 Great. Let's get started. What's that? Okay. We'll wait for a minute. So for those of you on internet land, what's going on right now is we're getting food here at Metta, thanks to Jane of Zencash. We're going to get started in a moment up here. If you want to follow along online or in the archive, we've provisioned a special domain name for the occasion to send entity.com for the pricely, princely sum of $8.75. That's right. Okay. What do you think? Should we? That's right on. So I'm going to... Oh, it's on the HackMD. Yes. Oh, one thing is, so the HackMD notes are going out, so let me show you how to do a screen share. The whole thing is screen share this one. And then you go back to the hangouts. Actually, can you go back to this one here? I think to the other screen. So do you link this tab so it's a standalone? Yeah. Now go to the hangout. Okay. I want all of these. These two separate ones so they're better taking notes as well. They're going to depend. Yeah. Yes. And now I'm going to go to the screen share. I'm going to select the application window. We need more shares. Yeah, okay. Okay, now you can open up the night and go to HackMD. And the other one. Can I put all three tabs on here and I'll just share it to the one I want to start? Sure. Okay, cool. So you're going to put a second tab there. Perfect. This one is... Oh, I can fix it. Yeah, I can run it. Yeah, I can run it anyway. So our C equals... I'm trying to code it. I have it right here. So that's all you had on your screen share. I'll put a direct link on it as well. Okay. Here's the direct link. Two, three, four, five, six, seven, eight. Oh, I see the issue. Oh, sorry. You have the most stickers on your computer that I've ever seen. We did some archival layers to see some really great projects from last year. Okay, great. So let's get started. Do you want to kick us off? Sure. Hi, everyone. My name is T.M.A. Welcome. So today we're going to explore how innovative FinTech products, services, and markets are arising from new digital assets such as identity and data. So to get us started, Daz is going to go over a brief overview of the concepts and the terms that we'll be using during the course. So we'll dive into a scenario on a sale of goods to explore how to identify the actors and actions and data for each scenario so that we can expand on these concepts and understand the foundations of how did I set the scenarios. And then I'll go into a more complex scenario that we've dived into during the inaugural computational law course at the MIT Media Lab where Michael Casey was exploring how to use microgrids in Puerto Rico. So we'll use a foundation set up by Daz to go and look into that particular initiative. So to get us started, Daz is going to start us off. Okay. Thanks, T.M.A. And so this description will set some context for how we're going to get into the topics, but I just want to start by acknowledging and thanking Jane and Zencash for helping put this together. So we could meet everybody. And we really do want to meet everybody. So this has been set up as a very interactive kind of workshop. So I will set some context, but we'll be seeking to elicit views and ideas, questions from everybody. Okay. And as I mentioned, just to be sure everyone's aware and is comfortable with it. We're recording. I think the venue is recording. And then we also have this recording that's going to thelaw.mit.edu YouTube channel so that we can bring some of the learning back home. Is that okay? Yeah. All right. So let's face it. Our digital identities and personal data have become an important economic and practical resource and of increasing value. The personal identity of individuals involves more than money because there's civil liberties aspects. There's social aspects. It's almost philosophical what our identity is, but we're very aware that the context for this lunch and so much of what's happening this week here in Hong Kong revolves around economic questions and financial questions. And that is very much a part of identity as well. You could look at online identity or digital identity as an emerging asset class. It's a digital type of asset. Same with personal data. There are thriving industries that exist to collect, track and trade this information. Well, but business and legal models regarding the rights and expectations of parties utilizing digital identity are still emerging. Let's just say it's still relatively early days. And in a sense the business models and certainly the legal models have not evolved to keep pace with what's happening technically. The technical capabilities have outpaced business and legal models. So the rise of smart phones, smart homes and smart cities, among other smart objects and internet of things, accelerated by blockchain and smart contracts and mass automation in general offer new modes for control, new methods for valuation, and new mechanisms for exchange of the key rights to this new asset type. So let me just break that down a little bit because there's a lot of words there, but when I say rights to the asset type, I'm thinking like the first year in law school, one of the things that people learn is ownership is not really a monolithic thing. You could think of it more like a bundle of rights, the right to exclude others, the right to rent or lease or license, a right to destroy an object. These are all examples of ownership rights. There are more subtle rights that emerge with some of the blockchain enabled and smart contract capabilities that source and use identities such as a right to access and triggers for things like turning on and off services based upon preset conditions. There's a number of rights that people have. So we will catalyze and focus discussion around an applied identity anchor scenario. Actually two of them. I'll start with one anchor scenario and then we'll go to a more complex one that we want to dig into. The anchor scenario that I'm going to bring up explores the legal validity, admissibility and enforceability of blockchain based digital signatures to grant or revoke consent and authorization for electronic transactions. So just to unpack that a little bit so that we're ready to dive in, what I mean by blockchain based digital signatures, actually let me just ask, who has an idea of what that could mean? Yes? Okay, maybe start with your name. Okay, I'm Neil. I'm from the company. So blockchain based digital signature, I would say it's a digital signature. Do you think any of the digital signature algorithms have to be verified on a blockchain sharing? Very