We The Web need a psychologist. We are rife with dysfunction. Psychopathy? Narcissism? I don’t know… but a look at some recent headlines can show you what I mean:
- Major US Twitter accounts hacked in Bitcoin scam
- Cryptocurrency users want boss’s body exhumed over theories he may have faked his own death
- Bitcoin’s Ransomware Problem Won’t Go Away
When the blockchain tracking and analytics company Whale Alert looked at reports and websites to understand the criminal activity, they reported that, “Crypto crime pays. A lot. There are dozens of different types of scams such as giveaways, sextortions, fake exchanges, fake ICO’s, bitcoin recovery, video scams, Ponzi schemes, fake tumblers, malware and the list goes on.” Likewise, U.S. Congressman Brad Sherman claimed in March 2019 that “charlatans and scammers have always favored decentralized new enterprises.” He believes the activity on cryptocurrencies, ICOs, and other decentralized systems is so nefarious as to warrant their total ban.
Fans of cryptocurrencies (myself included) argue that the level of fraud is a function of the newness of the technology. Scammers and criminals were amongst the earliest to embrace the internet too after all! As a viable regulatory structure forms and adoption increases, the overall rate of criminal activities will be more in line with the rest of the financial system. But even more importantly, Bitcoin and open blockchain technology can do so much good from preventing runaway inflation to leveling the playing field through access to financial services and combating the Cantillon effect.
Speculation, fraud, and greed in the cryptocurrency and blockchain industry have overshadowed the real, liberating potential of Satoshi Nakamoto’s invention. For people living under authoritarian governments, Bitcoin can be a valuable financial tool as a censorship-resistant medium of exchange… It has the potential to make a real difference for the 4 billion people who can’t trust their rulers or who can’t access the banking system. For them, Bitcoin can be a way out.Alex Gladstein, Human Rights Foundation
And yet, I fear that those crying a rise of cryptocurrency means a rise of criminality may not be completely wrong…
Are we destined to scam each other?
Without some serious intervention, I worry, yes.
Most people consider themselves to be good. This self-conception serves as an effective deterrent of bad behavior for the vast majority of people, so long as engaging in the bad behavior would trigger a negative moral judgment of themselves.
Indeed, it has been shown that people typically value honesty (i.e., honesty is part of their internal reward system), that they have strong beliefs in their own morality, and that they want to maintain this aspect of their self-concept (Greenwald 1980; Griffin and Ross 1991; Josephson Institute of Ethics 2006; Sanitioso, Kunda, and Fong 1990)… ToDan Ariely, Predictably Irrational
maintain their positive self-concepts, people will comply with their internal standards even when doing so involves investments of effort or sacrificing financial gains (e.g., Aronson and Carlsmith 1962; Harris, Mussen, and Rutherford 1976; Sullivan 1953). In our [deciding to (or not to) rob a] gas station example, this perspective suggests that people who pass by a gas station will be influenced not only by the expected amount of cash they stand to gain from robbing the place, the probability of being caught, and the magnitude of punishment if caught but also by the way the act of robbing the store might make them perceive themselves.
Yet, most of us will lie and cheat in small ways for our personal benefit if we think we can get away with it. Behavioral economic experiments by Nina Mazar, On Amir, and Dan Ariely looked into what proportion of test-takers cheated when led to believe they could get away with it and rewarded monetarily for correct answers. What they found was, as Ariely stated, “When given the opportunity, many honest people will cheat. In fact, rather than finding that a few bad apples weighted the averages, we discovered that the majority of people cheated, and that they cheated just a little bit.” This is likely because that act of lying, cheating, stealing, whatever-bad-behavior fails to activate our internal judge of the morality of our actions, allowing us to still consider ourselves honest even though we cheated (since it was just a little bit!).
A follow-up study tempting students to cheat on an exam that paid out for correct answers found that “non-monetary currencies” (things that have cash value but are not cash) greatly decreased integrity. When the payout was in cash, the students cheated (inflated the score of their exam) by an average of 2.7 questions. However, when the payout was in the form of a token which could then be traded for cash, the cheating increased to 5.9—more than double. Additionally, the rate of students cheating all the way (saying they got all questions right rather than just inflating their scores by a few points) increased from 0.2% to 16%, an astronomical increase in rampant dishonesty.
The results of these behavioral economic studies lead me to think with worry of the use of other tokens: cryptocurrencies. Would they function much as “nonmonetary currencies” and thus lead to an increase in crime?
