptation of badges on a blazer in the real world, and might serve to drive communities in a metaverse. The same is true for activism and political alighnment. It’s a great idea and worth developing.
  • Professional Networks and qualification badges, like a LinkedIn qualification panel, but in the metaverse. A cisco NFT in the metaverse for a CCNA qualification makes intuitive sense.
  • Badges to indicate membership of distributed projects within a metaverse. This allows users to identify avatars with shared goals in the metaverse.
  • Retail incentives, like brand loyalty stamps or rewards for participation in marketing, or early access programmes. This is a true in a metaverse marketplace as it is in a real world coffee shop.
  • Multiplayer communities with incentives to hit collective milestones. “Collecting as a team sport”. This again seems like a great and intuitive opportunity, but is perhaps less suitable for our more business focussed space. User content submission and automatic monetisation when reused by brands, bonded to an NFT contract.
  • Customer Cohort NFTs: early adopters of successful brands would be able to prove the provenance of their enthusiasm for a new product, and this might unlock brand loyalty bonuses. It seems this wouldn’t be a transferable NFT, and is more like the “soulbound” idea advanced by Meta.
  • Education and Customer Support, think an NFT of a great score on reddit community support forums. A trusted community member badge, but visible in the metaverse. This is somewhat like the web of trust model advanced earlier in the book.
  • NFTs as contracts is far more likely in the metaverse than it has proved to be in real life. This is how ‘digital land’ and objects will be transferred anyway, but with the addition of contractual conditionals with external inputs more subtle products may appear.

Defining money

• It is necessary here to briefly examine what money actually is in the world outside of metaverses, so we can understand it in the context of a virtual global space. In the previous section Bitcoin can be viewed in a couple of different lights. As a self custody digital bearer asset it can be viewed as ‘property’, like gold, i.e. not a liability on someone else’s asset sheet. Indeed this has long been one of the assertions of the community and it finds favour in law, possible most ironically in China, which of course banned mining. ‘Money’ though is a far more slippery concept to grasp. It seems very likely that Bitcoin is evolving as a “base money”, and it’s important to define that, but there are many other kinds of money within the online world which can potentially transfer value within virtual social spaces.
• Money is an economic good, that is generally accepted as a medium of exchange. This simple and specific description doesn’t do justice to the complexity of everything that humans consider to be money. Even the Encyclopaedia Britannica strays from this immediately in their definition:
  • “money, a commodity accepted by general consent as a medium of economic exchange. It is the medium in which prices and values are expressed; as currency, it circulates anonymously from person to person and country to country, thus facilitating trade, and it is the principal measure of wealth.”.
• In which it can be seen that the principle measure of wealth might not be money at all, but rather property, credit, etc. So are these things money? Is a promise on a ledger money? The assertion at the top of this section is challenged by different schools of economic thinking. Global debt is around an order of magnitude larger than base money, and most wealth is stored in illiquid land/built environment (some $300T), and yet the system seems to work fine. The debt theory of money offered by anthropologist David Graeber suggests that money is an abstraction of barter, and thereby ‘credit’, but credit clearly pre-dates money, and needs no barter, commodity, intermediary nor underlying asset.homer1996history This suggests that money is something slightly different.
• Money seems to have evolved for two principle purposes; trade outside of a village context, and inheritance.szabo2002shelling In doing this somewhat replaced and augmenting ‘credit’, which as said above, was a promise between parties based on future actions, and likely as old as rudimentary language itself. The anonymous Heavyside blog powerfully argues that it is the relative stability of money over time which creates a less discussed composite feature; that of ‘confidence’ in being able to defer labour into money, basically credit again.
• Money can be divided into two categories, which are fungible (interchangeable) from the point of view of the users. Base money is ‘commodity’ money which is backed by assets, or tangible physical (or digital) goods through the actions of a central bank ledger, and is around $30-$40T. Everything else is ‘fiduciary media.’selgin1996defense
• All fiduciary money is credit but not all credit is fiduciary money .Nobody knows the extent of the global supply of fiduciary media. It encapsulates all the new digital money platforms like PayPal, gift cards, offshore accounts and all manner of other vehicles, and is thought to be many tens of trillions ofpoundsborio2017fx.This somewhat muddies the waters since money that is backed by‘something’ blends away into money which cannot reasonably be assayed. This in turn undermines the assertion that money is backed. It seems that a combination of available raw materials and labour, central banks and their associated political structures,barsky1987fisher and global markets drive the value of money up and down relative to “stuff” in the shops. This manifests as ‘inflation’, which is ‘possibly’ the effect of not pegging money to an asset such as silver, or gold as in the past.hall2009inflation While the gross drivers of inflation seems to be accepted and understood, nobody seems verysurehow the various aspectsinteract.Dickson White wrote in 1914 about hyperinflation in France due to excessive money printing, and this driver and causal link persists as aprimary hypothesis for inflation and hyperinflation, a cautionary tale especially today after the huge fiscal responses to the 2008 global financial crisis and COVID.white1914fiat It may be that central banks actually have no decent response to global monetary pressures and areoverdue a paradigm shift, as explained by DanielaGabor (Professor of economics and macro finance at UWE Bristol):
  • “…last stage of a central banking paradigm, when it implodes under the contradictions of its class politics? Under the financial capitalism supercycle of the past decades, inflation-targeting central banks have been outposts of (financial) capital in the state, guardians of a distributional status-quo that destroyed workers’ collective power while building safety nets for shadow banking. The limits of this institutional arrangement that concentrates (pricing)power and profit in (a few) corporate hands are now plain to see. If the climate and geopolitical of 2022 are omens of Isabel Schnabel’s GreatVolatility that most central banks and pundits expect for the near future, then macro-financial stability requires new framework for co-ordination between central banks and Treasuries that can support astate more willing to, and capable of, disciplining capital. But such a framework would threaten the privileged position that central banks have had in the macro-financial architecture and in our macroeconomic models. The history of central banking teaches us thatpolicy paradigms die when they cannot offer a useful framework for stabilising macroeconomic conditions, but never at the hands of central bankers themselves.”
• All this makes it hard tofind a universally acceptedand explicable definition of money. The best approach may be to look atthe properties of a thing which is asserted to be a money. In his book‘A history of money’, Glyn Davies identifies “cognisability, utility,portability, divisibility, indestructibility, stability of value, and homogeneity.”davies2010history
• Stroukal examines Bitcoins’ likely value as a money from an Austrian economics perspective and identifies “portability, storability, divisibility, recognizability, homogeneity and scarcity.”stroukal2018can
• A helpfully brief and useful web page by Desjardins from2015describes some properties and explains them in layman’s terms below:
  • Divisible: Can be divided into smaller units of value.
  • Fungible: One unit is viewed as interchangeable with another.
  • Portable: Individuals can carry money with them and transfer it to others.
  • Durable: An item must be able to withstand being used repeatedly.
  • Acceptable: Everyone must be able to use the money for transactions.
  • Uniform: All versions of the same denomination must have the same purchasing power.
  • Limited in Supply: The supply of money in circulation ensures values remain relatively constant.