good. So for those of you who just got one microphone here, it was basically any digital signature algorithm that's ever viable on a blockchain. That's an elegant way to put it. And so like the typical digital signature algorithm for those that aren't steeped in this would be RSA, the RSA asymmetric curve. The algorithm that or the curve I should say that's supported on the Bitcoin blockchain and the Ethereum blockchain and many others is an elliptic curve, a little different. So one of the things that we did was we looked at utilizing that curve, the one that's native to Bitcoin and Ethereum blockchain and as a way to digitally sign off-chain transactions. So basically we used some wallet technology and some other things to enable a user to access the private key material and to digitally sign PDF documents and JSON data that were part of transactions that we've postulated in commerce. So the one that we're going to dig into first is to kind of set terms of reference and to kind of get conversant in this will be the simplest transaction we could imagine in commerce, which is a sale of goods and that brings us to the next sentence. What are the key issues, options and opportunities for startups generally and especially for innovative fintech products, services and markets for this new digital asset class? That's generally the conversation that we would like to have with you. So to show you a little something of what we're talking about, you can see it linked to the Eventbrite page, we have, let me get to this, yeah, I'll share my screen, yeah, I'll just take it. There we go, oh look it reverberated to the plant, this is the same text that you can find on the Eventbrite page. So what we did to test the legal, let's say status of digital signatures on commercial transactions that source from let's say identity on a blockchain from the address that one automatically creates when generating a key there and beginning to basically set up a wallet on a Bitcoin or Ethereum blockchain was a sale of a used car. The reason we selected that was because we wanted to find something that was slightly above the threshold of in the US something we have called small claims court. We wanted to find something that could be an everyday type of transaction that most people can understand and that has got honestly centuries of common law and statutes, consumer protection, uniform commercial code around it and the equivalent in all countries. But that would invoke the rules of evidence and like a proper complete trial of the civil, basically civil procedure so that we could see in this case just one sliver of the technical capability of blockchain for as a source of identity and as a source of indicating cryptographically in a cryptographically verifiable way that a person has digitally signed something that they have executed or adopted a valid legal signature on in this case a contract for the sale of goods. So for this particular we did a little mock trial where we kind of got a bill of sale that was the common form in the state of Massachusetts and we had an Alice and a Bob that played out the transaction and it went something along the lines of, I'm going to go back to our page now. Here we go. It's coming through. Here we go. It went something like this. It's a little small but you've got Alice that Alice signs a contract. Let's just assume it's a PDF for the moment. This simple rudimentary, not too different from what people do every day. What's different here is instead of using the built in digital signature or electronic manual signature capability in Adobe Acrobat or Preview on the Mac, she digitally signed the PDF with her private key from using her blockchain address. The payment in this case would be in US dollars. So we're just isolating one component here which is identity and authorization or you could say a scent to a signature to see whether blockchain as a source of identity is as good as what we otherwise would use or better or perhaps if there was some trap for the unwary we were not expecting and there were some gaps here. So we would say this was a research related fact-finding investigation or exploration of the technology against legal requirements. Bob countersigns using his blockchain-based digital signature. Alice pays Bob. Excuse me, Bob pays Alice. Bob is the buyer and then Alice disappears. So no car is provided to the buyer. Alice and now we have one more lane in the swim lane diagram which is Bob sues Alice and Bob enters the signature into evidence. I may have munched some of those words, but I think you get it. We have a buyer and a seller. The buyer transmits the money, the seller accepts the money, the seller does not transmit the goods. Now what happens? So let's say that let's just assume that Bob is around and maybe Bob hasn't disappeared completely but did not conduct the transaction. So let's say now we fast forward and it comes like time for the trial. So what we discovered over here is that there are a lot of issues that arose. So we had invited some litigators and some really first-class technologists from Stranger Labs, Christian Smith and others to set up some code, to set up a wallet and to make it possible for us to use that wallet to sign transactions. Most of what we did related to mortgage origination and signing a bunch of legal documents for that but we utilized it for this mock trial on a much simpler one-dimensional transaction. Buy the car, sign the contract. What we discovered is that some of the questions were the parties, among other questions we discussed whether the parties have access to anybody who is qualified and has standing to lay a foundation for admissibility through first-hand expert testimony. So there comes a question, who is going to, let me just ask Chopin, who's familiar with something called laying a foundation? Okay, so just a quick aside. If something goes wrong in a court of law, when you enter evidence to indicate something like a contract was breached, to bring the evidence into, basically to enter it into evidence, you have to pass a few tests. One of them is it has to be relevant, another one is you have to authenticate the evidence. So to authenticate evidence someone has to lay a foundation and then there are questions that you might ask. So if it was another commercial transaction, you might get a log file and you might say you might have someone testify, yes, this is the log of our payment. It hasn't been changed since the date. They might want to say if you're an attorney asking the witness a question, you