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IGF 2017 - Day 1 - Room IX - DC Blockchain Technologies

 

The following are the outputs of the real-time captioning taken during the Twelfth Annual Meeting of the Internet Governance Forum (IGF) in Geneva, Switzerland, from 17 to 21 December 2017. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record. 

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My name is Benedict Soupa.  I work at legal counsel for LICTA.  We're a Switzerland based blockchain advance.  I mostly focus on financial market law and classification of crypto currencies and tokens.  I do research on smart phone tracts also as a member of the dynamic coalition on blockchain technologies.  With me as well, I'm stepping in.  I wasn't originally planned to hold this session.  Cal Rayes is an associate professor at Stetson university in Florida and fortunately due to personal circumstances she couldn't make it either. 

So it's all a bit unplanned and new, but I'm pretty sure we can make this a very interesting session.  I'm going to give you a quick overview first of the work that our dynamic coalition has been doing.  And so the dynamic coalition on blockchain technologies brings together blockchain experts at a very interdisciplinary fashion.  So the people who participate in this coalition, they're from information scientists, economists, lawyers, and philosophers, all from different levels.  Either academia, governmental institutions, or private economy.  So we do have a lot of people who are in blockchain startups.  We have people from a lot of blockchain foundations with their own proprietary blockchain.  So we regularly convene all of these people together and work in these different working groups that we've established. 

And here too I'm going to give you a quick overview of the working groups that our dynamic coalition currently has.  So the first working group that we maintain is the blockchain and government.  And this group looks at blockchain technology and the government of public institutions.  We also explore government implications of blockchain applications to support the development of transparent.  So this can be how can we use blockchain technology to facility ‑‑ et cetera verify people's identity, bring the land retro screen on the blockchain, et cetera

The second working group that we maintain is the blockchain governance group.  And this working group looks like the implications of blockchain technologies in the field of governance.  I'm not going to go into that more deeply, because this is the main topic of today's session.  The third working group that we do is the identity group.  In the identity group, we review the very comprehensive research that exists on different blockchain identity systems.  So we particularly focus on the challenges and risks of leveraging blockchain technology for identity solutions as well as security and privacy considerations that may need to be taken into account.  Because it's a very paradiagnostic issue, identity and blockchain. 

Because if you think about it at a conceptual level, when it came into assistance, it was to allow people who are in an autonomous relationship with each other enter into transactions without a need to trust each other or the intermediary.  At the same time, blockchain technology can be used for very adversarial things which are the quite opposite which would allow people to have complete transparency over all identity and have that stored on the blockchain.  So it's a very thin line and it's very very important to stress identity and privacy matters when using blockchain technology.  Because it can be used to a great extent to facility every interaction that a government has with its citizens based on identity.  For example, with the technology such as ‑‑ which allows for the receiver to validate that the person is in fact entitled to whatever they seek permission, for example, entering into a country, without the need to expose the actual data or information. 

So that's what this working group is doing and the 4th is on legal responsibility and smart contracts.  We there analyze the issues which are related to the legal validity and the enforceability of smart contracts.  Basing on the questions, you know, are smart contracts actual contracts?  A lot of people argue they're neither smart, nor are they actual contracts.  And we dare explore the correlations between smart contracts and legal contracts.  What happens when they differ and ‑‑ yes? 

And the 5th working group, which I'm personally part of is the one on ICOs and token generating events.  We explore the current regulatory landscape which affects the operations of ‑‑ networks and start‑ups which 122 fundraising into space. 

So I'm pretty sure you guys are all aware of the whole ICO craze which happened in 2017, more or less, and all the regulatory implications this has grow more important than all governments because this is an inherently global issue, will have to come to a finding and common solution on how to deal with these events.  And therefore we currently in this group are discussing the coming into existence of the regulations for regulation cryptocurrency.  And we are working on several submissions to foreign governments.  So for example the ‑‑ in France published a paper where they want participants to submit their ideal of a current cryptocurrency.  And we're currently finishing this paper.  We will submit it on December 22nd to the AMS where we propose a new regulatory framework, mostly based on the concept of functional equivalence, something which we will come to discuss at a later stage. 