Money and Value

• Bitcoin As Money
• Money

Digital Value Transmission

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

Defining money

• It is necessary here to briefly examine what money actually is in the world outside of metaverses, so we can understand it in the context of a virtual global space. In the previous section Bitcoin can be viewed in a couple of different lights. As a self custody digital bearer asset it can be viewed as ‘property’, like gold, i.e. not a liability on someone else’s asset sheet. Indeed this has long been one of the assertions of the community and it finds favour in law, possible most ironically in China, which of course banned mining. ‘Money’ though is a far more slippery concept to grasp. It seems very likely that Bitcoin is evolving as a “base money”, and it’s important to define that, but there are many other kinds of money within the online world which can potentially transfer value within virtual social spaces.
• Money is an economic good, that is generally accepted as a medium of exchange. This simple and specific description doesn’t do justice to the complexity of everything that humans consider to be money. Even the Encyclopaedia Britannica strays from this immediately in their definition:
  • • Money originally emerged to solve issues with barter and the double coincidence of wants
  • • Early forms of money included commodities like shells, cocoa, salt, furs, feathers
  • • These served as money due to properties like portability, divisibility, durability, fungibility
  • • Social credit also played a role, enabling delayed settlement between known parties
  • Precious Metals as Money
    • • As societies advanced, precious metals like gold and silver emerged as the dominant monies
    • • They survived debasement from more technologically advanced societies
    • • This was due to their scarcity and difficulty to produce more even with modern techniques
  • Layers Added to Enhance Metals as Money
    • • Coinage added verifiability of weight and purity to raw metals
    • • This involved blending metals with authority of issuing institutions
    • • Legal tender laws mandated acceptance of certain coinages
  • Emergence of Paper Money and Banking
    • • Paper money initially emerged to enhance metals for long distance trade
    • • Evolved from bilateral credit channels to broadcast systems of bank notes
    • • Allowed easier transfer and divisibility without physically moving metals
  • Credit Theory vs Commodity Theory of Money
    • • Credit theory sees money as shared ledger, its value comes from authority
    • • Commodity theory sees money emerge naturally due to properties of commodities

