EthCC 2: Primavera de Filippi

okay okay hi everyone so this presentation will be about some of the ideas that I prevent I presented in my book collection and alone so I'm a legal researcher at the Seanna has here in Paris and that Harvard University and most of my research is looking at this interface between Russian technologies and the legal system and so most of the book is looking at how do we actually what is the interplay between the rule of law and the rule of code and so it all starts with the question of whether blockchain technologies in terms of an actual technology the technological instrument that we can use and regulate whether it is actually something that is completely different and therefore that we need to think about a new ways of looking at it from a legal perspective or whether this is just an incremental innovation that to some extent just might require some legal reform in order to address and so to try and understand how the legal system can actually look at this technology let's look at like without those unique characteristic of production technologies that actually distinguish itself from traditional code so well the first one is ablution is a decentralized database that operates on a peer-to-peer network and just like the Internet the adoption is a transnational network that of course do not account for national boundaries and because a blockchain is replicated on the node of every computer in the network it is also highly resilient and because all those nodes follow the exact same protocol then it is almost impossible to unilaterally change or tamper with the data that is stored on this decentralized database and then many blockchain are inherently transparent in the sense that anyone can see what everyone else is doing on that net and then because every transaction is cryptographically signed by the key of the party executing it then one cannot later deny having executed a specific transaction and then must blockchain are also inherently pseudonymous at least in the case of public auction and this means that people do not need to identify themselves in order to participate into the network and they just need to create an account in order to obtain an address that will then identify them in absurd Animus manner and then finally and most importantly then we have those blockchain that make it possible not only to record information but also to store and to execute software code that will run with a guarantee of execution in the sense that no one can unilaterally modify influence or stop the execution of that software and so in terms of regulation then how does those characteristic actually make a difference so to which extent does the code that is being a deployed on a blockchain actually differ from the code that we usually find on the internet and so on the internet back in the 90s then when people started reflecting about how how what kind of relation could apply or could not apply to - - like Internet code then we had this notion of likes informatica which essentially reflected the idea that on the Internet code is increasingly assuming the functionality the same function of law in the sense that private actors are actually using the home pieces of code in order to regulate behavior and so to some extent code becomes the law of the internet but of course on the internet on traditional software code then the the code remains under the control of the specific online operators which are which are themselves subject to the rule of law and so there is a form of indirect control of the law of the court and then on a blockchain then code also becomes one of the most important means to actually regulate behavior the difference is that this time given the specificity of blockchain code then it can be used to actually create those form of like smart contract and self executed codebase drill which to some extent will will and can ignore the traditional rule of the law and so the only law that actually matters in the context of a blockchain based system it's the code and so these are two important implications one is that blockchain technology actually reduce the needs of intermediaries of trusted authority because it actually shift the trust away from the centralized operators and towards the underlying technology and so this means that as long as people can actually trust the technology that they no longer need to trust anyone else and the other one is that it creates increasing opportunity for automation and autonomy of those code base system because once they have been deployed on the Block chantant I no longer need to obey or listen to the heels even of the operator that has actually deployed this code and so the system can actually be designed to operate autonomously and independently of the will of the party who have initially deployed on and so the from a legal perspective the interesting aspect of this is that this creates a potential conflict between the rule of law and the rule of code and so what what is explored in in the book is what is this interplay between those two types of regulations so to which sect week's extent one will of code or you know flow can actually overtake the other concoction based system be actually fast to comply with the law or can they instead be used to escape from existing regulatory framework to the extent that they exist within own technical framework and so if we back up a little and we look at the narratives from the early internet days then we might remember some of the claims of the early internet pioneers like John Perry Barlow of Timothy a wood saw the cyberspace as an independent space that simply could not be regulated because governments simply did not have the right or the capacity to exert the sovereignty of a writ but of course over time we realized that those visions those ideals did not actually materialize in the same way as many of us would have hoped and as soon as the opportunities of the Internet and the commercial interest actually became to be understood by new and established market players then the network of sheet actual actually started to change and slowly turn into a modern more concentrated system which is today controlled by a few incumbents and so in just a few years the internet which was initially seen as this powerful tool to promote freedom and individual autonomy as eventually become a powerful tool for surveillance