At TILTing 2019 the Lab presented a study on the legal instruments that are, as of today, applicable to blockchain-based digital assets under European law, and the relative enforcement challenges. The broader question to be tackled is whether and how regulators deal with such challenges, and what are the interests at stake. http://ipkitten.blogspot.com/2019/05/tilting-perspectives-2019-report-2.html
Generally, unintended consequences of laws, discouraging entire categories of activity when one wanted to only surgically forbid a few specific things, are considered to be a bad thing. Here though, I would argue that the forced shift in developers’ mindsets, from “I want to control more things just in case” to “I want to control fewer things just in case”, also has many positive consequences. Voluntarily giving up control, and voluntarily taking steps to deprive oneself of the ability to do mischief, does not come naturally to many people, and while ideologically-driven decentralization-maximizing projects exist today, it’s not at all obvious at first glance that such services will continue to dominate as the industry mainstreams. What this trend in regulation does, however, is that it gives a big nudge in favor of those applications that are willing to take the centralization-minimizing, user-sovereignty-maximizing “can’t be evil” route.Hence, even though these regulatory changes are arguably not pro-freedom, at least if one is concerned with the freedom of application developers, and the transformation of the internet into a subject of political focus is bound to have many negative knock-on effects, the particular trend of control becoming a liability is in a strange way even more pro-cypherpunk (even if not intentionally!) than policies of maximizing total freedom for application developers would have been. Though the present-day regulatory landscape is very far from an optimal one from the point of view of almost anyone’s preferences, it has unintentionally dealt the movement for minimizing unneeded centralization and maximizing users’ control of their own assets, private keys and data a surprisingly strong hand to execute on its vision. And it would be highly beneficial to the movement to take advantage of it.
Source: Control as Liability
“If you bribe 51 percent of the miners, they will change the ledger for you. [This] tells you just how little irreversibility there is in PoW coins,” tweeted Cornell University professor and researcher in blockchain consensus protocols Emin Gün Sirer.A 51% attack on the blockchain network is not a new attack vector for PoW blockchains. However, as highlighted by Gün Sirer, it’s also not really an attack vector. On very special instances, the majority of self-interested miners on PoW blockchains have voluntarily agreed to alter a transaction history to undo critical situations.While the situation isn’t entirely the same, in the past, blockchain networks have seen their histories altered in the wake of critical moments. This happened on the ethereum blockchain back in 2016 when over $60 million worth of coins were siphoned off from the now-defunct smart contract The DAO. It also happened on the vericoin blockchain back in 2014 after $8 million worth of coins were hacked.While controversial, both decisions were supported by the primary developer community who launched system-wide upgrades or hard forks to enable otherwise infeasible amendments to the blockchain transaction history.Yet those choices weren’t without their repercussions; the resulting ethereum fork resulted in two distinct chains, ethereum and ethereum classic, respectively.A resounding noStill, many in the bitcoin community took to social media to deride the idea as both infeasible as well against the philosophical underpinnings of the technology.In Binance’s particular case, prominent members of the bitcoin community point out that bitcoin being the world’s largest blockchain is a particularly unique case with a reputation to uphold.“Talk of forking or reorganizing the blockchain is close to heresy,” tweeted billionaire bitcoin investor Michael Novogratz. “When the ethereum community did it the project was like 5 months old. A baby. Bitcoin now has $100bn market cap and is a legitimate store of wealth.”It would also be unfair according to Adam Back – CEO of bitcoin development startup Blockstream – given that the latest Binance hack is nowhere near as severe as previous hacks suffered on the bitcoin blockchain.“A Bitcoin reorg is just not happening, and I doubt any Bitcoin industry, miners nor developers considered it either. Recall 2014 $473mil, 2016 bitfinex hack $72mil, 2019 binance $40mil etc. #NotHappening,” tweeted Back.
These days, it’s not a shared drill that’s redefining trust and supplanting institutional intermediaries; it’s the blockchain. Botsman now says that the blockchain is the next step in shifting trust from institutions to strangers. “Even though most people barely know what the blockchain is, a decade or so from now, it will be like the internet,” she writes. “We’ll wonder how society ever functioned without it.”
The ambitious promises all sound very familiar.
What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure.When that trust turns out to be misplaced, there is no recourse. If your bitcoin exchange gets hacked, you lose all of your money. If your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. If someone successfully hacks the blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?Blockchain enthusiasts point to more traditional forms of trust—bank processing fees, for example—as expensive. But blockchain trust is also costly; the cost is just hidden. For bitcoin, that’s the cost of the additional bitcoin mined, the transaction fees, and the enormous environmental waste.Blockchain doesn’t eliminate the need to trust human institutions. There will always be a big gap that can’t be addressed by technology alone. People still need to be in charge, and there is always a need for governance outside the system. This is obvious in the ongoing debate about changing the bitcoin block size, or in fixing the DAO attack against Etherium. There’s always a need to override the rules, and there’s always a need for the ability to make permanent rules changes. As long as hard forks are a possibility—that’s when the people in charge of a blockchain step outside the system to change it—people will need to be in charge.
It’s hard enough to get enterprises that compete with each other to work together as a team, but it’s especially tricky when one of those rivals owns the team.Shipping giant Maersk and tech provider IBM are wrestling with this problem with TradeLens, their distributed ledger technology (DLT) platform for supply chains.Some 10 months ago, the project was spun off from Maersk (the largest container shipping company on the planet) into a joint venture with IBM. But in that time the network has enticed only one other carrier onto the platform: Pacific International Lines (PIL), one of eight shipping lines in Asia and 17th in the world based on cargo volumes.As those involved admit, that’s not enough.
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 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.