Money and Value

• Bitcoin As Money
• Money

Digital Value Transmission

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

Costs and Benefits

• Energy Market Dynamics: The reliance on fluctuating energy markets poses risks for nuclear power, which has high fixed costs and is best suited for baseload power generation.
• Tech Companies’ Role: Big tech firms initially claimed 100% renewable energy while relying heavily on fossil fuels, leading to credibility issues and increased demand for stable power sources.
• Offshore Wind vs. Nuclear: Offshore wind projects are generally more expensive (£140-£260 per megawatt hour) and do not provide the guaranteed power delivery that nuclear can, especially critical for large data centres.
• Reliability of Power Supply: Nuclear energy offers a more reliable power source compared to intermittent renewable sources, particularly for meeting peak demand.
• The successful restart of Three Mile Island could pave the way for new nuclear projects, leveraging existing sites and infrastructure.
• The growth in AI seems to be shifting the narrative and reducing criticism around Bitcoin mining’s energy use. As people realize AI’s value, they accept that the energy use is justified, similar to Bitcoin.
• Major banks like Morgan Stanley are now writing serious research reports on how Bitcoin miners are positioned to support AI’s growth by providing much-needed power capacity. This validates the industry’s maturity.
• Time to accessing power is becoming the key constraint and source of value as demand for AI computing capacity far outstrips supply. Bitcoin miners with existing power access have a major advantage.
• By locating in areas with excess renewable energy that can’t be fully exported, Bitcoin miners are actually helping make these renewable installations more economically viable and efficient.
• Mike Alfred on X: “Morgan Stanley out with new research suggesting that BTC miners are the fastest path to put new data centers online because they already have access to huge amounts of power. Their models show BTC miners trade at a large discount to the intrinsic value of their secured power. https://t.co/rwJJLBPdYN” / X (twitter.com)

https://twitter.com/mikealfred/status/1781333730071896152

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

Global Centralised Ledgers

• Beyond even national CBDCs it is now possible to find discussion aroundweaving these together at a supranational level. Indeed it seems that competition is starting to emerge. The Bank for InternationalSettlements (BIS) and the International Monetary Fund (IMF) have both presented plans to deploy global ledgers to support programmable CentralBank Digital Currencies.

Podcasting2.0

• Podcasting2.0leverages RSS (theoriginal dissemination system for podcasts) and the Bitcoin Lightningnetwork, to enable so-called ‘value forvalue’broadcasting. Subscribers use one of a variety of apps to streammicro-transactions of Bitcoin directly to the content creators as theylisten to the podcast. No intermediate business takes a cut. Somevariation on this model exists, such as John Carvalho’s crowd fundedpodcast “The Biz” which progressively unlocks more minutes for everyonebased on crowd funded donations.

pubky

• Nostr also tightly integrates Bitcoin Lightning to support the protocol.This will hopefully enable secure transmission of value alongside theinformation and interactions on the platform. It also gives users theability to monetise their content.
• Repeat section?

