 Good afternoon everybody. Thank you so much for coming out this afternoon I'm thrilled to introduce our two guests today, but first just a quick housekeeping note or two This event is being live webcast and recorded So we will have a Q&A portion just make sure you know that that will be preserved for posterity We are also selling a couple copies of the book in the back. They're $35 and we accept cash and check Unfortunately, we are not unable to take Bitcoin at this time, but we hope to go get there someday We'll also be holding a small reception downstairs in the pub afterwards with some food and light refreshments So I hope you'll join us for that But it's my pleasure to introduce our two guests Primavera and Erin who just finished this amazing book blockchain and the law Primavera is a faculty associate with the Berkman Klein Center And we're grateful that she brought her co-author as well And hopefully today's discussion and presentation will be amazing and enlightening. Thank you so much Everyone. Thanks so much for Coming to hear a little bit more about our book So we're really just hoping to describe to you just a little bit about Blockchain technology. We're assuming that there's some familiarity with blockchain technology That's going to be kind of our supposition and then just kind of explore You know the core thesis in our book, which is that ultimately this technology Is regulatable and that there's some avenues for regulations. We're hoping to explore that we want to make this a pretty dynamic Conversation, so we'll have a short 30-minute or so presentation and then hopefully open it up to everyone else for questions and also Answer any questions that you may have So really, you know, what makes this technology so special And we're focused primarily in public block chains not permissioned or private block chains And I think when you think about it deeply There these tech this technology has some unique characteristics. You know first It's effectively a database or data structure that's running on a peer-to-peer network So a lot like the internet it's global and transnational so it operates anywhere where the internet is accessible And that has some challenges when it comes to regulation at the same time because it's a database That's massively replicated off of a number of different across a number of different computers. It's highly resilient So there's copies of all this transactional data on a blockchain and that's stored on various different nodes Those nodes are scattered across the globe. So for example on the Bitcoin blockchain I think there's about 12,000 or 20,000 nodes where there's exact copies of all the Bitcoin transactions that have occurred And there's also an interesting Mechanism that all these public boxing bases and to use called the consensus mechanism There's different variations like proof of work and proof of stake and the way that these networks come to consensus Actually enables them to create tamper resistant data for the really for the first time So thinking about you know files that you may have on your computer. They're kind of flimsy you can lose them Here we have a data structure where once you store information in a blockchain It's really really hard to change that information or to reverse that transactional data At the same time because it's on a peer-to-peer network. It's transparent, right? There's all this information that's flowing back and forth between all these computers that are supporting the network And there's certain information that gets that gets disclosed as part of that activity And at the same time it relies on all this These cryptographic techniques to enable all the records to be digitally signed So one way to think about a blockchain is actually particularly the bitcoin blockchains as a chain of digitally signed transactions So we know actually which accounts are the ones engaging in the transactions at any point in time Blockchains are also synonymous so you don't necessarily need to identify you as an individual to the network in order to participate in it You really just need to have an address and you can kind of think about it as an email address I can create an email address Where I identify me and you know, it's it's my address at the same time I could create some sort of pseudonym and interact with these these systems And the last the last two interesting pieces are the incentive mechanisms in place So there's an emerging field of economics called crypto economics where That rely on these blockchain based systems or are examining these blockchain based systems because there's a whole bunch of very interesting Interactions that are emerging between the various different parties in the network And last I'm more advanced blockchains most notably today ethereum You can actually not just store Tamp resistant records. You can also run Potentially autonomous code so code that is executed by all these different computers across the network So that's kind of this mix of unique characteristics that actually Makes blockchains interesting and actually makes them interesting from a regulatory perspective So we learned with the kind of birth of the the internet that you know, there's some new Ways in which online services are beginning to influence our lives There was this concept of lex informatica, which is basically code is law Where we learned that online intermediaries increasingly shape our lives. They set forth rules They're usually Imposed by intermediaries and that influences the way we behave on the internet And we learned that we can also influence the way that these intermediaries operate by applying regulations on those intermediaries So if we decide how data is going to be maintained or controlled we can actually influence the way data Is collected and the way that data is processed With blockchains because of the ability to actually store and run Potentially autonomous code We've and and highly distributed bits of software We've discovered and this is something that we explore deeply in our book That there's another type of law that's emerging something that we call lex cryptographica One way to think about this is that these networks actually enable a whole bunch of different people To create order without actually having a legal regulatory framework that's underpinning it So we can use these systems to order our behavior not based on bureaucratic state-based rules But instead rules that are encapsulated and enforced via these blockchain based systems And we think that this is a potent new tool To govern human behavior. So moving away from bureaucratic states to more To systems that are governed more and more by by these code based mechanisms So just think about bitcoin as an example here You have the bitcoin blockchain, which is effectively a central bank. That's administering Payments network, but yet there's no laws that are necessarily supporting it It's all code based rules and these little smart contract programs So what's the impact? So we really spend a great deal of time in the book examining What's the impact of this lex informatic or Lex cryptographica's impact and one is and this is what I think many folks are beginning to Think about with blockchain's technology is its capacity to disintermediate to actually thin out the need for certain intermediaries We can create code based systems and relying these These distributed networks to actually lessen the need for traditional intermediaries Particularly in areas like in the financial services industry because blockchains are showing to Or having shown to actually do a fairly good job of storing a number of assets Things like virtual currencies or these erc20 tokens, which are beginning to to emerge at the same time The lex cryptographica's impact could also apply to automation and autonomy So we can imagine seeing These smart contract programs and other all these other distributed systems Help facilitate Increasingly automated transactions that are managed through peer-to-peer networks And that could include value exchange things like virtual currencies like Bitcoin and ether Other tokenized representations even things like votes or other forms of social coordination So I think that's going to be one of the longer term impacts And so following those specific characteristics, then the question is to which extent these Lex cryptographica is actually Complying or to which extent it actually managed to escape from our specific regulation and we can see already that because of the Dominity because of the time for resistance and because of this potential autonomy of Blockchain based system then we are already seeing quite some issues with regard to existing regulations So we have seen like in the context of Bitcoin for instance There is all the question about can like can this technology be used for money laundering and things like this We have seen the emergence of decentralized marketplaces where we can actually Rely on like the the anonymity of Bitcoin in order to purchase potentially illegitimate items and then recently