Decentralization in Bitcoin and Ethereum

We have been conducting a longitudinal study of the state of cryptocurrency networks, including Bitcoin and Ethereum. We have just made public our results from our study spanning 2015 to 2017, in a peer-reviewed paper about to be presented at the upcoming Financial Cryptography and Data Security conference in February [1].Here are some highlights from our findings.

Source: Decentralization in Bitcoin and Ethereum

Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and The Social Workings of Law | Levy | Engaging Science, Technology, and Society

Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and The Social Workings of Law

Karen E. C. Levy

 

Abstract

This paper critiques blockchain-based “smart contracts,” which aim to automatically and securely execute obligations without reliance on a centralized enforcement authority. Though smart contracts do have some features that might serve the goals of social justice and fairness, I suggest that they are based on a thin conception of what law does, and how it does it. Smart contracts focus on the technical form of contract to the exclusion of the social contexts within which contracts operate, and the complex ways in which people use them. In the real world, contractual obligations are enforced through all kinds of social mechanisms other than formal adjudication—and contracts serve many functions that are not explicitly legal in nature, or even designed to be formally enforced. I describe three categories of contracting practices in which people engage (the inclusion of facially unenforceable terms, the inclusion of purposefully underspecified terms, and willful nonenforcement of enforceable terms) to illustrate how contracts actually “work.” The technology of smart contracts neglects the fact that people use contracts as social resources to manage their relations. The inflexibility that they introduce, by design, might short-circuit a number of social uses to which law is routinely put. Therefore, I suggest that attention to the social and relational contexts of contracting are essential considerations for the discussion, development, and deployment of smart contracts.

ts and The Social Workings of Law | Levy | Engaging Science, Technology, and Society

Call Blockchain Developers What They Are: Fiduciaries | American Banker

Wow. Aside from the fact that there should definitely be a movie made of these escapades (The Anti-Social Network?), the DAO debacle spotlights something very important. It is past time to acknowledge that governance of public blockchains is happening, by actual identifiable people, and that these people’s actions impact consumers.

In other settings, such as a corporation, we call the people who take comparable actions officers, directors and controlling shareholders. Along with these titles, we burden them with fiduciary duties because we recognize that others trust them to make good decisions on their behalf. We should treat those that govern public blockchains the same way.

Throughout the DAO episode, the Ethereum core developers have made critical decisions that impact Ethereum users. These include political choices (Should the blockchain be immutable? Should we treat the code exploitation as theft?) and technical choices (How do we write the code to take back the funds?).

The powerful miners of Ethereum, in voting for the hard fork by running the new software, made similarly critical choices for the network.

With millions of dollars of other people’s money on the line, these were enormous decisions for this small group of people to make. This exercise of power makes them look an awful lot like fiduciaries of ether holders, and maybe even of investors in the DAO. Notably, the core developers and big miners have been making similarly consequential decisions since the blockchain’s creation — the hard fork drama just makes this more transparent.

Treating the core developers and big miners of public blockchains as fiduciaries would set a clear standard for performance, make them accountable for actions that significantly impact other people, and ensure that they take their creation and operation of these public systems seriously.

Source: Call Blockchain Developers What They Are: Fiduciaries | American Banker

Technological Sovereignty

Technological Sovereignty, Vol. 2

We deserve to have other technologies, something better than what we nowadays call “Information and Communication Technologies”. This book deals with its psychological, social, political, ecological and economic costs while it relates experiences to create Technological Sovereignty. The authors bring us closer to other ways of desiring, designing, producing and maintaining technologies. Experiences and initiatives to develop freedom, autonomy and social justice while creating autonomous mobile telephony systems, simultaneous translation networks, leaks platforms, security tools, sovereign algorithms ethical servers and appropriate technologies among others. The texts are by Alex Haché, Benjamin Cadon, COATI, Carolina, Kali Kaneko, Loreto Bravo, Maxigas and Margarita Padilla.

Source: Introduction · Soveranía Technológica

European Commission publishes Blockchain in Education Report – Connected Learning

The Joint Research Centre of the European Commission has just published an early stage study on the potential and affordances of blockchain technologies for the education sector in Europe. The report introduces the fundamental principles of the Blockchain, and explores how the technology may both disrupt institutional norms and empower learners.

Source: European Commission publishes Blockchain in Education Report – Connected Learning

Cryptoanarchism and Cryptocurrencies by Usman Chohan :: SSRN

Cryptoanarchism and Cryptocurrencies

9 Pages Posted: 1 Dec 2017

Usman W. Chohan

University of New South Wales (UNSW), UNSW Business School

Date Written: November 27, 2017

Abstract

This paper examines the infusion of Cryptoanarchist philosophy in the construction and dissemination of cryptocurrencies, in light of the breakneck growth of these non-traditional financial instruments, and their perceived importance in transforming international monetary structures.

Source: Cryptoanarchism and Cryptocurrencies by Usman Chohan :: SSRN

Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law by Philipp Hacker, Chris Thomale :: SSRN

Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law

44 Pages Posted: 30 Nov 2017 Last revised: 13 Dec 2017

Philipp Hacker

Humboldt University of Berlin; WZB Berlin Social Science Center

Chris Thomale

Ruprecht-Karls Universität Heidelberg; Heidelberger Akademie der Wissenschaften

Date Written: November 22, 2017

Abstract

Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments. Rather, the current hype is fueled by financial applications built on top of these currencies that stand to potentially upend consumer and investment markets. The most remarkable and economically relevant of these applications are tokens sold via initial coin offerings (ICOs, also called token sales). In 2017 alone, the equivalent of more than $ 3 billion have been raised through ICOs. In these entirely online-mediated offerings, startup entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins traded on that blockchain (typically bitcoins or ethers). Investors receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations.