On Amir, a Professor of Marketing out of University of California San Diego, who has extensively researched (dis)honesty, had these insights on the matter:
[Money is] intuitively tied to moral standards…It is possible that in a couple of generations, for them, cryptocurrencies would be their form of payment and directly tied to their moral standards, and the same as cash. The problem is the generation that, for them, [Bitcoin is] a novel thing, it doesn’t carry the associations that the money they are used to do. Then you might get more behavior that is less encumbered by morals… When you click your mouse button to move something from Point A to Point B on the screen—and that something happens to be someone else’s money, but it doesn’t feel like someone else’s money, and doesn’t trigger moral standards—then you are more likely to see fraud happening. So in the transition period for all of these new technologies, that’s when you might worry most about these technologies essentially enabling more immoral behavior by virtue of not being associated intuitively with your moral standards… When you have a novel technology, a novel new medium, it is not yet associated with anything.On Amir, Associate Dean and Professor at UC San Diego,
On Amir sees another potential issue in fostering moral behavior in cryptocurrencies and decentralized digital systems: anonymity. Because of anonymity, cryptocurrencies and decentralized autonomous organizations likely lack one of the more powerful tools for enforcing morality across a population: social norms. “Social norms” are the unwritten rules and social pressures governing behavior within a group or culture and have been widely demonstrated to be an extraordinarily powerful force in enforcing moral standards, often proving even more powerful than financial incentives. According to On Amir, “we have a lot of evidence that anonymity is an enabler of avoiding social norms.” Since open blockchains are often used anonymously, he suggests technological means of enforcing morality as social norms are unlikely to be closely followed.
Behavioral economic research has revealed another method of encouraging morality: moral priming. If you morally prime people by reminding them of morality and character directly prior to an action: integrity shoots up dramatically. People cheat less after trying to recall the Ten Commandments—even if atheists. And after signing that they’ll follow the Honor Policy—even when no honor policy exists. Both the Ten Commandments and Honor Policy serve as a “moral prime,” leading most people to morally evaluate themselves and not cheat when they otherwise would have. The effects of moral primes, when done immediately before an action, can be quite striking. In the studies, cheating went from being something done by most participants when there was no moral priming to a jaw-dropping zero participants cheating after both the Ten Commandments and Honor Policy moral primes.
Software automated “moral priming” could greatly decrease cryptocurrency-related fraud. Imagine if logging into your account on a cryptocurrency trading platform like Binance or Crypto.com felt like the digital equivalent of walking into a gilded central bank with “E Pluribus Unum” written across the door. Imagine if before submitting a pull request on Github (which is how developers typically submit changes to code to open source software projects), you went through the digital equivalent of reciting an oath. Imagine if before signing your private keys to execute a smart contract, you had to sign an honor pledge.
Now, such moral priming may come with some software bulking—something I would certainly not recommend for a fundamental base protocol such as Bitcoin. However, given the humongous potential effects of simple moral priming interventions in decreasing rampant fraud, I imagine decentralized projects should consider adding moral priming to auxiliary protocols, applications, and websites. Specialized side chains, second layers, or niche altcoins may also be candidates.
Could we use moral priming to curtail crime in decentralized digital projects? As On Amir explained, in some cases, yes, but don’t expect miracles:
We called our first paper “The Dishonesty of Honest People.” If someone is—let’s take the extreme—is evil. If someone maliciously wants to hurt people… They have already consulted their internal codes, their moral standards, and for them, for one reason or the other, this seems right… these [moral priming] manipulations will not have an effect on them… That programmer who has no ill intentions but might reach the point in the code where there’s temptation… It’s that honest person who faces temptation that you want to say, “wait a minute, that would violate my moral standards.” That’s when you want to remind them that. I am not sure when temporally in the coding process that comes in. It might be that what you need is a random reminder every now and again when you open your editor to write code that, “Remember your code has the possibility to negatively impact other people. Be sure to stay committed to “The Code.” You could have “The Coder’s Code”… For those cases, yes, those kinds of intervention to help and prevent foul play, but we are not going to stop the evil masterminds.On Amir, Professor of Marketing at UCSD
We The Web will be exploring possibilities for effectively increasing moral behavior within the open blockchain space. If you have a pertinent background in the social sciences or are a part of a cryptocurrency application or decentralized autonomous organization and open to collaborating with We The Web L3C, please contact me at email@example.com. Pre-order the book System Override: How Bitcoin, Blockchain, Free Speech & Free Tech Can Change Everything here.