So today's schedule is as following.  It has been changed a little bit, but in the beginning, we will listen to a speech of Henning Dedrick, which is a very renowned blockchain expert as food for thought.  And this is something where we want everybody to get on the same level and use this as an input for the discussions. 

We're also going to manage to get taught from the airport online, we're going to have ‑‑ get his understanding of blockchain governance.  What is his concept of blockchain governance?  Because he has a very distinct concept of it, compared to other exponents and what his core elements and principles are, what he thinks a blockchain could be covered.  And we'll try to debunk some myths, make the differentiation between on chain and off chain governance, which is also very important.  And we will then look at the core principles of blockchain governance, which we're going to establish, in light of two distinct events which happened throughout the past two years.  And we see how these government structured helped with these events, and these events are on the one hand, the DOW hack, which happened in 2016.  And as a result of which, and actually the underlying governance principles.  The theorem blockchain formed. 

And the second event will be the transition from proof of work and census mechanism to the proof of state consensus mechanism at the example of the theorem block which is currently being introduced by ‑‑ Casper. 

After defining that, and we all fete a good gras of blockchain governance, we'll move over to compare it to internet governance and corporate governance and try to find out where we can get some learnings from internet governance which is for a far longer time than blockchain governance and whether it's some norms and institutions which exists with regards to internet.  Governance should be introduced to blockchain governance in general. 

So I'm going to give you a quick introduction to Flod, who we'll follow later.  He hails from Canada, and as I'm sure many of you are familiar with him, he's a theoretical mathematician and one of the core developers for the theorem foundation.  His work focuses on the consensus mechanism which underlines the theorem foundation.  And he's been working on the analysis and specification of the proof of stake consensus mechanism since 2014.  And this work ultimately resulted in Casper, which will be the novel consensus mechanism, which will be introduced.  And he just recently published a paper on this, Casper the friendly ghost where the theoretical founding on the Casper algorithm are laid out. 

Unfortunately, he cannot participate.  It would have been very nice to have him because he's done a lot of interesting work on blockchain governance, especially one of his papers where he looked at whether smart contracts, contract made in heaven, hell and the cloud in between, with two other members of our DC.

However, we'll now move onto the audio piece which I talked about, and this is an audio piece by Henning Dedrick.  Henning Dedrick, to give you a quick introduction to him, is a German programmer.  And he's mostly known for being the architect of the hyper ledger blockchain.  He's also working on his own project called Laexon where he'll create an ecosystem for smart contracts which will allow for the execution of bleakly agreed upon transactions and his main invention there is that he created a meta language which will bridge the gap between the code of his mark on track and the prose techs, which still often times is the foundation of the legal contract. 

(Audio playing).

 

Regarding bit coin, I read a definition recently which I think is one which probably comes closest, and it is ‑‑ bit coin is digital gold with a payment function.  And so this is something which I actually think often times is overlooked.  Bit coin is used as a means to store value as it is currently deployed in most cases.  Few people because of the transaction cost involved and the constant going up and down of the price use it as a means of payment because its functionality and utility as a means of payment currently is very much decreased, I would argue.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

So technology has ‑‑ cannot be separate snood absolutely, and I think that's only, if we want to talk about the implementation of blockchain on a global level to solve issues, we cannot separate it from the environmental issue.  And therefore, just supporting bit coin itself is not something which one can really stand behind at the moment because of the environmental impact it has.  And I fully agree with that.  And you have that with many blockchain applications, you're right.  And so we do focus too much in our discussion on this specific linear type of mechanism where you can have things which function completely different, like tingles.  That's absolutely right, and they could have the same function in the end.

