Abstract
This chapter addresses the myth of decentralized governance of public blockchains, arguing that certain people who create, operate, or reshape them function much like fiduciaries of those who rely on these powerful data structures. Explicating the crucial functions that leading software developers perform, the chapter compares the role to Tamar Frankel’s conception of a fiduciary, and finds much in common, as users of these technologies place extreme trust in the leading developers to be both competent and loyal (ie, to be free of conflicts of interest). The chapter then frames the cost-benefit analysis necessary to evaluate whether, on balance, it is a good idea to treat these parties as fiduciaries, and outlines key questions needed to flesh out the fiduciary categorization. For example, which software developers are influential enough to resemble fiduciaries? Are all users of a blockchain ‘entrustors’ of the fiduciaries who operate the blockchain, or only a subset of those who rely on the blockchain? Finally, the chapter concludes with reflections on the broader implications of treating software developers as fiduciaries, given the existing accountability paradigm that largely shields software developers from liability for the code they create.
Keywords: Blockchain, DLT, Bitcoin, Ethereum, Distributed Ledger Technology, Cryptocurrency, Digital Currency, Blockchain Technology, Governance, Fiduciary, Law
Research Notes
Corporate Governance for Complex Cryptocurrencies? A Framework for Stability and Decision Making in Blockchain-Based Organizations by Philipp Hacker :: SSRN
Abstract
Cryptocurrencies such as bitcoin or ethereum are gaining ground not only as alternative modes of payment, but also as platforms for financial innovation, particularly through token sales (ICOs). All of these ventures are based on decentralized, permissionless blockchain technology whose distinguishing characteristics are their openness to, and the formal equality of, participants. However, recent cryptocurrency crises have shown that these architectures lack robust governance frameworks and are therefore prone to patterns of re-centralization: they are informally dominated by coalitions of powerful players within the cryptocurrency ecosystem who may violate basic rules of the blockchain community without accountability or sanction.
Against this background, this paper makes two novel contributions. First, it suggests that cryptocurrency and token-based ecosystems can be fruitfully analyzed as complex systems that have been studied for decades in complexity theory and that have recently gained prominence in financial regulation, too. It applies these insights to three key case studies: the Bitcoin Hard Fork of 2013; the Ethereum hard fork of 2016, following the DAO hack; and the ongoing Bitcoin scaling debate. Second, the paper argues that complexity-induced uncertainty can be reduced, and elements of stability and order strengthened, by adapting a corporate governance framework to blockchain-based organizations: cryptocurrencies, and decentralized applications built on top of them via token sales. Most importantly, the resulting “comply or explain” approach combines transparency and accountability with the necessary flexibility that allows cryptocurrency developers to continue to experiment for the sake of innovation. Eventually, however, the coordination of these activities may necessitate the establishment of an “ICANN for blockchains”.
Keywords: blockchain; token sales; ICO; initial coin offering; governance; corporation; bitcoin; ethereum; hard fork; utility token; investment token; complexity theory; ICANN; hard fork
Blockchain in Journalism – Columbia Journalism Review
Blockchain, like the internet, or democracy, or money, is many overlapping things. It is a decentralized record of cryptocurrency transactions. It is a peer-to-peer network of computers. It is an immutable, add-on-only database. What gets confusing is the way in which these overlapping functions override one definition or explanation of blockchain, only to replace it with an altogether different one. The conceptual overlaps are like glass lenses dropped on top of one another, scratching each other’s surface and confusing each other’s focal dimensions.This guide takes apart the stack of these conceptual lenses and addresses them one by one through the reconstruction of the basic elements of blockchain technology. The first section of this report gives a short history of blockchain, then describes its main functionality, distinguishing between private and public blockchains. Next, the guide breaks down the components and inner workings of a block and the blockchain.The following section focuses on blockchain’s journalistic applications, specifically by differentiating between targeted solutions that use blockchain to store important metadata journalists and media companies use on a daily basis, and hybrid solutions that include targeted solutions but introduce cryptocurrency, therein changing the journalistic business model altogether. Finally, the report speculates on the proliferation of what are known as Proof-of-Stake blockchain models, the spread of “smart contracts,” and the potential of enterprise-level and government-deployed blockchains, all in relation to what these mean to newsrooms and the work of reporters.Key findingsFor media organizations, the use cases of blockchain can be grouped into three key areas: Auditable (and officially verifiable) database solutions for editorial and advertising Cryptocurrency-based business models Access to public data secured in blockchain-based file systems
Source: Blockchain in Journalism – Columbia Journalism Review
Critical Trust: Social Movements and Democracy in Times of Crisis | Della Porta | Cambio. Rivista sulle Trasformazioni Sociali
The recent financial crisis and, especially, anti-austerity policies, reflects and, at the same time, contribute to a crisis of representative democracy. In this article, I discuss which different conceptions of trust (and relations to democracy) have been debated in the social sciences, and in public debates in recent time. The financial crisis has in fact stimulated a hot debate on “whose trust” is relevant for “whose democracy”. After locating the role of trust in democratic theory, I continue with some illustrations of a declining political trust in Europe, coming from my own research on social movements, but also of the emergence, in theory and practices, of other conceptions of democracy and democratic spaces, where critical trust develops. Indignados’ movements in Spain and Greece as well as the Occupying Wall Street protest in the US are just the most visible reaction of a widespread dissatisfaction with the declining quality of democratic regimes. They testify for the declining legitimacy of traditional conceptions of democracy, as well as for the declining trust in representative institutions. At the same time, however, these movements conceptualize and practice different democratic models that emphasize participation over delegation and deliberation over majority voting. In doing this, they present a potential for reconstructing social and political trust from below.
