Having examined the social, economic and technical aspects of the Fabric Protocol, I concentrated on the way it is governed. Any system comprising of AI, robots, and blockchain will introduce new power relationships. Fabric claims to be decentralized based on non-profit foundation and community rules. Who actually operates the network though? What are the sources of power of the token rules? And what laws and morals will be required in a robot-trading and -deciding world? This paper examines the political and governance aspect of robot economy. I am not reciting marketing slogans I want to know what drives and what are the structures that determine who wins and who loses.
Dual Structure Foundation vs. Protocol Ltd
The protocol is maintained by the non-profit Fabric Foundation, and the $ROBO token is issued by Fabric Protocol Ltd. which is located in the British Virgin Islands. An institutional report indicates that the project has raised $20M in a Series A round led by Pantera Capital, Coinbase Ventures and other large investors. The report states that Fabric has an objective of developing open robotics hardware and software, which is aimed at platform-wise compatibility between systems and decentralized identity. The non-profit is supposed to allow anybody to be part and prevent a single company to take everything in its control. Nevertheless, the existence of a commercial enterprise that sells tokens and organizes the project may be a source of conflicts. Who serves the interests of the for-profit in accordance with the community? And when there is a profit made, whither does it go?
This two-part arrangement resembles other crypto organizations: Ethereum Foundation funds its research and upgrades, and commercial products are made by such companies as ConsenSys. The case of fabric is different since its product is real world robots that operate out in the real world. There are actual risks that are associated with real robots, which are not experienced with plain software. When a robot injures a person, to whom will the non-profit, the for-profit, or the token holders would be sued? The structure must provide answers to the governance and legal questions.
Tokenomics and Power
The division of power can be seen in the division of ROBO. The report states that 29.7 percent of tokens are sent to the community, but 44.3 percent of the tokens belong to the investors and the team (24.3 percent investors and 20 percent team). The supply is concentrated in the vesting schedules, which comprise 87.25 percent of the supply. Network rules, fees and upgrades may be voted by token holders, and thus most decisions can be influenced by early investors and members of the core team.
The risk is not just theory. According to researchers at Brookings, most decentralized platforms have large actors that have the majority of power, which is a violation of decentralization. They note that under token based governance, big holders have the power to make decisions on changing the protocols and distributions of resources. Even systems based on proof-of-stake are prone to concentration; 30-plus percent of staked Ether are under the control of Lido. This might happen in the robot economy when there are too powerful token holders or staking pools.
Motivation is also influenced in tokenomics. When the rate of emission (new tokens) is high, the value of tokens can be reduced and individuals might not have long term. When there is low emission, the community might lack sufficient funds to expand. Fabric states that it will adjust the rate of emissions depending upon the congestion of the network and the quality of donations, though they are only vaguely described. In case the emission rule becomes politicized, big holders might lobby to have rules which are more favorable to them. The rules should be measurable and transparent to maintain a healthy amount of tokens. Otherwise, money policy will lead to brawls.
Risk of Re-Centralization and Imperative of Policy.
The notion of decentralization is not a yes/no fact. According to Brookings researchers, numerous blockchain platforms have been re-centralized and large players emerge and make them less open. They state that decentralization must be maintained by fair governance and information disclosure on the possession of tokens and restriction of influence. The safeguards that may be implemented are restricting the right to vote, quadratic voting, and hybrid key management that may prevent one party to decide everything. In the absence of such regulations, even a non-profit making foundation might be hijacked by the insiders or the influential groups.
In robotics, there is a greater risk since safety is an issue. In case there are a small number of validators who determine the method of task checking and payment, they might block tasks, pay more, or modify the behavior of the robots. Poor management of consensus has the potential to squander resources and allow bad actors to re-direct robots or embezzle funds. The protocol must be able to combine transparency with strategies to prevent centralization and maintain accountability. Such tools as decentralized identity lists, community multisignature wallets, and slashing punishments on bad actions can assist, but they are difficult to construct.
Moreover, robotics scale implies that the insignificant power may be used to impact the real world. As an example, when a big token owner has power to coordinate the time of delivery robots in a city, they may give preference to their services or deny their competitors. Validators may then be perceived as a critical infrastructure by regulators and subject to their control. A combination of on-chain regulations and government legislation will be an important component of the robot economy.