In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. As a result, issuers increasingly structure ICOs such as to prevent US citizens and residents from obtaining tokens in order to exclude the reach of US securities regulation. However, for the time being, EU citizens and residents are free to invest in tokens. This raises the question to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. The question is of great practical relevance since, despite the high stakes involving more than $100 million in some ICOs, to our knowledge, up to now not a single token issuer has published or registered any such prospectus.

Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation. While the variety of tokens offered necessitates a case-by-case analysis, the discussion reveals that at least some types and hybrid forms of tokens are subject to EU securities regulation. By and large, pure investment tokens typically must be considered securities, while pure currency and utility tokens are exempted from securities regulation in the EU. In identifying these archetypes, regulation and market oversight will have to put substance over form. Finally, we spell out criteria for the application of EU securities regulation to hybrid token types.

The paper closes by offering two policy proposals to mitigate legal uncertainty concerning token sales. First, we suggest tailoring disclosure requirements to the code-driven nature of token sales. Such an ICO-specific safe harbor would offer a clear and less burdensome path to EU law compliance for token sellers who suspect that their tokens may qualify as securities. This only requires the Commission to amend its delegated 2004 Commission Prospectus Regulation. Second, we propose that, on an international level, governments form a compact to bestow certainty about the application of their respective securities regulation regimes to token sales. This is, first, to avoid regulatory overkill on the one and regulatory lacunae on the other hand in online-mediated, global token sales. Second, overlapping, and partially contradicting, securities regulation regimes can nullify each other. In the end, only a joint international regulatory regime can efficiently balance investor protection and investor access in the face of the novel generation of decentralized blockchain applications.

Keywords: blockchain, ICO, token sale, initial coin offering, bitcoin, ethereum, prospectus, EU law, smart contracts, DAO, utility token, investment token, safe harbor, cryptocurrencies

Source: Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law by Philipp Hacker, Chris Thomale :: SSRN

Virtual Currencies: A Hazard or a Boon? A Perspective from the Digital Finance Ecosystem and Associated Legal Issues by Nakul Sharma, Rahul Vyas :: SSRN

National Journal of Multidisciplinary Research and Development, Volume 2, Issue 3, September 2017

7 Pages Posted: 30 Nov 2017 Last revised: 6 Dec 2017

Nakul Sharma

Pacific University (India), Students

Rahul Vyas

Pacific University (India)

Date Written: September 12, 2017

Abstract

Digital India is a flagship program of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy. “Faceless, Paperless, Cashless” is one of professed role of Digital India. As part of promoting cashless transactions and converting India into less-cash society, various modes of digital payments have been put out.

Financial market regulators and central banks around the world regularly warn consumers about the risks related to virtual currencies. The Institute for Development & Research in Banking Technology (IDRBT), the research arm of RBI had published a report in which it stated that the time had come to adopt the blockchain technology in India, in the bid to evolve towards a cashless society.
As regards non-fiat crypto currencies, the RBI is not comfortable; the intrinsic value of the VC seems to be a matter of speculation, moreover the legal status is definitely missing, finally, the usage of VCs for illicit and illegal activities in the dark net has been reported to be hitting the roof across the world. The present paper takes into perspective the rapidly evolving Technology of the Digital Virtual Currency landscape from the Indian standpoint and the related Legal Conundrum.

Source: Virtual Currencies: A Hazard or a Boon? A Perspective from the Digital Finance Ecosystem and Associated Legal Issues by Nakul Sharma, Rahul Vyas :: SSRN

Bitcoin Mining and Its Cost by Sailendra Prasanna Mishra :: SSRN

Bitcoin Mining and Its Cost

9 Pages Posted: 5 Dec 2017

Sailendra Prasanna Mishra

University of Texas at Dallas – Naveen Jindal School of Management

Date Written: November 24, 2017

Abstract

As cryptocurrencies make a bid to become more mainstream, we investigate the resources needed to operationalize these at scales comparable to the traditional monetary system. As a first step, we study Bitcoin system, its mining process, and its resource requirements. Mining is a necessary process for the creation of bitcoins and verification of transactions. The process also makes the system decentralized and maintains security and trust in the system. Mining, which is tied to the solution of a complex crypto-puzzle, requires significant computing power. This resource demanding process has a significant impact on energy consumption. Our research looks at how the complexity of the problem to commit a transaction to the blockchain and the transaction volume impact computing capacity and energy consumption. We use data from January 2009 to October 2017 to analyze the problem. We highlight how the complexity, transaction volume, and price of bitcoins affect the mining capacity of miners. We find that the energy demand from mining activities will exceed 30,582 MW per month at 400 transactions/second. Our findings suggest that Bitcoin’s protocol induces competition among miners and computational power race, which may not be sustainable for future growth of the Bitcoin network.

Source: Bitcoin Mining and Its Cost by Sailendra Prasanna Mishra :: SSRN