2.3.1 Emerging consensus

The recent hype cycle ignored the legacy definitions described above and instead focusing almost exclusively on Ethereum based peer-to-peer projects. It can be seen that the description is somewhat in the eye of the beholder. It’s possible to frame this Ethereum Web3 as a hugely complex and inefficient digital rights management system (DRM). DRM is something that users of the internet are increasingly familiar and comfortable with. It’s somewhat debatable whether decentralising this is worthwhile. The thesis of the developers of the technology seems to be that without it, control of ‘value’ will accrete over time, to one or more hegemonic controlling entities. It’s a strong argument, but there is a substantial counter argument emerging that users just don’t want this stuff. The nervousness of legislators in the USA to the attempt by Facebook/Meta to enter this peer-to-peer value transmission space is telling in terms of the perception of who is driving Web3. Establish a clear vision to foster decentralized digital infrastructure Embrace multi-stakeholder approaches to governance and regulation Create targeted, risk-calibrated oversight regimes for different web3 activities Foster innovation with composability, open source code, and the power of open communities Broaden access to the economic benefits of the innovation economy Unlock the potential of DAOs Deploy web3 to further sustainability goals Embrace the role of well-regulated stablecoins in financial inclusion and innovation Collaborate with other nations to harmonize standards and regulatory frameworks Provide clear, fair tax rules for the reporting of digital assets, and leverage technical solutions for tax compliance This list seems targeted toward the coming regulatory landscape, and could be considered at odds with the original tenants of an organically emergent, decentralised internet. Indeed principles such as ‘furthering sustainability goals’ seem downright incongruous. The community they claim to wish to support here are openly critical of these major institutional players and their motives, with even more pointed criticisms coming from outside of the Web3. This book and lab steer well clear of these companies and their applications. Dante Disparte, chief strategy officer of ‘Circle’ venture capital, said in testimony to a US senate hearing; that Web 1 was ‘read’, Web 2 was ‘read write’, and that Web 3 will ‘read write own’. The important takeaway here is not so much this oft quoted elevator pitch for Web3, but the fact that legislative bodies now consider this technology a force which they need to be aware of and potentially contend with. It’s a complex evolving narrative, and clearly contradictions are common. Right now there seems little appeal for stepping into Web3. Into the confusion, this book advances a narrow take, and toolset, which might extract some value from the technologies, while maintaining a low barrier to entry. It might be that the future of Web3 comes in the guise of integrated suites such as the proposed Impervious web browser. They say that “without centralized intermediaries” it features: Google Docs, without Google. WhatsApp, without WhatsApp. Identity, without the state. This is obviously leading marketing hype, and they’re already late for their release deadline, but what they’re talking about here is an integration of the components mentioned in this book. If they can get critical mass around this browser then perhaps the Web3 market can be kickstarted. CEO Chase Perkins has recently presented on this.

Inherent Weaknesses

• Ethereum faces a unique dilemma, often overshadowed by its technological capabilities. Unlike Bitcoin (BTC), which has solidified its role as a stable and reliable store of value, Ethereum’s value proposition is more complex and, ultimately, paradoxical. The following points elaborate on this conundrum:
  • Lack of Monetary Certainty: Ethereum’s mutable supply schedule and governance model introduce a level of uncertainty not found in Bitcoin.
  • Scalability Trap: Attempts to scale the platform and lower fees would, counterintuitively, reduce Ethereum’s intrinsic value by decreasing its future cash flows.
• This presents a catch-22 situation where Ethereum’s value is fundamentally limited by its own economic model. If the asset’s value drops significantly, it could undermine the security of the entire platform, making it less reliable for settling large transactions.
• In the long run, this creates a feedback loop that could, theoretically, push Ethereum’s value towards zero. This issue casts a shadow over Ethereum’s long-term viability, presenting a challenge that goes beyond mere technical scalability.

2.3.1 Emerging consensus

The recent hype cycle ignored the legacy definitions described above and instead focusing almost exclusively on Ethereum based peer-to-peer projects. It can be seen that the description is somewhat in the eye of the beholder. It’s possible to frame this Ethereum Web3 as a hugely complex and inefficient digital rights management system (DRM). DRM is something that users of the internet are increasingly familiar and comfortable with. It’s somewhat debatable whether decentralising this is worthwhile. The thesis of the developers of the technology seems to be that without it, control of ‘value’ will accrete over time, to one or more hegemonic controlling entities. It’s a strong argument, but there is a substantial counter argument emerging that users just don’t want this stuff. The nervousness of legislators in the USA to the attempt by Facebook/Meta to enter this peer-to-peer value transmission space is telling in terms of the perception of who is driving Web3. Establish a clear vision to foster decentralized digital infrastructure Embrace multi-stakeholder approaches to governance and regulation Create targeted, risk-calibrated oversight regimes for different web3 activities Foster innovation with composability, open source code, and the power of open communities Broaden access to the economic benefits of the innovation economy Unlock the potential of DAOs Deploy web3 to further sustainability goals Embrace the role of well-regulated stablecoins in financial inclusion and innovation Collaborate with other nations to harmonize standards and regulatory frameworks Provide clear, fair tax rules for the reporting of digital assets, and leverage technical solutions for tax compliance This list seems targeted toward the coming regulatory landscape, and could be considered at odds with the original tenants of an organically emergent, decentralised internet. Indeed principles such as ‘furthering sustainability goals’ seem downright incongruous. The community they claim to wish to support here are openly critical of these major institutional players and their motives, with even more pointed criticisms coming from outside of the Web3. This book and lab steer well clear of these companies and their applications. Dante Disparte, chief strategy officer of ‘Circle’ venture capital, said in testimony to a US senate hearing; that Web 1 was ‘read’, Web 2 was ‘read write’, and that Web 3 will ‘read write own’. The important takeaway here is not so much this oft quoted elevator pitch for Web3, but the fact that legislative bodies now consider this technology a force which they need to be aware of and potentially contend with. It’s a complex evolving narrative, and clearly contradictions are common. Right now there seems little appeal for stepping into Web3. Into the confusion, this book advances a narrow take, and toolset, which might extract some value from the technologies, while maintaining a low barrier to entry.

