Save the date ! The Observatory and Forum is organizing a workshop on June 8th about GDPR, data policy and compliance. If you want to participate please register using this form. Confirmations will be sent by waves with additional information about the workshop.
The question of how territorial sovereignty operates in the interconnected yet diffuse, virtual yet material, and novel yet ubiquitous realm of cyberspace has proved enormously contentious. State practice in cyberspace presents a confusing array of behavior and justifications for conduct that runs along the enduring legal fault lines of territorial sovereignty. This article examines the legal history of sovereignty, emerging State cyber practice, and early legal views taken with respect to the application of sovereignty to cyberspace.
We concede contextual variations and exceptions to the integrity of territorial sovereignty have evolved for specialized domains such as the seas. However, we identify in territorial sovereignty a baseline rule of conduct and a corresponding duty on the part of States to refrain from interference with the integrity of conditions in other States’ territory. We argue that based on historical origins, legal evolution, international litigation, and recent State expressions concerning applicability of international law to cyberspace, the baseline rules of territorial sovereignty should be currently understood as a rule of conduct that generally prohibits States’ nonconsensual interference with the integrity of cyber infrastructure on the territory of other States.
We acknowledge that States may soon adapt sovereignty to operate differently in cyberspace, as they have in other contexts of international relations. However, in the absence of a lex specialis of cyber sovereignty and until States resort to deliberate international lawmaking, the baseline guarantee of territorial integrity provides a principled and normatively desirable understanding of sovereignty and how it relates to cyberspace. We urge States to act quickly to reaffirm their commitment to baseline Westphalian norms of territorial sovereignty in cyberspace while crafting, through accepted means of international legal development, a nuanced and effective doctrine of territorial sovereignty in cyberspace. A sound approach will acknowledge the binding legal character of territorial sovereignty as a limit on foreign interference but offer an emerging cyber-specific understanding much like that developed for other domains that have challenged national security and peaceful interactions between States.
Keywords: Cyberspace, Cyber, Sovereignty, Public International Law, State Responsibility, Computer, Violation of Sovereignty, Network
Another Kind of Radical Market
The book as a whole tends to focus on centralized reforms that could be implemented on an economy from the top down, even if their intended long-term effect is to push more decision-making power to individuals. The proposals involve large-scale restructurings of how property rights work, how voting works, how immigration and antitrust law works, and how individuals see their relationship with property, money, prices and society. But there is also the potential to use economics and game theory to come up with decentralized economic institutions that could be adopted by smaller groups of people at a time.
Perhaps the most famous examples of decentralized institutions from game theory and economics land are (i) assurance contracts, and (ii) prediction markets. An assurance contract is a system where some public good is funded by giving anyone the opportunity to pledge money, and only collecting the pledges if the total amount pledged exceeds some threshold. This ensures that people can donate money knowing that either they will get their money back or there actually will be enough to achieve some objective. A possible extension of this concept is Alex Tabarrok’s dominant assurance contracts, where an entrepreneur offers to refund participants more than 100% of their deposits if a given assurance contract does not raise enough money.
Prediction markets allow people to bet on the probability that events will happen, potentially even conditional on some action being taken (“I bet $20 that unemployment will go down if candidate X wins the election”); there are techniques for people interested in the information to subsidize the markets. Any attempt to manipulate the probability that a prediction market shows simply creates an opportunity for people to earn free money (yes I know, risk aversion and capital efficiency etc etc; still close to free) by betting against the manipulator.
Posner and Weyl do give one example of what I would call a decentralized institution: a game for choosing who gets an asset in the event of a divorce or a company splitting in half, where both sides provide their own valuation, the person with the higher valuation gets the item, but they must then give an amount equal to half the average of the two valuations to the loser. There’s some economic reasoning by which this solution, while not perfect, is still close to mathematically optimal.
One particular category of decentralized institutions I’ve been interested in is improving incentivization for content posting and content curation in social media. Some ideas that I have had include:
- Proof of stake conditional hashcash(when you send someone an email, you give them the opportunity to burn $0.5 of your money if they think it’s spam)
- Prediction markets for content curation(use prediction markets to predict the results of a moderation vote on content, thereby encouraging a market of fast content pre-moderators while penalizing manipulative pre-moderation)
- Conditional payments for paywalled content (after you pay for a piece of downloadable content and view it, you can decide after the fact if payments should go to the author or to proportionately refund previous readers)
And ideas I have had in other contexts:
Twitter scammers: can prediction markets incentivize an autonomous swarm of human and AI-driven moderators to flag these posts and warn users not to send them ether within a few seconds of the post being made? And could such a system be generalized to the entire internet, where these is no single centralized moderator that can easily take posts down?Some ideas others have had for decentralized institutions in general include:
- TrustDavis (adding skin-in-the-game to e-commerce reputations by making e-commerce ratings be offers to insure others against the receiver of the rating committing fraud)
- Circles (decentralized basic income through locally fungible coin issuance)
- Markets for CAPTCHA services
- Digitized peer to peer rotating savings and credit associations
- Token curated registries
- Crowdsourced smart contract truth oracles
- Using blockchain-based smart contracts to coordinate unions
I would be interested in hearing Posner and Weyl’s opinion on these kinds of “radical markets”, that groups of people can spin up and start using by themselves without requiring potentially contentious society-wide changes to political and property rights. Could decentralized institutions like these be used to solve the key defining challenges of the twenty first century: promoting beneficial scientific progress, developing informational public goods, reducing global wealth inequality, and the big meta-problem behind fake news, government-driven and corporate-driven social media censorship, and regulation of cryptocurrency products: how do we do quality assurance in an open society?