and control and in fact after the initial fear of crypto Anarchy faded away then it soon become clear that it's actually not that difficult to regulate the internet because even to direct regulation via the law can be difficult because code is increasingly replacing the law as a means of regulation then governments can actually use the law in order to regulate the code by exerting pressure on those centralized operators which actually operate and deploy this code and so then the question is whether the same solutions can actually be applied in order to regulate a blockchain based system and the problem is that in the context of a blockchain we lose this one of the most effective tools of regulation which are the intermediaries operators and if there is no intermediary operators then it becomes much harder to leverage the traditional means of regulation that were available on the internet because one can no longer easily identify what is the actual object and subjects of regulation and so if we look at the early narratives and promises provided by early blockchain advocates we can see that those are actually quite similar to those narratives that were promoted by the early internet pioneers and so the question that we'll ask ourself is whether blockchain technologies will actually succeed where the Internet has failed can it become this new tool of disintermediation an individual emancipation that the early internet pioneers were advocating for and can it help materialize the early visions of the cypherpunks leading to this whole new wave of crypto anarchy and so when talking about the regulation of the cyberspace then at the time of the internet people introduced the notion of irregular bility to highlight the complexity that is inherent in the regulation of such a global and transnational network like the internet and in the blockchain space then people like to refer to the notion of a legality in the sense that this is not legal or illegal but it operates outside of the purview of the law and so the idea is that a blockchain actually implements its own technical framework that operates according to its own rules and that cannot be touched are affected by existing regulatory frameworks and we can already see a few applications of doctrine technologies that are in direct conflict with existing regulation and those application oftentimes leverage dips Dyneema T of Bitcoin and other cryptocurrencies in order to facilitate money laundering or to set up decentralized marketplaces for the trading of illicit goods or service most recently we actually found out that the tamper resistant features of a blockchain can actually be abused to store illegitimate content on a blockchain as such as copyright infringement or hate speech or links to child pornography and potentially also prevent the exorcists of specific rights that might require the deletion of specific content such as for instance they had to be forgotten and so this distinction between the rule of code and the rule of law is actually quite apparent in the context of poverty so traditional property rights are defined by the law and the fact they can also be taken away by the law and so if I've acquired a particular piece of property in a ways that turns out to be illegitimate then a court order of a judge can actually declare that I am NOT the legitimate owner of that property and potentially seize it from me and when we move into a blockchain based system then we have this concept of cryptographic assets our blockchain base property that actually do not follow the same rules and so the ownership of those assets is not defined by the law but rather by the code and therefore it can only be taken away by the code and so if I illegitimate lis acquire a bit kind than regardless of what the law says then no one has the ability to unilaterally seize that asset unless the code specifically provide for that then the same applies in the context of contracts traditional legal contracts are created according to specific rules which are defined in contract law any government to create some kind of binding agreements between parties but those contracts need the intervention of a third party Authority that needs to interpret the wording of those contracts in order to understand what is the actual meaning of the parties and this is what will actually be enforced by No and when we move again into a production based system then with this math contract we have contractual relationships which are actually defined by code read abide by the law and of course this does not really account for the real intention of the parties but only account for the wordings of the code and the benefit of course is that those system do not actually require any third party enforcement because the provision of this map contract will be automatically enforced through the technology itself and of course we have the the best example of this clash between the rule of law and the rule of code which was provided by the Dow well a flaw in the code of the smart contract led to about 150 million dollars being taken away from a smart contract and the main challenge here was that regardless of what legal system what a judge will actually say regardless of the ultimate decision if there had been a dispute then because there was no centralized Authority then the only way to actually act and remediate on this on this issue was to affecting the actual code of the of the of the smart contract of the underlying protocol and so this of course raised is very interesting debates within the Terran community whether or not this act qualified as attempt in the sense that it actually want counter to the original intentions of the parties or whether it could be regarded as some kind of legitimate action because it did not actually go counter the actual wording of the smart contract and so until the godless of what we think it would have been then the interesting thing to observe is that this this issue could not be resolved by relying on the traditional legal system and because basically Terry no enforcement capacity that could have actually take place mostly because of the autonomy and theoretical imitability of the code that actually made it impossible for one third party such as a government her judge to actually seize the assets and so the only way to actually remedy I thought was to address the code level of the problem