we have seen these The possibility of actually storing within the Bitcoin blockchain or any other blockchain Particular information which is itself illegitimate. So whether this is copyright infringement Whether this is like pedophilia and so forth and then finally, of course, like there is this big question because of these tamper resistant feature of the blockchain based system then How does it actually interact with the right to be forgotten which might require the actual removal of specific content And so what we can see is that there is this kind of interesting distinction or like some kind of wall between The rule of law and the rule of the code and so what we explore in in the book is like What is the interplay between those two and to which extent one is actually Taking over the other and so in the case of property law this is we can we can quite easily Identify the problem to the extent that property laws are actually defined by the law And because of these they also can be taken away by the law So if I have acquired a particular property illegitimately because it have been stolen or whatever Then a court order can actually decide that I should not be the legitimate owner of this property and therefore sees my property Whereas when we move into those blockchain based system, then we have this concept of blockchain based property or crypto property which do not actually Follow the same rules and in this case because the crypto property is actually not being defined by the legal system It's actually defined by the code and therefore it can only be taken away by the code which means that Even if I am illegitimately acquiring a bitcoin or any other kind of crypto asset Then no matter what the law will say No one can actually seize these assets or at least not with the traditional enforcement mechanism Unless there is a particular provision in the code which will actually enable this seizure And then same thing when we look at contract law So we can see how traditional contract law is based on specific legal rules which Are designed to actually reflect the intention of the party So it's not necessarily the language of the contract But it's actually the intention that matter and this intention will be enforced by a third party authority Whereas in when we move into a blockchain based system and we enter into the context of smart contract Then again the the actual contractual relationship is defined by the code of the smart contract And is no longer really able to account for what is the real intention of the party Is only looking at what is the actual wording of the code And it does no longer require this third party enforcement authority in order to actually enforce the contract because The provision of the contract will be automatically executed by the smart contract code And so the question that we explore in the book is Are we actually through those new system of blockchain based system and legs cryptographic are we perhaps going back to these same visions that Were brought about in the beginning of the early internet days Where we had people like Timothy May or John Perrin Barlow that actually envisioned this kind of New digital anarchy or this cyberspace which was considered to be a non-regulatable space where State and government simply could not actually exhaust their sovereignty over it and Even though we have seen that these these initial visions somehow did not actually materialize in the same way as many of us Will have thought We can we can wonder whether those new technological system might actually help Not only bringing back those same vision, but perhaps actually help implement them in a way that the internet has actually failed to implement And so When we look at the way in which the internet has evolved we can see that it used to be it was bringing back those ideas of freedom of mass impassion but then quite quite soon it has been understood that it's actually quite easy to Regulate the internet because we can actually regulate the operator the intermediaries that are actually controlling the platforms on which people interact Now the question then is how within this new context in which we have Disintermediation and potentially automation then to some extent it becomes much more hard to Leverage the traditional tools of regulation that we had with the internet because simply we can no longer so easily Identify what is the actual object of regulation? So we can no longer regulate the platform operator because it everything is operated through this decentralized and disintermediated network but of course and this is the The big part of the book Abduction is not an island In the sense that it does not subsist on its own it actually exists within a much larger ecosystem And even though we cannot use the same traditional ways of regulation we can actually identify new ways to actually regulate the systems Yeah, and one thing to to realize is we begin to think about you know How can we begin to place pressure on these blockchain based systems or work in regulation attach? It's important to recognize that Blockchains they're built upon the existing internet, right? So if you need to transmit or store information on a blockchain You're still going to have to rely on various different intermediaries that currently exist So any information that's getting recorded on a blockchain will have to pass through at some point an internet service provider isp Which can apply packet filtering techniques or other techniques to limit access to blockchain based networks You're also going to have to find any application or service that's relying on a blockchain So you're going to have to presumably identify those through various different Intermediaries and information intermediaries in particular and we're already seeing That some of these information intermediaries folks like google facebook mail chimp They're beginning to censor certain activity that's occurring on the networks So for example, all those services that I just mentioned are not providing advertisement related to token sales Or the sale of these erc20 tokens, which many of you may have heard of and that's one way to begin to Limit some of the use and widespread distribution of the technology At the same time we're going to see the emergence of new intermediaries And we've already seen some new intermediaries emerge that rely on blockchain technology that are not necessarily completely Decentralized or distributed But really are just companies that are interacting with this data structure. One notable one is exchanges So if you need to buy or sell or or trade in the assets that are being managed via blockchain Well, you have to go through an exchange and many of those exchanges are centrally maintained They're backed by large venture capital funds and look like they're on a path to become publicly traded companies And in the u.s. In particular, we've already seen that regulations are being applied on those central centralized exchanges in order to limit some of the activity that's going on So even though bitcoin itself was not designed to comply with AML know your customer other financial regulations We're seeing that the exchanges are applying it before they're they they enable any party on their system to begin to facilitate some of the trades At the same time we've seen that In order to process transactions on a blockchain There's various parties known as miners that are the ones that validate those transactions And they're not completely decentralized instead. They've kind of coordinated around these mining pools And for bitcoin and ethereum, there's only a handful of these mining pools that control the entire network So that's another area where we can see regulations attaching in order to shape the In order to shape the development of the technology and we've already seen some Jurisdictions begin to explore whether or not they can apply regulation on these mining pools So for example in china There's been attempts to actually begin to tax these mining pools in a way To either collect some of the profits that they're generating But you can imagine taxes being imposed to shape the way that these mining pools develop At the same time other jurisdictions have looked to mining mining pools Like for example, venezuela in order to understand what's going on within the network So you could imagine additional laws and regulations being Applied in order to shape that the way that these Way that these blockchain based networks develop And then alternative avenue for regulation is obviously the The most radical one which is basically criminalizing users So basically saying that it is illegitimate for a particular individual to run a blockchain node Or perhaps to interact with a particular account or with a particular smart contract Or basically just identifying the various Activities that will actually be reprimanded And this is actually quite a critical question because we have already seen in the past in especially in the context of copyright law How criminalizing and user is actually