The Stakes of Smart Contracts by Mark Verstraete :: SSRN
By consensus, smart contracts are a revolution in private ordering: they offer guaranteed enforcement, independent of the whims of territorial governments; efficient formation and interpretation; immunity from external interference; and complete deference to the parties’ wishes. Each of these claims is a myth. While smart contracts present themselves as natural and neutral, they are in fact deeply politicized. The Legal Realists tore down the foundations of smart contracts almost a century ago. Advocates for them have not solved the problems of the past—they have forgotten them.This Article offers a new critique of the optimism about smart contracts and desirability of securing mutual agreements by code rather than law. More specifically, this Article takes aim at the assertion that smart contracts can, and should, provide an alternative to traditional contract law. It contends that advocates for smart contracts rely reflexively on deeply contested assumptions from Lochner-era legal thought, including a political commitment to “freedom of contract,” insistence on a division between “public” and “private” spheres, and a minimalist view of the state’s role in managing private law systems of contract and property. More specifically, these assumptions cause smart contract partisans to fundamentally underestimate the role of the state in maintaining a functioning private law regime. This failure to recognize the inevitable extent of state intervention in private law means that smart contracts will create novel distributions of wealth and power that are normatively suspect.Furthermore, this Article draws upon two foundational moments in Internet law—early hopes for a realm beyond territorial governance, and attempts to override copyright law through technology—to demonstrate the errors that advocates and scholars alike commit based on the evanescent technology promise of this new method. Finally, this Article demonstrates that, far from realizing a utilitarian ideal of efficiency, smart contracts are constructed without democratic oversight and governance, which are essential for a legitimate system of private law.Keywords: contracts, legal theory, private law, private law theory, Lochner, smart contracts, law and technology, blockchain, Legal Realism, private order
Source: The Stakes of Smart Contracts by Mark Verstraete :: SSRN
Regulating Blockchain: Critical Perspectives in Law and Technology, 1st Edition (Hardback) – Routledge
the distributed architecture underpinning the initial Bitcoin anarcho-capitalist, libertarian project, ‘blockchain’ entered wider public imagination and vocabulary only very recently. Yet in a short space of time it has become more mainstream and synonymous with a spectacular variety of commercial and civic ‘problem’/’solution’ concepts and ideals. From commodity provenance, to electoral fraud prevention, to a wholesale decentralisation of power and the banishing of the exploitative practices of ‘middlemen’, blockchain stakeholders are nothing short of evangelical in their belief that it is a force for good. For these reasons and more the technology has captured the attention of entrepreneurs, venture capitalists, global corporations and governments the world over.Blockchain may indeed offer a unique technical opportunity to change cultures of transparency and trust within cyberspace, and as ‘revolutionary’ and ‘disruptive’ has the potential to shift global socioeconomic and political conventions. But as a yet largely unregulated, solutionist-driven phenomenon, blockchain exists squarely within the boundaries of capitalist logic and reason, fast becoming central to the business models of many sources of financial and political power the technology was specifically designed to undo, and increasingly allied to neoliberal strategies with scant regard for collective, political or democratic accountability in the public interest. Regulating Blockchain casts a critical eye over the technology, its ‘ecosystem’ of stakeholders, and offers a challenge to the prevailing discourse proclaiming it to be the great techno-social enabler of our times.