which is taking a coordinated action in order to change the underlying code of the interim blockchain and so this actually shows something that is really important which is that no blockchain is an island in the sense that it does not actually subsist on its own but actually it exists within a much larger ecosystem and this ecosystem can actually affect and influence the operation of a blockchain and so even though we cannot rely on traditional means of regulation as Blonk blockchain system actually become widely adopted and progressively become part of a global infrastructure then we might actually see governments or other actors trying to find and identify those new avenues for impacting the operations of those systems and so what are those avenues well we have like the the traditional intermediaries in the sense that most blockchain based system are actually built on top of the existing Internet which are controlled by traditional Internet service provider and those operators of course called leverage the tools that they have at their disposal in order to try and affect the operation of those networks for instance by applying some form of packet filtering technique are other ways to actually limit or slow down access to a blockchain base network and then we also have the traditional info media's which are actually providing access helping us find the right infrastructure and this those could actually also be used to limit the adoption of those technologies by making them harder to find and we actually have seen these already during 2017 during the ice your insanity as Google and Facebook actually started to burn every ad that was related to a token sale and then we have the emergence of new intermediaries so we have of course the cryptocurrencies exchanges which are using to buy and sell those those token based assets and of course avatar is some decentralized exchanges that are being built most of the exchanges today are centrally operated by companies which are incorporated in a particular jurisdiction and therefore those exchange must comply with the rule of the law of that jurisdiction and of course we have seen this with all the know your customer and anti money laundering interventions and then we have the mining pool of the miners and the transaction processor and we have seen that in the last few years there has been a growing consolidation of the system into a few large mining pools which have become identifiable intermediaries which can also be regulated by the country in which they exist and we have seen both in the US and in China we are seeing like some initial form of intervention where some states in in the US have starting to increase taxes for mining pool of perhaps reducing the amount of electricity that they will actually let use for instance in in Washington State and then we also have alternative avenues for the regulation and so one obvious and traditional one has been to criminalize and users and in that case that will mean that governments might prevent people from running blockchain base not even prevent them from transacting with an illicit smart contract and of course this has a lot of issue because so it is very hard to identify users on abdominals network and secondly as it has been shown in the past it is usually a very bad idea to actually target and users have we seen with the case of copyright law for instance with the world against piracy because this might actually justify very draconian regulations which are actually intended against the end-user but eventually actually affect the world population of the internet and then we also have the possibility of actually imposing liability on software developers or hardware manufacturers and again we have seen this in the past as the US was trying to fight against cryptography by trying to impose specific backdoors or kill switches and again that he is very bad consequence about doing this in the sense that is often can create vulnerabilities because this any bug daughter's interest into a system becomes a security vulnerability and also because all of student and we are giving a lot of power to those centralized authorities and then there is the the possibility of actually manipulate or affect the operation of a blockchain by using the market forces and so to the extent that the usability of the adoption of a blockchain mostly is related to the actual usage of the of the tokens that that are used to execute transaction then we have the obvious issue of the 51 percent so if one government of a group of government could try and actually take over and network but there are also other mechanisms such as just market manipulation in the sense that it could be possible to affect the stability of a token in order to actually reduce the appeal and the usability of those things and this is obviously something that government could have the resources to do and then we have the small [Music] specific mechanism of intervention which relates to the notion of a option neutrality as an analogy to network neutrality and this is actually affecting the way in which those specific like specific super nodes such as mining pool or the the the the blockchain node that actually have more power such as the exchanges of the blockchain Explorer and the idea is that if we can control we don't actually need to take off of the world network we just need to have exercised control on those super nodes and then automatically if a particular exchange like if conveys how can our blockchain Explorer are adopting a particular fork of a blockchain then automatically most of the user that depend on the services will also follow that Fox so those those operator haven't thought I don't have the actual power technical power to actually affect out the side or take over the network they actually have extreme influence to dictate which one of the thoughts will be used and then finally we have social norms which is which which actually did the DAO hack has shown that can actually play an important role and this means that we can either try and directly affect the decision norms within a particular network through direct engagement and actually enforce the direct effect to shape the governance of this network or indirectly to the various regulatory levels and we have seen the importance that social norms can play in in the operation of a blockchain when we compare especially for