All in all, I highly recommend Radical Markets(and by the way I also recommend Eliezer Yudkowsky’s Inadequate Equilibria) to anyone interested in these kinds of issues, and look forward to seeing the discussion that the book generates.
Watch video Close
Despite these advances, there has been a growing backlash from opinion leaders as the technology’s drawbacks become better known. Perhaps you’ve heard that Bitcoin alone uses 0.25% of the world’s electricity? Other blockchain systems, such as Ethereum, use similar approaches that require computers to burn electricity unnecessarily. Perhaps you are concerned about the number of accidents, hacks and scams possible in this new space, where the law has not yet found its feet? Or you may have heard that crime and terror networks could use these technologies to transfer funds. Blockchains and digital currencies pose important questions to both their advocates and regulators.Pioneers in the industry are alert to such concerns and have attempted collective self-regulation. The Brooklyn Project, an industry-wide initiative to support investor and consumer protection, was launched in November 2017.“By acting responsibly today, we can help make sure we are collectively able to reap the benefits of this powerful technology tomorrow,” explained co-founder of Ethereum Joseph Lubin. The following month, a coalition of cryptocurrency organizations and investors representing $650m in market capitalization established Project Transparency. It seeks to protect investors by enabling more disclosure within the digital currency sector.
Limits to arbitrage can help explain why Bitcoin has been so bubble-prone. Until recently, it was easy enough to take a long position, but expensive and risky to bet against the cryptocurrency. Things really changed in December, when U.S. regulators allowed the trading of Bitcoin futures. That move came in the middle of a historic runup in the price of Bitcoin and other cryptocurrencies. But as soon as futures contracts began to trade, an interesting thing happened — futures prices suggested that Bitcoin’s growth would slow.What happened next is historic. Bitcoin’s price crashed from a high of about $19,000 to less than $7,000 as of the writing of this article:
Balazs was speaking at the The Future of Digital Innovation in the European Union conference about policy issues of blockchain technology.
The conference was organized by the College of Europe on the 10th of April 2018.
Here is the prezi of the talk:
Andrea Renda is the Google Chair in Digital Innovation at the College of Europe. The event was the first of a series of annual conferences on Digital Innovation.
The outline of the event is the following:
Digital innovation is permeating a big portion of the economy, reshaping the way we live, work, interact. Two paradigms currently stand out as potentially disruptive: the emergence of Distributed Ledger Technologies (DLTs) such as blockchain, and the increasingly pervasive use of Artificial Intelligence and Machine Learning in a variety of applications, from e-commerce to self-driving cars. Policymakers find it increasingly difficult to keep track of this evolution given the breathtaking pace of innovation, and the challenge of dealing with algorithms, collective intelligence, and often a patchy and uncertain set of legal rules. The College of Europe Chair in Digital Innovation organizes a one-day conference to discuss the challenges and opportunities for innovation in the digital age. Key themes addressed by the conference:
- What are the key opportunities and challenges of DLTs and Artificial Intelligence?
- Is Europe competitive in the deployment of these technologies?
- What new forms of innovation may emerge from the diffusion of these disruptive technologies?
- Is the EU legal system well-equipped to cope with the peculiarities of these technologies?
- What can the EU do to harness the potential of DLTs and Artificial Intelligence to strengthen the Single Market and promote better economic, social and environmental outcomes?
This paper examines data protection on blockchains and other forms of distributed ledger technology (‘DLT’). Transactional data stored on a blockchain, whether in plain text, encrypted form or after having undergone a hashing process, constitutes personal data for the purposes of the GDPR. Public keys equally qualify as personal data as a matter of EU data protection law. We examine the consequences flowing from that state of affairs and suggest that in interpreting the GDPR with respect to blockchains, fundamental rights protection and the promotion of innovation, two normative objectives of the European legal order, must be reconciled. This is even more so given that, where designed appropriately, distributed ledgers have the potential to further the GDPR’s objective of data sovereignty.
Indeed, the same innovations that power crypto-assets can also help us regulate them.
To put it another way, we can fight fire with fire.
Regulatory technology and supervisory technology can help shut criminals out of the crypto world. More broadly, we are seeing crypto-asset exchanges in some countries that are subject to know-your-customer requirements.
Ads for cryptocurrencies, ICOs, wallets and exchanges will be blocked from June to prevent scams, following Facebook’s move in January