first of all quite problematic But also it's really difficult and it might actually lead to requiring external So providing more surveillance providing actually like monitoring of activity in order to be able to catch Those individuals and especially in the context of this intermediated and pseudonymous system This means that if we decide to regulate the end user we need to actually change the infrastructure or create specific Intermediary chalk points in order to be able to actually catch Those infringers and then there is also the possibility to actually control developers So actually forcing the particular developer of our technology either at the blockchain level to implement specific mechanism that will Ignore specific transactions or that will create a particular flag for a tainted Transaction and so forth But also at the level of the smart contract and providing like obliging specific software developer to actually Codify specific backdoor or specific kills which that a particular government authority has actually control over And then same thing at the level of the hardware So and again this is kind of reminiscent of what happened like in the early days on the internet with the advent of Cryptography in which we saw that there was the government that was trying to make pressure in order to actually like do In the the crypto world in order to force device manufacturer to actually implement specific backdoor And as we have seen this is extremely problematic one because it's providing this power to this third party authority But at the same time because it can actually generate new vulnerabilities into the system What's also interesting about blockchains is they actually implement Where there's a possibility for governments or other regulatory bodies to be involved in market-based regulations So imagine a world where Or bitcoin and oretherium is 20 times as large as it is today. It's not just storing access or records of Virtual currencies, but is also storing an increasing number of represented assets including things like real property or stock certificates Or other valuable assets Well, you can imagine at that point in time that there'll be a desire for these networks to become more and more stable And that governments may actually decide that they may want to get involved in the operation and maintenance of these networks in order to Ensure some stability. So if you're recording some assets on a blockchain You know that the entire data structure won't be attacked by let's say a state actor Or some other large party At the same time by participating in the mining of these networks You actually begin to Have some say in the way that these networks operate if there is an upgrade or a fork Or some other sort of activity on the network So you can imagine a world if blockchains become more and more important where governments begin to actually Become involved in the validation and running of these networks at the same time If a government wanted to limit the ability of these networks to grow and develop It can impact the stability of the underlying assets that are useful for it So on the network, uh, the theorem network, you actually have to buy ether In order to run computer processes the smart contract programs And if the cost of running those processes is significantly higher or if there's variable pricing that gets Implemented such that a business or service can't predict accurately how much it's going to cost for them to begin to run And develop applications on top of it becomes much less attractive to use So by impacting the stability of the underlying crypto asset Or crypto token you can begin to impact its mainstream use And then finally there is um these Kind of new possibilities that emerge as well in terms of identifying Which one are the actors that actually have a more influence over the networks? And so on the one hand there is obviously the miners which are the transaction processors and which today are pretty much Just ignoring the actual source or destination or typology of the transaction They are basically just taking them and according to the transaction fee. They decide which one to incorporate in the next block Um, what might happen is that those miners can actually receive some kind of pressure Whether this is like from a government that might say you actually need to ignore specific transactions Which are coming from a particular source or towards a destination Or perhaps you can actually have Private actors that might actually create some external agreement with some of the mining pool and actually give them some financial Compensation to actually process their transaction More like sooner than the others and in these cans we we start seeing kind of the same question that Are existing today in terms of network neutrality But in the blockchain space and already today, of course The the problem of blockchain neutrality already exists because it already the processing of the transaction depends On the transaction fee that is actually being put for this transaction But this is to some extent transparent So we can actually see who is putting which transaction fee and therefore why a transaction is being processed faster Whereas by creating those external agreement or because of governmental pressure Then we might actually be in a situation in which by just looking at the blockchain We don't know that some transactions are actually being Either prioritized or perhaps the prioritized or eventually events answered and then there is the Another really critical question which is actually identifying who are the super nodes of a particular blockchain network So event though it is a completely decentralized network and this intermediated There are some actors that actually have more influence than others and those are for instance the the exchanges Those are the blockchain explorer Those are potentially the large commerce commercial actors that are accepting cryptocurrencies And those actors are basically the one that will decide what is the most relevant blockchain And so if we actually decide or impose a particular restriction either on the exchange is saying that They could not actually enable any transaction Towards an account or towards a particular Or preventing transaction that are issued perhaps in the past because the transaction history is transparent You can actually identify what what is called the taintness of the transaction So what is the probability and what is the percentage of this transaction that comes from a particular account Which is held to be a criminal account or whatever And so we can actually impose or the government could impose on the exchanges the restriction that they should not process those those transactions which will literally Disrupt the neutrality of the of the blockchain And and same thing like for the commercial operator if the commercial operator is only following a particular blockchain which operate according to specific rules and we decide for instance that there will be a hard fork requiring that specific accounts are ignored then Most likely everyone will essentially follow that fork just because the large super node are actually endorsing this one as opposed to one that did not actually implement the fork And in much in the same way these blockchain based networks are fairly new and it's unclear right now whether or not The existing blockchain based networks will be the final version of what Eventually could mean could it could achieve scale? So there's a number of technological limitations that limit the number of transactions that can be processed by these networks the speed of these networks There's questions related to the Privacy that these networks can provide and there's a number of Computer scientists and other developers that are trying to solve these problems So at this point in time, we're still at the very early days of blockchain technology You know this may very well be the first inning instead of the you know fourth or fifth or sixth inning Of the game So there's an immense opportunity for Regulators to get involved in actually shaping the development of how these networks operate And we've already learned from the existing blockchain based networks that these networks tend to develop different social norms So for bitcoin, there seems to be a collective desire To achieve Near perfect immutability or having a data structure that will never change That's something that collectively a number of the participants in that network value. We've seen what the ethereum network that they've been less Sensitive to those concerns and have been willing to actually modify The blockchain and upgrade their blockchain to permit some transactions to be unwound If they think that it may have had a socially negative impact on the rest of the technology on the rest of the network So we can imagine over time laws regulations or governments getting involved in this process So we can build a blockchain that hopefully can achieve All of its benefits on Potentially limiting some of its downsides And