Bitcoin as a money

• Nwosu, cofounder of Coinfloor exchange in the UK, and cofounder of the aforementioned Fedimint and says that a digital money needs the following four characteristics:

  • that it be technically mature.
  • Again, irrespective of the author here, this point seems to ring true.The memetic power of Bitcoin is in it’s proximity to ‘money’, and the potential of the separation of money from the state.
  • It is beyond argument that the Bitcoin network is a rugged message passing protocol which achieves a high degree of consensus about the entries on it’s distributed database.
  • Ascribing monetary value to those database entries is a social consensus problem, and this itself is a contested topic. The most useful ‘hot take’ here is that Bitcoin behaves most like a‘property’,while it’s network behaves far more like a monetary network which is created and supported by the value of the Bitcointokens.
  • Jack Mallers, of Strike presentation to theIMF identified thefollowing challenges which he claims are solved by the bitcoin monetarynetwork.
    • Speed
    • Limited transparency and dependability

  

  • Potential market exposure to Bitcoin as a money
  • Perhaps more than any of these takes, it is worth considering the current public perception of the technology as a money and store of value. This twitterthread from professional sportsman Saquon Barkley, to his half million followers on the platform, captures the mood. He is one of a handful of athletes now being paid directly in Bitcoin.
  • it“I want my career earnings to last generations. The average NFL career is 3 years and inflation is real. Saving and preserving money over time is hard, no matter who you are. In today’s world: How do we save? This is why I believe in bitcoin. Almost all professional athletes make the majority of their career earnings in their 20s. With a lack of education, inaccessible tools, and inflation, a sad yet common reality is many enter bankruptcy later on. We can do better. We need to improve financial literacy. Bitcoin is a proven, safe, global, and open system that allows anyone to save money. It is the most accessible asset we’ve ever seen.”
  • This ubiquity of access is what probably most distinguishes Bitcoin. Previously it could be argued that only the most wealthy could access the ‘means’ to store their labour without loss of value over time(through inflation). To be clear, inflation is an important part of the money system, somewhat within the control of the central banks, and approximate to taxation. It applies equally to all holders of the moneys upply. Asserting that money should be replaced by a ‘hard asset’ such as Bitcoin, in the place of the more controllable utility of money, is likely both a fantasy, and wrong minded. This conflation of money and property is a confusion caused by Bitcoin’s proximity to money, and it’s‘ money like’ network, and is extremely commonplace.
  • These narrative takes are all rooted in the popular idea that Bitcoin isa ‘hedge against inflation’; an increasingly fragile take, as the price plummets with global markets. The Bitcoin community seems somewhat confused about the nature of money, which is predictable because we can see in these sections that money is pretty confusing. Money is the fluid, elastic,cagan1958demand and thin ‘working credit’ layer on top of historical human production, which provides transaction convenience, and tools for credit. Value is effectively swapped in and out of this layer through the actions of central banks, controlling inflation into acceptable margins. Simplistically this is done through manipulation of interest rates (the easiness of credit), quantitative easing (buying of assets) and quantitative tightening (selling of assets). To give a quick high level view of central bank activity we can use the PESTLE framework:
    • Political:
      • Government policies and regulations can impact central banks by influencing monetary policies.
      • Political stability and government credibility can impact the confidence in central banks and currency.
    • Economic:
      • Economic growth and inflation rates influence central bank decisions on monetary policy.
      • The level of debt and balance of payments can impact a central bank’s ability to control monetary policy.
    • Sociocultural:
      • Consumer behaviour and demographics can influence demand for money and credit.
      • Attitudes towards saving and borrowing can impact the economy and central bank decisions.
    • Technological:
      • Technological advancements can change the way money is distributed and managed, such as the increasing use of digital currencies.
      • Technology can also influence the accuracy of economic data, affecting the decisions of central banks.
    • Legal:
      • Central banks are subject to laws and regulations, such as those related to banking and finance.
      • Changes in laws and regulations can impact central bank policies and operations.
    • Environmental:
      • Environmental factors, such as natural disasters, can affect the economy and central bank decisions.
  • Fundamentally, Bitcoin isn’t money (in the traditional sense) because it’s not an IOU, which money certainly is. It’s a bearer instrument, novel asset class, with money like properties, as identified above. As said again and again it functions most like a ‘property’ which can be invested in by anyone, with all the attendant risks of that property class to the holder. Lyn Alden says it sits somewhere between a saving tool, and an investment, acting as “programmable commodity money”.
  • Andrew M. Bailey says it“in an ideal worldwhere governments honour the rights of citizens, they don’t spy, they don’t prohibit transactions, they manage a sound money supply, and they make sound decisions, the value of bitcoin is very low; we’re just notin an ideal world”