 

 

 

 

And very often, they cannot.  They cannot come to a ‑‑ of legality.  So having a land that they know is theirs when they come back and recorded in some form for posterity is a safety for them.  But this is the kind of thing we should be thinking about.  What deserves to be in a ledger in a permanent ledger and what doesn't and what of that of which is supposed to be in such a ledger should be protected in what kind of way?  We're thinking about algorithms, but there's many other aspects of the mechanisms arriving a proof of spick, that doesn't need to be algorithm based.  It can be in other forms.  And this is exciting and needs to start being explored.

 

 

 

 

 

I've been in the mod for a few years ‑‑ 16 years or so.  I worked for the preparations of world ‑‑.  And I've seen how that is not any manageable text.  (Audio fading in and out.) Or whatever issue you think of all of of these meetings and the same knowledge is kind of regurgitated.  So one aspect of ‑‑ (Audio fading in and out.) Is to seek ‑‑ perhaps and put that into ‑‑ and perhaps the consensus mechanism, the governance body or another body can think about that.  But for us to find a way to get the best policy on the ‑‑ and make something out of that, instead of all of these just needing to be ‑‑ but I would love to get more and more ‑‑ start thinking about what do we ‑‑.

 

Because in essence, it's used to establish veracity.  It's about veracity of information and you don't need a trusted intermediary to establish the veracity, but you have a decentralized cup census mechanism.  In order to establish whether a certain information is true or false or whether a certain person has access or not.  So how do we discuss also with somebody of Twitter how they want to combat fake news.  And we talked about how they could actually use technology, where you would have a distributed ledger which would allow you to see whether a video that was posted for example was actually posted where it was portrayed to be recorded from.  Where it was recorded in the place or wasn't recorded from the pictures could be verified by a community et cetera so there's a great news case for this. 

On the other hand, what you mentioned also, it's about ownership.  And especially talking about Gotha and the silicone valley companies which basically own all our private data.  And blockchain allows us to reclaim sovereignty over our own personal data.  And because it is a very paradiagnostic situation where you see that these companies which have grown to become the largest companies in the world use our resources which we give them for tree free.  And with blockchain technology, there are many news cases for this, and they're actually implemented already also in Switzerland, where I'm from, where they allow the user to reclaim sovereignty and decide on each moment when to display and disclose which data, personal data, and also be remunerated for it. 

So the session is closing very soon.  What I would like to know from all the people in here who have a lot of knowledge on internet governance as well is how could blockchain governance experts or people involved in these decision making processes learn from internet governance?  Do you think it's blockchain governance would require the introduction of an institution such as ICANN?  Do you think there should be global norms which should be introduced which govern blockchain?  And how can we maintain the decentralized aspect of it?

 

It's happening ‑‑ it's really ‑‑ the rise snap to people.  That also when you use the technology like in fishing, this technology protects it.  So when we think about the governance, I think I totally different from the previous one.  But still we need to try to work together to find a way how to make the governance system.  And also I am ‑‑ and also in work I ‑‑ so as you mentioned that we were thinking, also we want to initiative the collaboration of mountain our eyes. 

I think blockchain is next at the level ‑‑ it's at the level of ‑‑ and also we'll see beyond the border.  So it should be the collaboration among the nations and under the ‑‑ I think it's the perfect.  But also I consider (Audio fading in and out.) There are just like we have ‑‑ we talk about a hot, but we still have very few practice or something as to go into real.  But I think much is quite suitable or quite ‑‑ the technology we can make the practice like you have already make ‑‑ and the idea by the way is very very good and that we can promote more ‑‑ and the project or something like that.

 

If it has a legal value and it's an actual legal agreement, it is always an international context.  So in our national jurisdictions, you would hardly ever find even a court which would deem itself competent because you wouldn't know the counter party and there's always people from different nations involved.  And I think blockchain really shows that we need to find global solutions for this as a global community.  And whether it's just as a super national level such as European union, also very much as you see mow it tackles the problem of data protection with the GDPR.  And if We want to and up with a regulation for at least crypto currencies, my background being financial market law, I think it's something we need to find on a global level. 