then another element that we then explore in the book is this shift towards the notion of code is low Which essentially illustrates the idea that Increasingly on the internet. We are actually relying on infrastructure and technology To act as a particular regulatory mechanism Which are rules dictated by the platform operator and in the case of code as low The distinction is really when blockchain technology is actually being used as a regulatory technology In order to achieve specific regulatory objectives through a technological mean and this is the This is the the new opportunity that is provided by smart contract to the extent that we can now have Specific smart contract design on purpose to actually implement specific legal rules and which might be deployed by Either governmental authority and then requiring that specific transaction actually go through those smart contract or perhaps being implemented by Companies or by the civil society but following the rules that a particular governmental authority has established and then So as we have seen With the internet thanks to the internet and I think by right now We all agree on is the idea that of course architecture is politics and the technology obviously is not neutral Even though it has like those particular features We can actually design this technology to act to have very different objective and outcomes And the like it can go from having this very socially beneficial platform that will actually enable more emancipation more freedom of expression And provide more transparency and accountability. We can also use the same technology to actually create those autonomous System that are actually not regulable and that will actually promote this vision of like crypto anarchy At the same time the same technology can then be used either by corporation or by governmental authority to actually create Totalitarian space of like self-executing rules in which automatically every Real will be automatically enforced by the text the better technology And really, you know, what what this all highlights Is the importance of governance? So the emerging issues and most critical issues with a blockchain technology space is these Networks are not going away. They seem increasingly important And governance is going to play an increasingly important role in shaping how this technology develops You know, do we want a blockchain based networks to be socially beneficial or do we want? Do we want to some of the other effects that primavera just mentioned and what's what's important is that there's two different emerging Modes of governance that are being explored by those that are developing the technology both looking at how you can Shape governance through the infrastructure itself through the code that's in the networks That's often called on-chain governance And then there's also just the surrounding ecosystem and shaping that surrounding Ecosystem that is supporting a blockchain In order to implement some sort of governmental governance rules. That's often referred to as off-chain governance And then one one important element that needs to be identified is that for every Layers on the blockchain then we can see that there is a distinction between Andogenous rules, which are the rules that are defined by the community and for the community So in the case of a blockchain, it's the blockchain protocol in the case of a blockchain based application It's the actual code of the smart contract and then we have the exogenous rules Which are actually rules that are generally imposed by a third party over a particular community And what we notice at least today is that initially most of the focus in the blockchain space was on Governance by the infrastructure and andogenous rule Which means like what are the particular governance system that we can bake directly into the technological tool In order to actually create a particular governance. So Most of the cases like what are the particular Protocol that and consensus algorithm that we that we will embed into the blockchain system and in the case of the smart contract So what is the governance structure that operates this particular smart contract? And then increasingly especially because of the specific problems that have emerged in the in the last few months Essentially not noticing that there can be sometimes mistakes and bugs into the actual technology And so when we realized that the governance by the infrastructure is not sufficient because The design was actually out of vulnerability or the flow Then we need to actually think about the governance of the infrastructure and that is how do we actually change Or how do we even define the rules of the infrastructure through a more social or institutional mechanism? And this is where the community social norm actually come into play and also there are some procedures that have been Stipulated by different communities. So in the case of bitcoin, we have the bitcoin in pros improvement proposal With ethereum, we have the ethereum improvement proposal, which are all based on the social norm There is no authority that is actually enforcing those norms But the community as a as a general consensus has decided to actually abide by those processes So those are all rules that are andogenous to a particular community And what has not yet been explored until now, but actually we're starting to see that they are Actually very relevant are all the exogenous real that might affect a particular blockchain based system And whether those exogenous rules can be technologically. So this is the actual Software and hardware constraints that will be implemented But also on the bottom layer of the internet we can actually affect The governance of a particular blockchain based system by affecting the governance of the underlying framework on which it operates And and then finally and this is the reason why we actually wrote this book Is those exogenous rules that are actually non-technical and this is mostly basically laws and regulation Which obviously will and can impact the governance of a particular blockchain based system And to some extent what we what what is lacking today is actually this bridge between those andogenous and exogenous rules And that's you know, that's really the tension that we explore in the book It's this tension between these new code based systems And the rule of code that they They implement with the rule of law and it's going to be this interaction that I think Is going to be really interesting. I think it's also going to play a huge role in just shaping how this technology develops Thank you so much. And if anybody has any questions, just raise your hand and I'll come over to you with this mic Thanks guys One idea that you raised that's really interesting to me is the idea of a government Exerting some level of control on a blockchain based ecosystem by being a participant something that really hadn't crossed my mind before Do you think that proof of stake consensus protocols would be particularly vulnerable to that type of effort by a government? I would say that probably both any consensus mechanism would be so proof of work If a government wanted to participate and again, we're not advocate necessarily advocating for it We're just flagging it as a potential avenue for regulation governments can buy hardware they can get electricity at a lower cost than potentially the private sector and And operate machines in order to to begin to do that validation process That could be actually a net positive right Again imagine more and more assets being managed by these systems at this point in time At least the last time I checked it cost about two plus billion dollars to modify a record on the bitcoin blockchain So, you know, that's not something most private actors can can do but for a state actor It's actually it's not in it's a significant sum but not out of reach So if we really want to put trillions of dollars of assets onto these systems and have blockchains managed trillions of dollars With the assets really state actors are going to have to contemplate participating on these networks with proof of stake It's based on fundamentally, you know, how much of the underlying Token do you do you own again? A government could purchase a number of those tokens and begin to Participate on the network. I think I think proof of stake. There's still working out a number of different issues related to it So it's unclear how it's going to operate But I don't think that that is out of reach And I cannot that actually There are two layers to actually analyze as to like which one will be the most likely to be potentially co-opted by government and one is To which to which extent the government can actually engage into like the actual mining So whether whether by purchasing the stock and becoming a validator in the case of proof of stake or by actually purchasing the necessary Hardware for mining and then there is the question of to which extent those different Consensus protocol will lead to more or less Concentration which means that if