Rationalle

• As human beings, we have always relied on certain social constructs toguide our interactions and transactions with one another. Money andtrust are two such constructs that have played a vital role in shapingour societies, and the way we live our lives. However, the digital agehas brought with it new challenges that are testing the foundations ofthese social norms.
• In a world where we are increasingly connected through the internet andable to communicate with people from all corners of the globe, theconcept of money and trust is changing. Gone are the days of the villagestructure in which we evolved, where personal relationships andface-to-face interactions were ubiquitous. Now, we are faced with theprospect of working and interacting one another, and also withartificial intelligence actors that seem subjectively real, all whilenavigating the complexities of a global mixed reality.
• This transition to a more efficient and interconnected world has thepotential to bring about great benefits, but it also presents us with anenormous challenge. The chaotic and intangible mix of value, trust,socialisation, generative art, and AI chat actors, is not yet wellunderstood, and it will take time for us to adapt to this new way ofliving and interacting with one another.
• We initially wanted to explore exciting new developments in thetransmission of value, and trust, in ‘digital society’. The problem isthat each of these topics alone are enormously complex, and theintersections seem to be more so. We have been researching the currentstate-of-the-art, and the emerging consensus narrative, to try to figureout how the collision of these technologies might serve our virtualproduction workflows (Figure7.7).As we worked on this research the Cambrian explosion of generative AIadded an incredibly important new strand to our investigation.
• Over the course of a couple of years the focus of the work hasdeveloped, and refined. Our tool-kit, as it stands, supports inclusivehuman creativity and economic exchange, especially for emerging marketsand especially perhaps Africa. There isa huge proportion of human creativity currently excluded from mediaproduction pipelines due to gatekeepers of knowledge, access to identityproofs, and financial infrastructure that is taken for granted in thericher nations. This inclusion will be accomplished for the most partthrough integration of open source machine learning and AI tools, butthis field quite new, and that part of the work is under developed.

2.4.2 Podcasting2.0

Podcasting 2.0 leverages RSS (the original dissemination system for podcasts) and the Bitcoin Lightning network, to enable so-called ‘value for value’ broadcasting. Subscribers use one of a variety of apps to stream micro-transactions of Bitcoin directly to the content creators as they listen to the podcast. No intermediate business takes a cut. Some variation on this model exists, such as John Carvalho’s crowd funded podcast “The Biz” which progressively unlocks more minutes for everyone based on crowd funded donations.

Keet by holepunch

• Tether and Bitfinex have released Keet messengerwhich allows peer to peer video calling and file sharing. It will be BTCand Tether enabled which allows transmission of value in a trustminimised fashion. Non custodial Lightning is coming to the productsoon. It looks like an incredibly strong and interesting product suiteis emerging here. If possible we would like to integrate this opensource platform with our metaverse. It is built upon the sameHypercore“holepunch” technology used by Synonym.

Rationalle

• As human beings, we have always relied on certain social constructs toguide our interactions and transactions with one another. Money andtrust are two such constructs that have played a vital role in shapingour societies, and the way we live our lives. However, the digital agehas brought with it new challenges that are testing the foundations ofthese social norms.
• In a world where we are increasingly connected through the internet andable to communicate with people from all corners of the globe, theconcept of money and trust is changing. Gone are the days of the villagestructure in which we evolved, where personal relationships andface-to-face interactions were ubiquitous. Now, we are faced with theprospect of working and interacting one another, and also withartificial intelligence actors that seem subjectively real, all whilenavigating the complexities of a global mixed reality.
• This transition to a more efficient and interconnected world has thepotential to bring about great benefits, but it also presents us with anenormous challenge. The chaotic and intangible mix of value, trust,socialisation, generative art, and AI chat actors, is not yet wellunderstood, and it will take time for us to adapt to this new way ofliving and interacting with one another.
• We initially wanted to explore exciting new developments in thetransmission of value, and trust, in ‘digital society’. The problem isthat each of these topics alone are enormously complex, and theintersections seem to be more so. We have been researching the currentstate-of-the-art, and the emerging consensus narrative, to try to figureout how the collision of these technologies might serve our virtualproduction workflows (Figure7.7).As we worked on this research the Cambrian explosion of generative AIadded an incredibly important new strand to our investigation.
• Over the course of a couple of years the focus of the work hasdeveloped, and refined. Our tool-kit, as it stands, supports inclusivehuman creativity and economic exchange, especially for emerging marketsand especially perhaps Africa. There isa huge proportion of human creativity currently excluded from mediaproduction pipelines due to gatekeepers of knowledge, access to identityproofs, and financial infrastructure that is taken for granted in thericher nations. This inclusion will be accomplished for the most partthrough integration of open source machine learning and AI tools, butthis field quite new, and that part of the work is under developed.

