Blockchain, DAOs and Game Theory: The Basis of Dan Larimer’s ‘True Democracy’

Dan Larimer is an American programmer, economist, game‑theory expert and technology entrepreneur. To ForkLog readers he is perhaps best known as one of the creators of the blockchain EOS, DEX Bitshares and the decentralized social‑media platform Hive. But his achievements do not end there.

In 2022, news emerged of the launch of the Fractally project, founded by Larimer. It was announced as a decentralized exchange and a social‑media‑content network under management by, as the founders claimed, the most advanced system DAO. In Fractally’s architecture Larimer uses the principles laid out in his 2021 book More Equal Animals: The Subtle Art of True Democracy (More Equal Animals: The Subtle Art of True Democracy).

In this work, which alludes to George Orwell’s ‘Animal Farm’, he described his vision of governance and the harm that centralization inflicts on human development, suggested how to give each person on the planet a more meaningful role, and much more.

It all began in 2009, when Larimer was working on creating his own digital currency. He joined the Bitcoin community and began writing his code. In the book he recalls:

“It was at that time that I directly interacted with Satoshi Nakamoto, the enigmatic creator of Bitcoin. I voiced concerns about Bitcoin’s scalability, and Satoshi replied with the famous quote at the time: ‘If you don’t believe me or don’t understand, I don’t have time to try to persuade you'”.

Each of Larimer’s projects was a social experiment in building community, governance, economic incentives and game theory. He writes: “My hypothesis is that nonviolent methods for defending our rights from public and private criminals will be incredibly valuable, and therefore those who provide them can help people while earning a lot of money”.

In his book he investigates new democratic processes aimed at encouraging compromise within power structures — instead of factionalism. Larimer proposes envisioning a society governed without parties, electoral campaigns and dirty political technologies. He reasons about questions such as the necessity of government, its legitimacy, tasks and powers. The ultimate aim of Larimer is to establish a democratic process resilient to manipulation, and to give individuals the opportunity to reach a new consensus.

On the pages of the book he draws attention to the following problem. In large groups the chances that your vote matters are extremely low, and in traditional democracies difficulties arise precisely as scale grows. “The bigger the society, the harder it is for an individual (or a minority) to secure agreement among all participants,” summarises Larimer.

As an alternative he proposes a hierarchical structure in which small groups (for example, families) can easily reach agreements; and for communities larger than 150 people a division into subgroups is necessary. Regarding his role in developing the concept of a DAO, Larimer says:

“While everyone was trying to understand what Bitcoin was, I was the first person in the blockchain space to describe blockchains as decentralized autonomous companies (communities, corporations or organisations). Since then the concept of DAC has been widely adopted in the industry.”

That unconventional view led him to invent one of the most widely used consensus algorithms, Delegated Proof of Stake (DPoS), which enabled blockchains with low transaction costs (high throughput) and built-in decentralized governance.

At first glance the book is packed with socio-economic details, but it is precisely these aspects that helped the author to conceive future ideas, theories and, ultimately, creations.

Further, Larimer discusses the need for fundamental changes in society and proposes ways to achieve them. He argues that this requires:

• found a new political party on the principles of “true democracy”;
• create DACs that will foster autonomy among community members;
• use low-tech solutions to gain greater independence.

Also, Larimer emphasises the importance of the right to secession as a key element of true democracy. He argues that its absence would lead to tyranny, and proposes organising societies in a federation of micro-states. Larimer compares this with what is happening in crypto‑community:

“They have no notion of a closed system. People run communities from the outside, thereby orchestrating control over the governance of the blockchain’s structure. They create fake accounts, voting with other people’s tokens, diverting funds intended for the community’s needs”.

Larimer draws a parallel between governance principles and his specialization — software engineering — advocating modularity, low coupling and independence in the structures of society.

He highlights the role of randomness in political processes and argues that it protects against party capture. Larimer cites examples of using randomness in computer systems, in nature and other domains; recalls the Pareto principle; and suggests applying randomness in politics to foster a diversity of opinions and to prevent monopolies of influence.

This, he argues, would be aided by each person using their mobile phone and blockchain technology. Under this approach cryptographic methods aim to produce a verifiably fair random number. An example is the use of a hash of a future Bitcoin block: after selecting a random number it is used in a deterministic shuffling algorithm to group people into groups of ten.

Larimer envisions a new approach to selecting public leaders through a system of “political games for removal”. In it, candidates are chosen based on their skills in various ‘games’ that test such virtues as building consensus, logic and negotiation.

The book also describes property rights using a smart contract, according to which contracts should include only conditional transfers of ownership. If a party does not currently hold ownership of the asset, the contract is invalid. The author argues that smart contracts implemented as computer code on the blockchain ensure its logical sequence and enforceability.

Turning to financial integrity, Larimer points to the importance of distinguishing between tangible assets and financial instruments and opposes the “financialisation” of everything — given the potential rift between money and real goods and services. In his words there is critique of derivatives and crypto-exchange loans, as well as a negative stance toward sovereign debt.

Speaking of universal basic income, he does not yet see a path to implementing it in society due to potential problems with money creation and thus prices. UBI clashes with the model he proposes, in which daily toil for the community remains central.

Larimer contemplates ownership of land, air and water, questions of inheritance and how to ensure fair distribution of natural resources. He proposes the idea of universal heritage, under which each generation is granted an equal share of resources to avoid unequal contracts and ensure fair inheritance. To bring this idea to life he puts forward the following proposals:

• annual increase in the money stock and its distribution among participants in the “peaceful pact”;
• imposition of a property tax;
• redistribution of corporate shares;
• participation in drafting a new constitution.

Moreover, Larimer is a proponent of a “wealth tax” (5% per year), which would ensure a stable distribution of wealth between generations and prevent the concentration of power.

He considers intellectual property only in the context of the ideals and principles of true democracy, arguing that copyright centralises power. He argues that society should not purchase technology or art from monopolists, and even suggests withholding access to any technologies until others can reproduce them.

As an alternative method of regulating the ideas market, he proposes using smart contracts, because they can ensure privacy and non-interference. And he suggests that without artificial monopolies competition in this market would be even more active and spread more quickly and accessibly.

The central idea of Larimer’s book More Equal Animals: The Subtle Art of True Democracy is that everyone can contribute to a genuinely democratic society, where each person would strive for maximum personal independence. To begin, according to Larimer, one should:

• strengthen physical and mental health;
• minimise dependencies;
• use real money (gold, silver, and cryptocurrencies);
• avoid debt;
• produce one’s own energy and food;
• learn to say no.

The author even provides concrete advice for achieving these aims:

• adopt periodic fasting to improve health;
• buy produce from local farmers;
• build your own energy sources;
• ideally — grow your own food.

He emphasises that these steps not only promote personal independence but can also be economically advantageous for everyone.

Larimer’s enthusiasm has led him to take on new projects time and again, though not all proved profitable or successful. This time he invites us to change the world with him. As he hands the book to friends, he asks readers to spread knowledge and sow a desire for action. Soon, I think we’ll see what comes of it — perhaps he simply lacked support earlier.

Author: Sergei Golubenko