like in the case of proof of work We have seen that actually because of the economies of scale then there is this tendency of concentration And as time goes you just get those growing large mining pools with themselves can then be Easily regulated because they become a centralized intermediary to some extent And so the question is when we like between proof of work and proof of stake the government can either engage directly By actually purchasing the necessary resources to influence the decision and the consensus or they can Identify whether this actually leads to those specific Concentration and chalk point and then actually regulate those and But both proof of work and proof of stake actually have those questions those problem of concentration and centralization At least up to now Your first slide talked about public blockchains made a very important point about that A lot of the economic activity the investment in blockchain technology also goes into private blockchains How does that interact with This progression that you're describing I mean the like We precise it in the beginning because actually the whole book is looking at the the question of like this Lex cryptographic and rule of code and to which extent it's actually different from lex informatica Is actually the fact that there is no centralized operator or identifiable actor that actually can influence the execution of this Technological system so a private blockchain does not really lead to any New challenges because a private blockchain is actually controlled at least by a consortium of identifiable actor Which actually is pretty much the same as code is low as we have known it until now Whereas and this is why we decide to focus on public blockchain They actually introduce this new feature which actually Create the autonomy and the disintermediation which creates a lot new legal challenges that did not exist Not to the same manner in the traditional lex informatica But we we may see a blending of permissioned and private blockchains with public blockchains So some people have used the analogy that permissioned and were Private blockchains are kind of like internets from the early 1990s and eventually that gave way to the public internet So if that is the way things develop then We're going to see a lot of interest in permissioned and private blockchains Going forward at the same time a lot of what we're talking about here is financial regulation. So you can imagine certain impetuses to actually begin to Construct or manage that activity through permissioned blockchains. It's it's too too too soon to tell which way it's going to develop Hi, I really like that your approach was a more scientific Let's look at what is and ask questions rather than try to give Answers like you try to cover the questions but for those of us who also like answers do you have Either predictions or recommendations as to the future of Whether things are going to go more the totalitarian way or more the anarchistic way How what can we do what do you think will happen and what do you think we can do to have things in one way or the other? So my personal belief that blockchains I think right now are kind of in the crypto anarchy phase Where it's assumed that laws and regulations may not apply Certain activity may may violate existing laws and regulations. I do think over time as people really understand these choke points and pressure points Much like with the internet once they began to understand how to regulate certain intermediaries and shape laws that were appropriate for the internet We may see A similar trend here where there's an increasing amount of regulation that applies to the technology And some of the anarchic tendencies are tamed or tamped down. You just hope that it doesn't go too far Where we do get that totalitarian State towards the end at least that would be my hope And I think I think you actually need to look at the adoption curve So in the same way as like with the internet initially the early internet pioneers where You know researcher or like those cypher punks and things like that people that were looking at how this technology can How do you push the boundaries and how what what can you do with this new technological tool in order to promote Individual emancipation freedom of expression and so forth and then slowly we see that you have more and more commercial actor That actually enter and then the narrative change right because everyone is trying to use the technology in order to further their own interest And then eventually because commercial actor come in then the government needs also to look at this technology and regulate it And eventually my figure that well actually we can also use this technology as in order to further our own interest right And so it's just like the technology will always be used by like as the particular stakeholder group Needs to use it and I think in the blockchain is the same at the beginning We had this very strong like crypto anarchist or crypto libertarian narrative And most of the usages of the technology was focusing on that because that that was the actual User base right and then slowly we have the financial sector that gets interested in it and is actually exploring very different Usages and then we have the commercial operator and then we have the speculator and then we have now increasingly the government That is also trying to look what what can we do with this technology? So It's actually going to go in all the direction But it's just going to be representative to the different size of the stakeholder group And obviously the crypto anarchist will always exist and they will always look at what kind of usages they can do of this technology But the mainstream use is obviously going to be the commercial operator and that will Pretty much be designed in order to further those interests Thank you very much for that So I'll ask my question and also give you a little context to why I ask it My question is is a public blockchain Uh, can can the public blockchain exist without cryptocurrencies? Or do you think? Uh, they're both joined at the hip and interrelated interconnected The reason I ask that is uh, so i'm a lawyer and we are currently in the supreme court in india Uh, challenging the most the recent circular of our central bank pulling the plug on cryptocurrencies earlier in the month Basically saying no more banking uh for cryptocurrency businesses and one of the key arguments of the debate that's going on is when the government says that Blockchain is good. We support the technology But we are concerned about cryptocurrencies that particular application The debate that we are trying to you know, kind of find an answer to is that it is even is it even possible to do that? um, or or is it just You know, that's that's that's that's not possible and you cannot have one without the other That's a great question. I don't know if we'll be able to fully answer it since we're not computer signed tests, but I mean permission blockchains Currently don't have Tokens or some other cryptocurrency that are necessary for them to operate Uh, you know public blockchains assume that everybody's a bad actor And they use these tokens in order to reach that common point of consensus In the case of bitcoin, it's about every 10 minutes in the case of ethereum. It's about every 10 to 12 seconds particularly with ethereum if you want to run these Decentralized applications if you want to actually run the computer code necessary To support these applications you need a token Because if it's not there then this world computer, which is one way to think about what ethereum is It would seize up So think about when you open up too many files on your computer and the computer freezes it freezes because you've effectively DDoS your own computer right you've you've sent it too many requests and it just it's saying please stop Well, if you have a global world computer people can send in requests into that computing system And slow it down or seize it up So you actually need this token in order to meter the activity and prevent that abuse So it has a strong utility component to it. And so to the extent that that trusted computing environment is valuable Um, presumably you would need that Some sort of token in order to meter that activity at least as blockchains are currently conceived today Yeah, if I can add it it's like from a game theory or economic perspective It's like the concept of like a club good right, so if you have a public Common pool resources then either you have not enough contribution or you have the risk of over exploitation And so you need to create some kind of governance mechanism that will ensure that the resource actually survive the use And uh, but if you don't have a centralized Institution that can actually impose and enforce those rules Then you need to identify like a decentralized mechanism to do that and like the token is literally these these mechanisms that converts these public common pool resource into an actual club good so that you actually