Egalitarian Society or Benevolent Dictatorship : The State of Cryptocurrency Governance – Semantic Scholar
In this paper we initiate a quantitative study of the decentralization of the governance structures of Bitcoin and Ethereum. In particular, we scraped the open-source repositories associated with their respective codebases and improvement proposals to find the number of people contributing to the code itself and to the overall discussion. We then present different metrics to quantify decentralization, both in each of the cryptocurrencies and, for comparison, in two popular open-source programming languages: Clojure and Rust. We find that for both cryptocurrencies and programming languages, there is usually a handful of people that accounts for most of the discussion. We also look into the effect of forks in Bitcoin and Ethereum, and find that there is little intersection between the communities of the original currencies and those of the forks
Blockchain technology and the GDPR: the beginning of a beautiful privacy whac-a-mole?
On the first day of the CPDP2019 at 10:30 we’ll have a fantastic panel on blockchain technology and GDPR.
https://www.cpdpconferences.org/cpdp-panels/blockchain-technology-and-the-gdpr-the-beginning-of-a-beautiful-privacy-whac-a-mole
• What are the main points of friction between blockchains and the GDPR?
• What are the technological privacy enhancing mechanisms that could apply?
• What are the appropriate and necessary conciliations for the creation of privacy-preserving blockchains in accordance with data protection regulation?
• Is there a market for non-compliance that blockchain technologies are best suited to serve?
The speakers include: Michèle Finck, Max Planck Institute for Innovation and Competition (DE); David Ciliberti, DG JUST (EU); Alexandra Giannopoulou, Blockchain and Society Policy Research Lab, Institute for Information Law, UvA (NL); George Danezis, UCL (UK); and Konstantinos Stylianou,
University of Leeds (UK). The panel will be moderated by Mireille Hildebrandt, VUB-LSTS (BE), and chaired by Balazs Bodo.
ABSTRACT: Individual user control of data has become a central issue in the European Data Protection Regulation (GDPR), creating a more demanding data protection framework for involved actors, all while coming in conflict with fundamental characteristics of blockchains. Thus, the difficulty lies in designing a system without compromising core values of both privacy regulation on the one hand and blockchain technology on the other. Given the right incentives there is no doubt GDPR compliant distributed ledgers can, and will be designed. The real question is what happens if there is persistent market/social/political interest in those blockchain implementations which do not care for, or are unable to achieve GDPR compliance. Considering the interdisciplinary nature of the main question, the proposed panel consists of invited experts selected to cover various privacy-related fields including law and computer science.
• What are the main points of friction between blockchains and the GDPR?
• What are the technological privacy enhancing mechanisms that could apply?
• What are the appropriate and necessary conciliations for the creation of privacy-preserving blockchains in accordance with data protection regulation?
• Is there a market for non-compliance that blockchain technologies are best suited to serve?
All Smart Contracts Are Ambiguous by James Grimmelmann :: SSRN
Smart contracts are written in programming languages rather than in natural languages. This might seem to insulate them from ambiguity, because the meaning of a program is determined by technical facts rather than by social ones.
It does not. Smart contracts can be ambiguous, too, because technical facts depend on socially determined ones. To give meaning to a computer program, a community of programmers and users must agree on the semantics of the programming language in which it is written. This is a social process, and a review of some famous controversies involving blockchains and smart contracts shows that it regularly creates serious ambiguities. In the most famous case, The DAO hack, more than $150 million in virtual currency turned on the contested semantics of a blockchain-based smart-contract programming language.
Source: All Smart Contracts Are Ambiguous by James Grimmelmann :: SSRN
Professors From 7 US Colleges, Including MIT and Stanford, Have Teamed Up To Design a Cryptocurrency Capable Of Processing Thousands of Transactions a Second – Slashdot
Professors from seven U.S. colleges including the Massachusetts Institute of Technology, Stanford University and University of California, Berkeley have teamed up to create a digital currency that they hope can achieve speeds Bitcoin users can only dream of without compromising on its core tenant of decentralization. The Unit-e, as the virtual currency is called, is the first initiative of Distributed Technology Research, a non-profit foundation formed by the academics with backing from hedge fund Pantera Capital Management LP to develop decentralized technologies.