The meaning of it all
We established in the introduction that MEV is a general phenomenon which arises from the time it takes to communicate. If communication is not instantaneous, then those who receive information first can act on it prior to anyone else.
Why is the ability to act on information first more valuable?
Acting on information is how we make meaning.
There are at least three important points to note about the previous sentence.
- "Acting on information" can mean doing stuff to the information itself (i.e. ordering it), or taking action due to how the information is interpreted.
- Meaning depends on time. Whether it is about how bits are ordered, or the order of actions resulting from some series of bits, those who receive information first have an asymmetric influence on the "direction" of the resulting interpretations.
- Meaning is something we make, not something we derive.
- Meaning depends on interaction with intentional beings capable of interpretation. This provides a means to balance the asymmetry above, because we can create systems that account for how information moves and what incentives for action that movement creates. It is also a warning about the always-present danger of collusion.
- The meaning of any information always exceeds our ability to describe it fully. This does not mean it exists independently of our interactions, just that there is always more meaning to be made from any information.
- Meaning is a strange loop. Though it depends on time and interaction, it always remains open to reinterpretation. We will never "solve" MEV, because we do not have access to "ultimate meaning". However, through the creative application of how we represent time and our commitments across it, we can create more fair systems.
What's the value here?
The reason all of this matters is that the meaning we make of/from any given information is inseparable from the value we assign it. In order to understand what is actually being extracted, we must first perceive how meaning is made (and therefore how it can continually be remade). This is not just a philosophical exercise: if we refine our understanding of meaning, we can more readily identify relevant information and valuable means of acting on it at different times.
Metaphor is the primitive through which we make meaning. We equate one thing with another, and so perceive the value of it relative to some prior experience/perception. Metaphor is not just a literary phenomenon. E = mc2 is a metaphor. The concept "electron" is a metaphor. We chain these metaphors together in order to create shared understanding: "data" is a metaphor for unstructured bits; "information" is a metaphor for structured bits; "knowledge" is a metaphor for interpreted bits; "wisdom" is a metaphor for understood/realised bits. "Bit" is also a metaphor, though one which lacks a stable referent, because metaphor - just like the meanings we construct with it - is itself a strange loop.
Strangeness does not mean we cannot learn to apply our understanding in practical ways. In particular, we can notice our dependence on time and interaction when making meaning, and the way this links to the value we can extract from receiving any piece of information first.
This leads to a simple question: what is the metaphor that takes the least time to share, such that we can keep everyone equally informed?
It's money.
Money reduces the complex process of making meaning and assigning value to one variable: price. There are various mechanisms by which this happens, though most fall under the general category of "auctions". Auctions are how we discover price in uncertain environments, and are the means by which information is transferred in return for payment or (the more general term) commitment.
However, as the old adage goes: "Price is what you pay. Value is what you get." This is really a description of the difference between your buying power and your ability to make meaning that is widely accepted. The information you can provide is more valuable to others who can aggregate it than it is to you, yet if the systems we use do not account for this, then there is no way for you to participate in that added value. You're stuck paying increasingly more for things whose value does not change.
Extracting the key
Does programmable money provide a means of addressing this problem? We know that systems which only have win-lose transactions amplify inequality, and we're looking for ways to quantify and distribute the added value of information as it is ordered by the people who receive it first. Essentially, we're trying to program money such that we can participate in win-win transactions, where the shared wins come from accounting for the time it takes to communicate price.
How can we do this? SUAVE is one option: create an open marketplace for mechanisms that enables anyone to develop applications which strive for a balance between maximizing revenue and returning that revenue to the people whose information created it.
If the systems we create do not find this balance, then those who can access information first interpret it in ways which assume that they deserve payoffs significantly different than the average. We may not consciously agree to this, but every time we take a loan, or buy a stock, or interact with money in general, we give our implicit agreement. In this, we get stuck playing unbalanced games in which we are both victims and perpertrators, all hoping we can manipulate things such that the lack of balance works in our favor.
This leads us to our first claim:
People should be able to participate in the value they create by virtue of the way information about their intentions is acted on.