identify the optimal Um Positioning of how much people can use it and as more people actually want to use it then it has these Inerrant recursive mechanism that the value of the of the token or the cryptocurrency is increasing And therefore automatically more people will be incentivized to provide the resources So the like it's actually a really elegant system in order to enable a public resources to actually Scale and like to be elastic to the actual demand and eventually to incentivize and Incentivize contribution and this is it is incentivize over exploitation And so the the challenge and I I don't think there is any solution at the moment But that doesn't mean it's impossible But the challenge is how do you actually ensure this kind of decentralized governance without this economic tool? That is the native cryptocurrency of the blockchain I guess another way to think of it, you know these tokens solve some commons problems that exist on these blockchain based networks Uh, hello first. I'd like to apologize for buying your book on amazon and not on a decentralized thing that would enable you to get more royalties per book We won't hold it against you. Yeah uh It seems like most of the ways of uh A government or any group of humans will manage Will make a blockchain do what they want Despite the blockchain's objection are from the exogenous forces, right? but if the underlying hardware changes Like through the through mesh nets, right instead of internets with isps Would that just take the wind out of the sails? I know that there's already a A startup that connects you can connect your Bitcoin node to a satellite and then You don't need an internet connection You just have to have a radio transmitter in the dish and you're on the bitcoin network and anyway, so there's a lot of uh Hardware ways people can can get around a lot of the ways that Regulation might come Are there any Your thoughts on that? Sorry I think in in many ways those intermediaries They exist and maybe there's some technological solutions to to guard against any Application of some law regulation I think it could play out a lot like copyright, right? So we saw Napster emerge it facilitated copyright infringement at least as viewed by us courts and over time we saw technological responses to napster So the one of the core issues of napster was there was a centralized index So lots of really talented developers said well, how can we build a similar system without a centralized index? And we saw things like a nutella emerge. We saw things like bitcoin emerge I think here we're already seeing some early indication of technologists responding to regulatory Pressure and or laws that are being applied. So for example, bitcoin emerged. It was thought it was anonymous It was kind of presented that way turned out. It was not anonymous Um, so we've seen a great deal of effort put into building more anonymous Virtual currencies so things like zcash and minero and other examples And do they function as well right now as as bitcoin not necessarily but they could in the future At the same time, we're seeing more pressure being applied on the exchanges where they're going to have to comply with Traditional financial services regulations. We're seeing a movement to build decentralized exchanges We're exchanges that are not That are not centrally maintained but are maintained by usually one or more smart contract program And then the question becomes, you know, will that attract the same The same level of usage will they be able to actually handle the same amount of Volume as these centralized exchanges and at the same time will people trust them enough? Right? It may be maybe these laws and regulations actually have a utility a use outside of Just being kind of a thorn in the side of some developers Yeah, I think I mean this goes back to the concept of like no blockchain is an island So you can have a particular technological infrastructure But you actually want to interact with that particular technological infrastructure and there is all the Different actors that needs to that provide the gateway the bridge between them And that's actually where you actually can make pressure. So the idea is not that there will always be a gray or black Blockchain right but the question is How do you avoid these to be coming like the mainstream system? And you cannot like unless you have a completely totalitarian internet Censorship and regulation then you will never be able to prevent those people with the satellite But those people with the satellite might not be able to actually interact with Exchanges with blockchain explorer with commercial actor and so forth And so the question is and it's just like the internet the internet we always will have like some kind of You know gray market and like tar and like some kind of thing that cannot be regulated And then the danger is is exactly that is that as you as technology Moves towards those more decentralized system the law to some extent will try to find that the rule of law Will always try and find a way to control and to regulate those those actor And the technology will always find a way to escape from the law But the and that's the danger and I think that's actually what we have seen with the internet is that as we move towards more decentralized system We we actually observe more and more draconian regulation and those regulation Affect everyone right and the people that know how to escape those regulations the people that know how to develop new technology Or use those new technology They will always escape from the law But in the in the meantime we have those regulations that actually apply to everybody else That actually did not intend to do any of those legitimate action And this is like this is the danger right is like we are entering into this race in which we have laws regulating technology technology Becoming more unregulatable under more law Happening to the to push the boundaries, but then it's affecting everything in between That's why we need to get the regulation right here Hello, so um due to my background, I guess when I hear things like The rule of code my mind automatically wanders towards The free and open source licensing World and I was wondering whether you think there's some overlap or influence That's going to happen towards regulation the regulation domain of blockchains based on how Many of the implementations are using free software licensing Did you see any connection between those two things or i'm just seeing things I mean there's definitely an overlap in the community. So folks that tend to be interested in Free and open source software have have seemed to have gravitated into this space But um, I think that they like I guess the similarity is in the sense that when you create an open source software Then anyone else can take that software and develop it as they wish and in the same way and you have this kind of like Exit based mechanism and in the same case like with a blockchain If it's like an open source blockchain then you can always if you disagree for instance like in terms of regulation if there is an actual hard fork that is implemented in order to sense or something or to just like Make a change in which the the way in which the protocol work Then anyone is actually free because it's under an open license to take that code And fork it in a different way or just not actually accept that particular modification And so you like the difference is I guess it's not necessarily different but you You cannot enforce a particular adoption Of a change that has been implemented in the network And you cannot force for instance Even if the if the government was to oblige a group of developers to implement a particular feature That the community does not agree with then either they don't actually update their client and then they stay Or they can take the code change it and do something different and then you have this kind of Plebiscite power in which people are just going to follow the fork that they enjoy the most So the like I guess the connection between like the open source Of the the licenses that applies to those network is that it enables anyone to actually exit if they are not happy Or just not to adopt the change that has been imposed upon them Like you basically cannot impose a particular change and you cannot prevent Networks from evolving in a particular direction at least not by relying on the traditional copyright mechanism Free and open source network or something like that We talked about this race, um between regulating the centralized intermediaries and incentivizing decentralized technologies to Escape that so what's a way for regulation to this to disincentivize? Actually making decentralized alternatives to the centralized intermediaries. I don't think you can I mean, I don't think you I don't think you can have a a law that prevents people from experimenting with decentralized alternatives Um, and and because of that, I think they they change like how do we stop this loop? Right, how do we stop this cycle which