instance the social norms of the Bitcoin network which as this collective desire of actually achieving near-perfect imitability so that the notion of code is law as opposed to a theorem which actually focus perhaps more on the notion of distributed consensus rather than code is law and this means that if my mom are willing to modify the blockchain if some transaction needs to be reverted enough the because it would have a negative impact on the community as a world or because this might have a more socially beneficial outcome and then another thing that we are observing is this shift from code is law so using code as a means to regulate behavior to the notion of code as law which means that we can we can use blockchain technology as a regulatory technology to achieve specific policy or regulatory objectives and this basically means using blockchain based system of not contract as a system to ensure compliance with the law whether it is in terms of transparency accountability of providing real-time audit ability to a system but also the possibility for instance to government of essence an actor to actually require specific actors or institutions to interact with a particular contract as part of a regulation in order to ensure for instance automated compliance of tax reporting and so essentially the idea is that depending on the architecture and the deployment of the system then blockchain technology can lead to very different outcomes they can create socially beneficial platforms which might enable more transparency accountability individual autonomy and participation they can create more regulatable and autonomous code based systems that actually operate outside of the purview of the law if they are used by governments or corporations they also have the ability of creating some form of not totalitarian system with a set of code base and self-executing rules that will automatically be enforced by the technology and so essentially it all boils down to the idea that architecture is politics and that technology is neither good or bad but it is also not neutral and so the design of the infrastructure will have very significant and political consequence and so it becomes extremely important to actually understand how the technology work and how it can be designed in order to try and foresee without the legal is social and the political implication of those technologies and so this of course I like the importance of the issue of governments which I believe will actually play a crucial role in defining the way in which production technologies will evolve and so before I conclude I would like to focus on the various aspect that could influence the governance of reduction based systems and so first of all we can distinguish between government's by the infrastructure so what we call Unchained governance in the consists of a blockchain which basically refers to all the rules that are baked into the technology and which are automatically enforced by the technology and the the focus here is actually on the enforcement of hue as opposed to the elaboration of those fields and then we have governance of the infrastructure which the blockchain community calls of chain governance and those are all the social and institutional rules that are used to elaborate the rules that then will be embedded into the code and then all the procedures that are necessary in order to define and potentially modifies those rules that will become then Unchained governance and while the first one doesn't need any form of third-party enforcement because the technology is enforcing those rules governance of the infrastructure obviously require all the traditional mechanism of enforcement and surveyors to make sure that those bills are actually being followed and then another important distinction is the distinction between endogenous and exogenous rules where endogenous rules refer to the rules that are developed by the community and for the community whereas exogenous rules are those rules that are imposed on at a party of a particular community and if we look at how those things can refer to brush my system then we can see that initially most of the focus was actually on untrained governments which is all the government skills that can be baked into the technological framework and this is like all the blockchain protocol the consensus protocol the government structure of a particular smart contract and then eventually it became obvious that the governance by the infrastructure is not sufficient and it is also important to focus on the governance of the infrastructure which is the definition and the modification of unchain rules and and so those are all the processes that exist outside of the block chains the the etherium improvement protocol the community death calls the meetings and like everything that actually does not have an instantiation into the protocol or the code of a smart contract and those are things that are defined by the community and that must be enforced also by the community and so we have like those two example in which the children community had to face two important government decisions the first one was the DAO attic which actually led to an intervention and a decision to actually change the code of the of the protocol and the other one being the parity bug which actually again raised in this question which in this case was like much more of a and could not be defined as an exceptional decision but actually will will become a process will actually formalize a form of of chain governance and eventually led to the decision of non-intervention and so and then in terms of the exogenous fuels then we have when the government's bide infrastructure being all the sort of hardware components that are affecting the blockchain system identity operate outside of it so this is like all the the protocol of the internet and all the software out of applications on which a blockchain is operating which are actually often for gotten when we discussed the overall governance of Apple Action News system and then we have all those non-technical years that come from outside the blockchain community and in particular laws and regulations which also are often forgotten are ignored by many people in the blockchain community and so yeah and then if you want to hear more of all the things you can read this book that tries to address social questions [Applause]