Fragments of Regulation and the Problems of Cross-Jurisdiction.
Both robots and blockchain have to deal with dynamic regulations. The report indicates that regulation varies significantly across countries and therefore a protocol developed to suit U.S. regulations might struggle in Europe or the Asian region. According to the automation article, overlaps in regulations and absence of standardization prevent cross-platform work and complicate the process of adhering to data protection regulations.
When there is no universal agreement on the laws, the companies can only start in amicable locations and this restricts the international coverage.
Robots will manage personal information of our houses, workplaces and health conditions as they become increasingly prevalent and interconnected. According to the GCR report, decentralized systems need to reduce the amount of risk associated with excessive concentration and allow users to control access to their data. The automation article further explains that although blockchain indicates the identity of the person who does what, it may also reveal confidential details of how it operates unintentionally. The necessity to achieve a balance between transparency and confidentiality requires privacy saving techniques. Firms with considerable investment in robot AI are also concerned about the loss of intellectual property in case the algorithm and the data are registered on an immutable registry. Permissioned chains, with zero-knowledge proofs and secure enclaves can be helpful but also increase the difficulty of connecting systems as well as rendering them genuinely decentralized.
The politics of data is already red-hot. In case robots take audio-video records in the open space and upload such information to the chain, individuals may not like to be under constant monitoring. There are areas that consent must be made before a recording; other areas are subject to facial recognition. The design of fabric should be within these laws. It should also make decisions on ownership of the data: robot owner, filmed people or the community? Data markets might be exploitative, as the scandals of social media have been without definitive regulations.
Concerns on intellectual property also emerge. Robotics companies would not prefer recording sensor data in a public registry since rivals can reverse engineer their algorithms. They can desire encryption or selective disclosure. So Fabric might be a mixture of public and private data network. The government should find the middle ground in this, being fair and keeping proprietary tech protected.
Machine Ethics and Accountability
Ethics and responsibility arise as a matter of politics when robots are left to do their own things. Should robots be accorded legal status? Who ought to be the wrongdoer in the event of a robot acting wrongly? Fabric Protocol assigns a verifiable ID to every robot and logs the activities on the chain. This allows us to audit what has transpired but it does not resolve the question of accountability. Having no evident guidelines, manufacturers can pass on the responsibility to protocol, and the operator can blame the manufacturer. Shared governance should establish a sense of responsibility and ensure that it provides incentives that encourage safe actions. This could be in the form of staking, where the owners of robots pledged their bonds upon bad manner or insurance pools funded by network charges.
Ethics go beyond accidents. It is possible to use robots in the work which attracts some moral issues such as surveillance, police work or military work. Community governance will not prevent harmful uses when the token holders are primarily interested in profit. Unregulated use may be required to limit or prohibit certain uses. What is good is that fabric is open enough to catalyze good innovation: It can also be used to do bad things more readily. This is comparable to open-source software controversy: it provides lots of power to developers but also allows bad actors to use it.
One more issue that is ethically problematic is algorithmic bias. When the workload is chosen by token rewards, there is a possibility that the robot avoids low paying yet socially beneficial work, such as delivering medicine to the poor areas. Social values must be incorporated to task-assignment algorithms by governance. Perhaps some portion of rewards ought to compensate the unprofitable but necessary services. Such decisions are not technical.
Long-term effects: Worker and Machine Rights.
The more autonomy and economic power robots have, the more they may appear to be more than mere tools. There is a debate on whether advanced AI has moral consideration by philosophers and legal experts. Should robots be entitled to rights or representation in case they can make money and conclude contracts? And what will the human workers have to be when robots take over the economy? In the absence of a proactive policy, the transition may increase inequality and lead to unrest. Among them is a universal robot dividend or basic income as was discussed earlier. The other one is to keep humans in control of major decisions and to maintain some jobs (e.g. care giving) to humans only. The work, citizenship and rights of the society might need to be reconsidered in the long term when machines are part and not merely a property.
We can refer to other models of governance. To have a balance between expertise and inclusion, open-source software communities combine meritocracy and committees. Cooperative businesses avoid the concentration by the use of one person one vote. Quadratic voting and token-weight caps are employed as blockchain network limits to big holders. Fabric might attempt similar, such as providing local communities with veto power over the use of robots or voting power proportional to the contribution made rather than to the number of tokens one has. However, these concepts require an emphasis on community health in the long term, rather than on short-term returns to investors.