is going towards more decentralization more regulation? I think it's actually By the blockchain based communities to come up with specific governance structures That will show that they are actually able to self regulate themselves right, so if you have for instance like some criminal smart contract or some criminal content stored on a blockchain based system um How do we actually act as a blockchain based community in order to give a possibility to the actual users or to the actual stakeholder of this network to decide Whether they want to endorse this particular blockchain or whether they actually want to have a blockchain that does not host this content Right and at the moment, it's really difficult because at the moment. There is actually no government structure around this so it's it's it's it's it's like There is no there is no specifically designed solution So people just will choose and you need a developer that actually will implement A particular alternative will change the protocol and decide by their own that we don't want to host this particular type of content but The question is how does the community as a whole? Decides and at the moment the developers They have a very strong power because they are the one that can implement the protocol change And the question is how do we make sure that these decisions that is taken by the developers actually reflect the decision of the actual blockchain community and if the blockchain community so And that's that goes back to the andogenous and exogenous rules, right? So if we can figure out a set of andogenous rules that to some extent comply with like the society social norms with the external regulation Then there will be no need for the law to actually Expand in order to cover and in order to prevent specific uses of the technology because there will be this form of self-governance So I think for me it's it's up to like the The actual blockchain community to come up with like those proper andogenous rules that will ensure that this race Does not actually go too far That will prevent governments from wanting to regulate it That seems to me that seems not super realistic, but that is my To come up with the rules or what's an example of some rules that some You know public blockchains right now could implement that you think would Reduce the incentive for governments to write, you know to want to regulate that in some way or get involved in regulation Yeah, well, I think what so there's a tension between transparency and privacy. So obviously You know we cherish financial privacy, right? People don't tend to like to disclose their assets or what they make on a Given year with for example Bitcoin Let's imagine a world where every everybody's using Bitcoin for for every transaction You can actually de-anonymize the network in different ways and understand what people's assets are I don't think that's necessarily something that most Most people in society at least society today would feel comfortable with so, you know, maybe there's techniques or other Different rules that can be put in place where we can begin to preserve financial privacy in some instances but also Create transparency when that's needed and there's a number of projects that are kind of exploring that dynamic between the two There's no answers yet, but you can imagine kind of a state That emerges where we preserve some of the financial privacy, but at the same time Permit disclosures in order to prevent bad actors from abusing the system There may be one example And I think we have other examples that are actually happening right now, uh, which is so at the moment there is the The Ethereum network which actually has a lot of contentious questions as to whether or not to recover some funds as to There is actually contentious and the the interesting thing is that Normally there is a process which is the Ethereum improvement process Which is actually meant to upgrade and to modify the governance by the infrastructure But these these processes actually mostly oriented towards technical changes, right? And now there is this big discussion this big debate that is happening because there is Proposals to actually change the protocol not because of a technical problem But because of a political question right a decision needs to be made And everybody knows what the technical solution is there is no contention about that the question is Are we as this undefined community to implement this particular change in the protocol in order to recover funds that were That are stuck because of a particular problem Even though this is not necessary for the survival of the network, but this is perhaps necessary because We as a community undefined community We actually have specific specific values and specific norms by which we think that it is okay To recover the funds if they have been stolen or if they have been frozen because of a particular reason And this is the process that needs to be figured out. There is no No formal or informal process to actually take this decision and there is no consensus as to how to act About this decision or about the fact that there is a lack of consensus so The question is really like can and we don't know yet, but can the community actually come up with specific governance Processes or specific governance tools that will enable to resolve this problem when there is a political contentious issues as opposed to just a technical one I think you actually just answered most of my question, but I was really interested in the decentralized and endogenous governance and You know, what other concerns do you have in terms of like emergent power structures that are going to come from that? So right now the the power does rest with the developers in terms of fiscal power political power But even if we were to distribute that more equitably You'd still have problems like tyranny of the majority or issues like that Where in our democracy, we need the courts to resolve issues around that so Do you have any insights into how those can be overcome on On blockchain or within a community? I guess there's kind of layers of powers that we've already seen emerge in these blockchain based systems So the miners have some degree of power I think ultimately vote and decide if they want to do a protocol upgrade of some sort We've seen that the developers themselves have a significant amount of power They're the ones that implement changes and they're going to discuss and decide whether or not it's technically feasible or Like being there mentioned socially desirable in order to implement these changes We're also seeing you know members in the ecosystem that have a significant amount of power as well like exchanges So exchanges can decide whether or not they're going to recognize, you know One fork of a blockchain over another they are determining whether or not certain assets are going to be Traded or not and rules that relate to who will have access to You know to some of the blockchain based applications and services that emerge So I think there's definitely you know early indications of layers of Power within these networks and then I think it that's an area that needs a significant amount of exploration of how those interact And how those disputes are going to get resolved between those parties I want to add something. I think that the the blockchain actually has a particularity in which The problem is not actually the Dictator of the majority because actually you cannot impose anything to anyone, right? There is no evidence like Miners Major Italy decide to mine a particular chain rather than another No one is forcing me to go to that chain. I can still stay on another chain And so the majority is kind of weird because of course perhaps The value of the token on one network is higher than the other But no one can actually impose any user Even if it's the majority and you can have like a 49 51 percent and then it's quite a problem, right? So the as opposed to traditional centralized platform in which actually you have the problem if you have like a Democratic governance, then you will have the dictatorship of the majority in a blockchain based system You have different problem, which is the tyranny of structurelessness Which basically means that It's actually really hard to understand who is in power and who has control and who has higher Amount of influence than an author, right? And so when you have institutional or bureaucratic Process for governance, then you have some kind of accountability. You know who is taking the decision You also can appeal a particular decision If you think it has not been taken according to the right procedure Whereas when you enter into a blockchain based system because there is no formal Governance system then you actually do have those kind of invisible powers, but they are not accountable There's no accountability because you don't actually know who is really making the decision You just have those different clusters which are interacting one way with the other and trying to exert more or less pressure Without