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, 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
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.
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
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.
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
At the tip of the hype cycle, trust-free systems based on blockchain technology promise to revolutionize interactions between peers that require high degrees of trust, usually facilitated by third party providers. Peer-to-peer platforms for resource sharing represent a frequently discussed field of application for “trust-free” blockchain technology. However, trust between peers plays a crucial and complex role in virtually all sharing economy interactions. In this article, we hence shed light on how these conflicting notions may be resolved and explore the potential of blockchain technology for dissolving the issue of trust in the sharing economy. By means of a dual literature review we find that 1) the conceptualization of trust differs substantially between the contexts of blockchain and the sharing economy, 2) blockchain technology is to some degree suitable to replace trust in platform providers, and that 3) trust-free systems are hardly transferable to sharing economy interactions and will crucially depend on the development of trusted interfaces for blockchain-based sharing economy ecosystems.
The European Review of Private Law has a special issue on Smart contracts.
- ‘The Legal Meaning of Smart Contracts’, Riccardo De Caria, Issue 6, pp. 731–751
- ‘The Formation of Blockchain-based Smart Contracts in the Light of Contract Law’, Mateja Durovic, André Janssen, Issue 6, pp. 753–771
- ‘Interpretation of Contracts and Smart Contracts: Smart Interpretation or Interpretation of Smart Contracts?’, Michel Cannarsa, Issue 6, pp. 773–785
- ‘Force Majeure and Excuses in Smart Contracts’, Eric Tjong Tjin Tai, Issue 6, pp. 787–804
- ‘Quandary of Smart Contracts and Remedies: The Role of Contract Law and Self-Help Remedies’, Larry A. Dimatteo, Cristina Poncibó, Issue 6, pp. 805–824
- ‘Blockchain & Data Protection … and Why They Are Not on a Collision Course’, Lokke Moerel, Issue 6, pp. 825–851
- ‘Electronic Platforms: Openness, Transparency & Privacy Issues’, Eliza Mik, Issue 6, pp. 853–870
- ‘Contract Law and Smart Contracts: Property and Security Rights Issues’, Louis-Daniel Muka Tshibende, Issue 6, pp. 871–883
- ‘Smart Contracts as the (new) Power of the Powerless? The Stakes for Consumers’, Oscar Borgogno, Issue 6, pp. 885–902
- ‘Digital Platforms: Regulation and Liability in the EU Law’, Piotr Tereszkiewicz, Issue 6, pp. 903–920
- ‘Will Innovative Technology Result in Innovative Legal Frameworks? – Smart Contracts in China’, Jia Wang, Chen Lei, Issue 6, pp. 921–942
- ‘Smart Contracts: A Synoposis’, Linda Tissaoui, Joyling Liu, Dan M. Marcotte, Issue 6, pp. 943–949
This paper provides an analysis of how concepts pertinent to legal contracts can influence certain aspects of their digital implementation through smart contracts, as inspired by recent developments in distributed ledger technology. We discuss how properties of imperative and declarative languages including the underlying architectures to support contract management and lifecycle apply to various aspects of legal contracts. We then address these properties in the context of several blockchain architectures. While imperative languages are commonly used to implement smart contracts, we find that declarative languages provide more natural ways to deal with certain aspects of legal contracts and their automated management.
A new study that was undertaken by Queen Mary University of London and the University of Cambridge, UK, came to some interesting conclusions about how blockchain could fit into the EU’s complex regulatory structure.