Other Protocol Comparisons and Community Comparisons.
In the quest to learn more about the governance decisions of Fabric, it is useful to consider other systems. The rules of Bitcoin are extremely simple: no formal voting or changes and only when the majority of miners and nodes switch the software, changes will occur. Ethernet allowed individuals to make suggestions on the chain and organize amongst clients, although this is still dependent on people making agreements off-chain. Fabric engages in token voting and a non-profit making foundation. This can be compared to contemporary DAOs, except it has a company that runs it as well.
In contrast to Bitcoin, the tokens of Fabric provide actual economic privileges. The foundation is more proactive in the development as opposed to Ethereum. The mix has the ability to make decisions appear more central and yet, seem to be decentral.
It is instructive to compare it to open source communities such as the Linux kernel. Linux is maintained by few experienced professionals who select and analyze code. The companies contribute money and computers, however, they do not determine what changes are to be included into the kernel. People gain recognition through reputation, which is not by way of a token. This system is in support of billions of infrastructure. On the negative aspect, free-software projects may find it difficult to compensate individuals since they are dependent on volunteers. The token of Fabric is an attempt to compensate the contributors, though, it attracts speculators. It aims at maintaining open-source excitement and achieving a regular corporate investment without reducing a few individuals to control the discussion.
Competition and Geopolitics.
Outside the internal regulations, there are international politics of the robot economy. Countries use robotics and AI as a strategic resource. China, United States, EU, Japan are putting a lot of money in robot research and manufacture. The global account and coin of fabric might emerge as an arena of struggle of power. Governments may either prod or pull towards the use or the use of Fabric depending on its suitability with their objectives. The protocol can be copied by some countries to retain control. Foreign robots may have their path to the market blocked by others. Companies such as Amazon and Tesla are developing their robots. The open design of fabric has the potential of putting the giants on its toes, yet they can take advantage of their scale to bend the rules or create competing networks.
Standards could be coordinated with the assistance of international organisations. International Organization of Standardization (ISO) is already authoring safety regulations to industrial robots. The International Telecommunication Union (ITU) studies ethics of AI. These organizations may establish the regulations governing the robot economy and exchange of data. Unless they collaborate, it could be possible that there would be a lot of incompatible systems that decreases the growth of each other.
Democratic Governance and Policy Recommendations.
In order to minimize risks, I would propose the following few policies:
- Distribution of tokens must be different. Quadratic voting method or stake limits or ageing voting methods can be used to ensure that a few individuals do not command the majority of the tokens. Invest a large portion of tokens in social research and social program funds, financial institutions.
- Hybrid governance ought to combine token voting with councils with workers, local groups and regulators. This assists in ensuring that decisions are made in a way that it takes into account everybody and not only money holders.
- There should be a demand of transparency. Reporting on the ownership of tokens, the number of validators, and their decision-making process should be reported regularly. The open information prevents secluded transactions and fosters credibility.
- Law systems must be transparent. Collaborate with legislators to establish the parties responsible, ownership of data, and robots taxes and rights. Certification programs will be able to ensure that the robots comply with the safety and ethical standards before they become part of Fabric.
- Privacy should be designed in. Privacy usage like zero-knowledge proofs and store data locally when being shown to the user. Provide means of deleting or anonymising data where requested by the law.
These recommendations are not an exhaustive list, but they demonstrate a need to have technology design and political design shift in a similar direction.
The success of Fabric will not be possible without it consulting legal experts, ethicists, worker groups, and lawmakers.
Conclusion
The regulation of the robot economy is not only a technical fact; it does determine whether Fabric will become a power sharing endeavor or support the existing structures. Majority tokens, in-group transactions, and watered-down law are actual threats, which require a cautious response in policy. In order to ensure that robots become beneficial to society, we need to develop equitable regulations, coordinate with others around the world, safeguard privacy and intellectual rights and establish social safety nets. The two-sidedness of fabric, where it is a non-profit organization and a token-issuing company, requires a clean sheet to avoid conflict. It must also co-operate with national and international institutions to address transnational regulations. Unless we address these political and ethical concerns, the robot economy can increase inequality but in the guise of being open. When we get it right, we will be able to build a future in which people and machines are success and influence makers. Politics of robots will rely on both our common choices and code.