really being able to impose anything But of course you have like, you know the well you have People like Vitalik and like people that have much more influence than author But you also have actors which like specific mining pool might have more power and things like this But it's really hard to actually know how a decision is made Who is responsible for that decision and who are the different actor which are on which side, right? So the and this is a very interesting problem that that emerges that because it's so decentralized And because it's so informal in in the manner of like the decision making Then you actually have this different kind of tyranny, which is not the majority one And I think that's I think that's why we're seeing, you know some You know next generation blockchains trying to add more formal structure and how some some of this process may emerge I just wanted to ask a quick question to build on that and about communication of the development of blockchain and how As we kind of grow this technology how we're Building understanding and consensus with The rest of the world who we're hoping will adopt this technology in the future Because it seems like We ran into a lot of problems with the development of the internet of a lot of people being Having a fear reaction to this new technology and how it's going to change their lives And that's kind of how we ended up with like the computer fraud and abuse act So what what what is the community doing now or what are you seeing or kind of what are the trends That could develop in a way to get ahead of some of that fear that it Kind of been made known like decentralized anything decentralized anything with anarchistic tendencies tends to be met with a lot of fear I mean, I think one thing is at least today The parties that are developing the technology are much more widely dispersed and I think they were When the internet emerged so a lot of the development happens with teams that are not located in one physical location They're scattered across the globe. You you hope that some of those voices get kind of instilled and Baked into the underlying technology itself So I think that's one positive note at least And you know, I think so, you know, you know, there's lots of problems in social media But a lot of this is hashed out in the in public, you know on through social media through Things like reddit posts and and in-person meetings and I do think that There is a quite a number of different voices from different parts of the globe that are Involved in the development of the technology even if you think about the most some of the major exchanges They're not based in the u.s. They're based in in Asia, right in japan or in south korea, etc So I do think that they're It's a little bit more of a global movement than Then maybe the first internet was which really seemed to come out of mostly from the u.s They're like very tech savvy and at the forefront of these emerging technologies and with that comes kind of almost an inability to Understand what a beginner looks like And then how and and those beginners tend to be like the people who are in The government or in other these other regulatory bodies that their knee-jerk reaction is Tends to be a very fear response reaction. So I'm just wondering Having seen how people view like the exchanges and the blockchain now It seems like there's already a lot of misinformation happening Uh, and I'm wondering like what can be done on the side of the creators to Build a space that feels more accessible to people who don't understand it Yeah, I I agree. I think this is this is a lot of work that needs to be done Um, I think it's it's starting like I I can notice like a big difference when I was talking about the blockchain Two years ago and literally no one Could actually Interact whereas now you actually have very interesting Feedback and and sometimes not and the danger now I think is kind of that up to two years ago people knew they didn't know and so they were kind of like Eager to learn whereas what happened now? I think is that some people think they know whereas they don't know And that's the dangerous part right and and they also are communicating what they think they know But they actually don't know and it's it's it's quite challenging to really like Know very well, you know, like it takes a lot of effort to really deep dive into this and I think there is kind of responsibility to Try and communicate as well as possible in order to actually inform people and like get them to actually experiment also with this technology, but that's uh, I I don't have the solution to this but you know read the book That's a beginning We have time for one more question. I did see a thought I saw a new hand up here I will give you the last honor You were quite clear about the importance of self-governance and and For These groups to self-regulate In order to solve this this problem Where you also did you did I also hear you say that the ability to manage tokens As part of this process is essential in other words having The economic incentives around a fat protocol or around a governance mechanism Is going to be have to be part of the solution that you're seeing in terms of self-regulation So I think I think the answer is yes I mean, so if a blockchain is Increasingly going to manage more and more assets than the question of custody and maintaining control over those assets is going to become essential for it to develop into a mainstream technology So, you know, we've We may have built the bank, but we haven't built the bank bolts yet. So I think uh, that's an important challenge. I don't think anybody actually knows how to build Secure systems or systems that are secure enough for people to Feel like they're not going to necessarily lose their assets at the same time questions of asset recovery or Or being able to recover loss assets. I think soften some of the some of them or Stringent parts of the way that these blockchain based networks operate. I think that's probably an area where The blockchain based ecosystem differs Radically from the way we deal with assets today. You usually don't Have somebody take your assets and you're never able to recover them. We have various different ways to kind of soften that blow I was trying to ask are you saying that these problems will be solved one blockchain at a time or one token at a time? That was my question So I think I I think that there are like different layers to answer this question in the case of public blockchain so the The idea that you actually need a token is actually how do you govern a particular public blockchain without a particular institution around it? I think that there is an actual Danger In the sense, I mean this is this goes to my next part of the research I think if you look at most of the governance structure that have been deployed so far in the blockchain based systems It's oftentimes based on this kind of market based or plutocratic model Right. So whether it's hashing power Whether it's how many tokens you have in deposits for proof of stake Or when you actually look at the application on top of a blockchain oftentimes, it's a token based governance And so it's it's always looking at market based system And my my belief or my intuition will be that We are we have a decentralized infrastructure And we're trying to design a decentralized governance structure on top And what we know today the closest thing that we know that is a decentralized governance structure is a market based system The problem is that if the goal is to actually have a decentralized system Then it's kind of dangerous to rely on a on a on a market based system because We we well know that without a particular institution protecting them then market oftentimes concentrate and so it's kind of like Ironic or paradoxical that if the goal is the ultimate goal is actually the centralization It's not enough to actually have a decentralized infrastructure and that theoretically Decentralize governance structure on top of it because in practice it's actually going to concentrate and we have seen it with like the mining pool And we have seen it like in the various applications So I think and that goes back to like the endogenous rules I think what we need to focus on and some projects are actually starting to focus on this is how do we actually design Distributed governance systems, which are not necessarily based on a market based or token based mechanism In order to actually design like decentralized structure, which are not necessarily based on a plutocracy And we are I think we are still at the beginning, but there is an increasing amount of projects that are actually exploring this So I hope that eventually we will not always have to vote with our documents All right. Well, please join me in thanking Primavera and Erin Just a reminder, we do have some of these beautiful books on sale And they'll be sticking around after the talk for a little bit as well as joining us in the pub For a celebration of this of this book. Thank you so much