might ask, has anyone else had access to the log? You might want to show that they had control, you need to show that they had control and you want to show that specifically right here. We have a little legal memo on it. These are the specific standards. There's like six basic points and that this last one was interesting, that the exhibit was properly identified. So what we ended up doing in this case is we decided our best bet with a judge or with a human being would be to print the public key and to print the, what was your name again, I'm sorry? Leo. Leo, to print what Leo was referring to about a digital signature verification tool, that basically requires three things, a public key, a digital signature which is a signature block and the file that was signed and with those three things, you can verify the digital signature. And so what we decided to do is print them. We printed out the PDF, we printed out the verification and the digital signature block and we printed out the public key. Something that's a little weird is you need to be in a place where in essence the judge probably as well as both the party should have access to those three files and agreed standards-based verification algorithms or software and should be able to achieve the same result. When we hash this file, we get a certain message digest. Shot 256 is what we're using. And when we digitally sign this file, we get this signature block. And if that block hasn't changed, we know two things. Number one, the private key associated with the public key was the one that digitally signed the file. And number two, the file hasn't changed since the time of its signature. Does that make sense so far? Well, it's easy to say that. It was a nightmare trying to play act that in a court of law in a way that people can understand. And I just want to identify that that was something that we didn't see coming. And so what's happening now back in the Media Lab where we did this and MIT is a small army of user experience experts and litigation experts trying to think what would be the documentary evidence or the ways that one would easily describe and show this mathematical process such that others could understand that wanted to verify the transaction. Another thing is the cryptographic and other verifiable data is correctly aligned to the specific activity and the records necessary to legally attribute the technical signature process to a given legal party. So in other words, this second question was how do you link the private key with a given party that is accountable or responsible for the transactions that were conducted that they signed? So you can extrapolate this to blockchain and more exotic transactions but we just want to isolate this identity aspect first. And the pointy end of identity legally is a signature. So there's different ways to do that. I'll just mention one which so far to me seems most promising. And the phrase that we'll use is dual integration. So there's no one way to do this but the basic concept would be that in a legal document a human readable document describing a transaction usually in the top we have recitations of who the parties are so maybe like TMA of 123 Elm Street and DAZO whatever 52 Greenwood Street the parties agree to a following transaction. You could in the legal document include one more identity attribute, one more address which would be perhaps the public key of the party and the address on the relevant blockchain where we are leveraging the blockchain-based digital signatures. You could just type it out. You could take comma with the following public key find about the following address on the following blockchain and you could do that for both parties. Now conversely if you look at the blockchain you could put and if it was Bitcoin for example Bitcoin for a transaction a URL to that legal document. So we put the legal documents, the PDF just in GitHub has a nice URL. Anywhere you want but basically we thought a link to the document where you could find the file that was signed and a hash of the document could be included on a blockchain-based transaction. So what you now have is a pointer or cross-reference you could say of the key relevant data to bind the legal party and a transacting party in a blockchain together to a given transaction. This is, we can call this a design pattern if you will and you could implement this any way you like but this seemed to be a logical and minimally sufficient method to handle the second bullet that came up when we tried to actually test this stuff in a somewhat realistic scenario. Another thing that came up was the purported signatory in fact had the requisite legal intent to sign that is to authenticate, be bound by, a sense, a test, consent, et cetera, authorize the contract or other record in question. So here's an interesting thing in the law. So let's just say Bob for example at the opposite buyer. Let's say Alice the seller who never delivered the car was 12 years old at the time of the transaction. Well under the common law there's no breach of contract there's no contract to start with because miners cannot form a contract. Let's say Alice had a gun tour ahead at the time from Bob's mischievous cousin or something. Well now we have duress and that type of coercion also would be a complete defense or would be a defense potentially let's say to enforcement of the contract because they lack the requisite legal intent to sign. So technically you could show all day long that the math works and that the signature verifies and validates but for lots of reasons that we may not want to consider the transaction or forcible such as these defenses I mentioned. So that was a third item that we surfaced when we played through the scenario and then also the right evidence was created and properly maintained to sufficiently prove a valid chain of custody. That gets into other stuff like supply chain and providence and things. That's not so much a deal right here but that can come up in other situations and actually plenty more hitches and snacks that we identified. So I can say like at a high level this was a... Well actually I'll just read it. So we expect and hope the above exploratory prototyping will generate constructive and valuable feedback and other inputs to software and tool and practical innovative designs and process industry. So as we discovered these things just by playing through the scenario one way to look at that isn't oh no like it doesn't you know there's issues but oh goody there's things that we can build we now have a few