2.4.2 Podcasting2.0

Podcasting 2.0 leverages RSS (the original dissemination system for podcasts) and the Bitcoin Lightning network, to enable so-called ‘value for value’ broadcasting. Subscribers use one of a variety of apps to stream micro-transactions of Bitcoin directly to the content creators as they listen to the podcast. No intermediate business takes a cut. Some variation on this model exists, such as John Carvalho’s crowd funded podcast “The Biz” which progressively unlocks more minutes for everyone based on crowd funded donations.

Keet by holepunch

• Tether and Bitfinex have released Keet messengerwhich allows peer to peer video calling and file sharing. It will be BTCand Tether enabled which allows transmission of value in a trustminimised fashion. Non custodial Lightning is coming to the productsoon. It looks like an incredibly strong and interesting product suiteis emerging here. If possible we would like to integrate this opensource platform with our metaverse. It is built upon the sameHypercore“holepunch” technology used by Synonym.

  Key Characteristics

• Aligns system goals with human values

  • Technical and philosophical challenge

  • Critical for beneficial AI

  • Addresses capability-safety gap

  • Long-term AI safety concern

    Academic Context

    Value alignment represents the fundamental problem in AI safety: how to ensure increasingly capable AI systems remain beneficial to humanity.

    Related Concepts

• AI Alignment: Technical implementation

  • RLHF: Practical alignment method

  • AI Safety: Broader research area

    UK English Notes

  • “Behaviour” (not “behavior”)

    Last Updated: 2025-10-27 Verification Status: Verified against alignment literature

    Academic Context

• Value alignment represents a fundamental challenge in artificial intelligence safety and ethics

• Emerged as critical research area alongside exponential growth in AI capabilities

• Addresses the gap between AI system objectives and genuine human values and intentions

• Encompasses both technical encoding problems and deeper philosophical questions about what constitutes “human values”

• The field distinguishes between thin and thick alignment

• Thin alignment: AI systems superficially meeting human-specified criteria

• Thick alignment: deeper, contextual understanding of human values across diverse real-world scenarios

• Recognition that alignment requirements vary significantly by use case and cultural context

  Current Landscape (2025)

• Core principles guiding alignment research

• Robustness: reliable behaviour across edge cases and novel scenarios

• Interpretability: human-understandable decision-making processes

• Value alignment: training systems to pursue outcomes aligned with human ethical standards and societal norms

• Scalability: mechanisms that function for both current and future, more powerful models

• Continual oversight: human feedback loops enabling adaptive behaviour over time

• Controllability and ethicality (RICE framework)

• Industry implementation and technical approaches

• Reinforcement learning from human feedback (RLHF) as primary fine-tuning methodology

• Synthetic data approaches and red teaming for robustness testing

• Leading organisations: OpenAI, DeepMind, Anthropic, IBM

• Application domains: healthcare diagnostics, autonomous systems, generative AI chatbots

• UK and North England context

• Growing alignment research capacity within UK universities and research institutions

• Regulatory frameworks: EU AI Act compliance considerations for UK organisations post-Brexit

• Healthcare sector particularly engaged with alignment challenges (NHS AI implementation considerations)

• Technical challenges and limitations

• Operationalising abstract ethical principles into verifiable technical specifications remains difficult

• Tension between competing values (e.g., privacy versus transparency in healthcare contexts)

• Difficulty anticipating outcomes as AI models increase in complexity and autonomy

• The “AI alignment problem”: challenge of controlling increasingly advanced systems

• Superalignment concerns regarding hypothetical artificial superintelligence (ASI) systems

  Research & Literature

• Foundational works and current research

• Larsen, B.C. (2024). “AI value alignment: Aligning AI with human values.” World Economic Forum. Discusses embedding core human values into AI systems across development lifecycle, with healthcare case studies demonstrating practical operationalisation challenges.