I can tell you that we have a huge lack and void of regulation right now, and what the financial market regulators actually are here to do, which is consumer investor protection, and to ensure a functioning financial market.  This is not happening right now, and it's not happening all of the nations, especially with regards to initial coin offerings and with regards to the secondary markets that these coins are being traded on.  And so what we see is we see how the regulators are struggling with it to come up with a national solution.  And we see that the need to bring all of these regulators together to actually form and come up with a regulatory framework for the use of blockchain technology, and it's different use cases.  So this will also cover initial coin offerings.  This will cover blockchain itself, smart contracts and privacy and identity.

 

For example, the internet of things hypo, where everyone wants to apply the internet to everything and then there's a cost to applying the internet of everything, in merits of data protection, security, and people in the end people find out that maybe they want to connect their toaster to the internet.  We don't really need to go that far.  Maybe the blockchain, we'll figure out the same. 

And also the dot com bubble, if we were to regulate the internet based on the dot com bubble in the '90s, we probably have a really different internet right now.  And the bit coin probably bubble, I'm sorry, someone agreed, but it may be one.  If we regulate it based on the results of this, we might get nonoptimal results in the future.  So I believe we still have actually watch the situation before actually making many more concrete institutions or regulations opener even, I don't know ‑‑ yeah. 

So I agree with your out look regarding the introduction of new institutions such as you know that govern the internet or the internet and things.  But I disagree with regards to regulations of crypto currencies because currently there's millions of people lured into investing into crypto currencies and they're going to lose money, and there is need for action from the regulators, and I think we shouldn't wait any longer than that.  Maybe we can have the vote here and at the same time we're going to get Flod to give the last Answer two later.

 

So now with blockchain, in this room we are aware and 100 percent confident in that future is there.  Some of the ICOs are basically changing the way we perceive the reality as of today, the way we collaborate, the way invasion happens, one of them is the auto for example the amazing example of how you build a new concept of trust.  And we're talking not about here about bit coin or anything else.  The other one, hopefully very soon to be there, is the marketplace for artificial intelligence.  And all this based on blockchain.  So obviously we should not stop this amazing invasion that we see spurring around.  And regulation is must be very careful, but I agree with you, we need to start, because it's already late.

 

However, how the looks like in practice is the following.  The market entry barrier is extremely high, and it costs about 150,000 euros to get a perspective filed internally for example.  And actually nobody ends up reading it.  So there's probably no investor who ends up reading the 250 page prospectus, thus the regulation doesn't reach its objective of making sure that every investor makes an informed decision.  And this is something I would encourage for blockchain or cryptocurrency regulation.  We can change that.  And that is with the concept of functional equivalence. 

If we use technology, whether it's blockchain based or not blockchain based too, ensure the objectives of the regulation, I think there's a fair case to be made that the regulation itself could be local.  So I wouldn't ask for anybody to actually introduce a 250‑page prospectus when they want to do an ICO. 

However, if they want not to be subject to this regulars and we assume it's a transferrable security, they can show to the regulator that they have a technical system in place which will ensure the objective.  This is actually the whole subject of the paper that will we will submit to the AMS is in three days.  So you have the example of rather than having the obligation to draft these perspectives, you could just introduce a simple test.  And at its base is a 10‑page document, and every investor as to pass the test in order to be able to invest. 

And you can store everything, every Answer two he has on the ledger and the test will involve very simple questions, such as what laws or profit has the company you want to invest in occurred in the last financial year according to the audited financial report?  What are the risks involved?  And by that, you could use technology to reach the objective that a regulation want.  And I think this is definitely something that if we want to introduce regulation for blockchain, we need to use the technology itself and we need to make sure it's smart regulation.

 

 

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