• AryaXAI (2025). “AI Alignment: Principles, Strategies, and the Path Forward.” Explores goal alignment and value alignment as cornerstone principles, addressing context-sensitivity of human values across cultures.

• Witness AI (2025). “AI Alignment: Ensuring AI Systems Reflect Human Values.” Comprehensive overview of alignment principles with emphasis on reinforcement learning and LLM contexts.

• IBM (2025). “What Is AI Alignment?” Describes alignment as encoding human values and goals into AI models, covering RLHF, synthetic data, and red teaming methodologies.

• Brookings Institution (2025). “Hype and harm: Why we must ask harder questions about AI and its alignment with human values.” Introduces thin versus thick alignment distinction; emphasises context-dependent alignment requirements across sectors.

• Shaoxiong, J. & Chao, L. (2025). “Advancing AI Value Alignment Through Psychological Theories.” Journal of Psychological Science, 48(4), 782-791. Bridges psychological theory and AI alignment development.

• Emerging research directions

• Integration of psychological theories into alignment frameworks

• Sector-specific alignment requirements (healthcare, education, autonomous systems)

• Cross-cultural and contextual value mapping

• Scalability of alignment mechanisms for increasingly capable systems

  UK Context

• British research contributions

• DeepMind (UK-based, Alphabet subsidiary) leading alignment research internationally

• Anthropic’s engagement with UK regulatory and academic communities

• University research programmes addressing alignment challenges

• North England considerations

• Manchester, Leeds, Newcastle, and Sheffield universities increasingly engaged with AI ethics and safety research

• NHS trusts in North England implementing AI diagnostic systems requiring robust alignment frameworks

• Regional tech hubs exploring alignment implications for autonomous systems and healthcare applications

• Regulatory environment

• UK alignment with international standards whilst developing independent regulatory approaches

• Healthcare sector particularly attentive to alignment requirements under existing governance frameworks

  Future Directions

• Emerging trends and research priorities

• Development of more sophisticated value elicitation methods capturing nuanced human preferences

• Advancement toward superalignment techniques for hypothetical superintelligent systems

• Integration of continuous monitoring and updating mechanisms to adapt to evolving societal norms

• Cross-disciplinary approaches combining computer science, philosophy, psychology, and domain expertise

• Anticipated challenges

• Maintaining alignment as AI systems become more autonomous and capable

• Balancing competing values across diverse cultural and contextual settings

• Ensuring transparency and auditability without compromising privacy or security

• Scaling alignment mechanisms without proportional increases in computational or human oversight costs

• Organisational and policy priorities

• Embedding alignment considerations into AI development from design phase onwards

• Establishing clear accountability frameworks for misaligned AI systems

• Supporting interdisciplinary research bridging technical and philosophical dimensions

• Developing sector-specific alignment standards (healthcare, finance, autonomous systems)

  References

• Larsen, B.C. (2024). “AI value alignment: Aligning AI with human values.” World Economic Forum. Available at: weforum.org/stories/2024/10/ai-value-alignment-how-we-can-align-artificial-intelligence-with-human-values/

• AryaXAI (2025). “AI Alignment: Principles, Strategies, and the Path Forward.” Published 5 February 2025. Available at: aryaxai.com/article/ai-alignment-principles-strategies-and-the-path-forward

• Witness AI (2025). “AI Alignment: Ensuring AI Systems Reflect Human Values.” Available at: witness.ai/blog/ai-alignment/

• IBM (2025). “What Is AI Alignment?” Available at: ibm.com/think/topics/ai-alignment

• Brookings Institution (2025). “Hype and harm: Why we must ask harder questions about AI and its alignment with human values.” Available at: brookings.edu/articles/hype-and-harm-why-we-must-ask-harder-questions-about-ai-and-its-alignment-with-human-values/

• Shaoxiong, J. & Chao, L. (2025). “Advancing AI Value Alignment Through Psychological Theories.” Journal of Psychological Science, 48(4), 782-791. DOI: 10.16719/j.cnki.1671-6981.20250402

• McKinsey & Company (2025). “The State of AI: Global Survey 2025.” Available at: mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai

  Metadata

• Last Updated: 2025-11-11

• Review Status: Comprehensive editorial review

• Verification: Academic sources verified

• Regional Context: UK/North England where applicable

Provenance