more requirements that can be solved. We have legal use cases that can be solved by structuring and engineering shall we say the transactions to address them to manage the risk to create and preserve the evidence that you would need to avoid these problems. These are foreseeable issues. These are not the issue sets that usually come up at meetings and startups and big companies and government in other places where it's the CIO or CTO driven processes or even business driven processes because they're legal. But we're trying out a new method of co-design which is to surface business legal and technical requirements as part of a holistic set of design requirements and constraints so that we can basically not find out later that something wasn't working but also to be able to take not just like these kind of heavy requirements from law especially in the ICO space and in other regulated industries a lot of the legal requirements seem quite onerous just an unfortunate thing that happened to you that you have to deal with one way or another or avoid in some case like in contract law for example and identity law broadly construes there's a lot of wisdom in the law you don't necessarily want contracts that are easy to have coercion or fraud or forgery on right. So there's some of these kinds of defenses and other legal requirements actually have a lot of common sense like the scenarios at law.mit.edu we're hoping to take an engineering approach to a more holistic design and build and deploy process. So this is literally a process of evidence-based requirements gathering in this case it was the law of evidence that we use but there's lots of interesting other areas of law property law is the big one that we're going to tackle in 2018 back at MIT and well there's so many agency would be the other one I would just highlight who here knows the law of agency agent principal third party you do have a legal background I'm just going to say I think this is probably one where we could get billions of dollars of mileage out of looking at everything from OAuth to authorization flows to more exotic blockchain based transactions is very sensible centuries old wisdom in the laws of agency and when a third party should be held should be able to be basically accept the gains when they've reasonably relied upon for example what an agent of a principal has done we even call we call so much software an agent now who's the legal party behind these agents and what are the fair allocations of risk and liability in the new formations of roles and relationships and transactional flows with this technology we think we can actually surface some very very powerful and very helpful solution oriented requirements from the law of agency among others contract law as well okay let me speed this up a lot what else was I supposed to say she wanted to go over the supply chain scenario okay I'll say one thing on the supply chain yes oh yeah could you say your name please I'm Brian I'm paying as a lawyer now the start-up is looking different awesome so electronic signatures have been around for a while so what has your analysis been vis-à-vis the existing piece of electronic signature and how does to what extent are the deficiencies in life production that is a very good question did everybody hear that the question basically was what about the existing law for electronic signatures and is that not sufficient to address blockchain based signatures so let me just speak to that for a moment and then they will do that the supply chain and move forward that's probably a better question so the fundamental law for electronic signatures can be found in unsatral model law electronic commerce that's United Nations Commission on International Trade Law I actually participated in some of those discussions in the U.S. way back when way back when me too so did you know Tom Spenninghoff and those those are the days so the basic you may remember the basic concept at that point in the late 80's and 90's was to have legislation that let's say removed undue obstacles to the use of electronic signatures and electronic records in commerce this is partly because there is a lot of statutes and regulations and even common law from judicial cases that assumed and I think inadvertently required signed in ink kind of language that's not going to get you too far you now have a technical problem when you use electronic signature and some area of law that covers your transaction that requires signed in ink or written in paper what they meant would be signed in a way that you could authenticate the signer and tie them to the thing or inscribed in a tangible media would have been nice language but in the 30's, 40's, 50's they did the best they could and I came across a bunch of law in Massachusetts that assumed microfeesh and other funny media so we had these technology specific formulations of law that this undertrawn model law and the implementations by statutes virtually every country now in the United States we implemented it in the Uniform Electronic Transactions Act which I was at every drafting committee meeting of for years other than one the law is called the Electronic Signatures in Global and National Commerce Act so I participated very much in the drafting of that in the House and the Senate and testifying and getting it through and we basically have achieved this so what we now have is a formulation of law that avoids the obstacle of a signature being denied legal force or effect on the sole ground that has been achieved with electronic methods this is terrific that really allowed commerce and civilian government transactions and all sorts of societal beneficial transactions to occur electronically because they could not be unenforceable on the sole ground that they were electronic what we didn't do was to go a little bit further and to talk about evidential issues for example and to talk about other let's say what used to be edge cases and now we're gaping holes with respect to the use of algorithmic processes that are given fundamentally agency, autonomous automated processes are raising new questions about how to attribute signatures and other legally binding assent to a contract or other transaction to a given legal party these are addressable but we didn't do it then and that was wise quick story in 1996 or something I was mistakenly in retrospect involved with state legislation state of Utah digital signature statute and a few others and then Malaysia I think picked it up and a few other places where we thought well we could address this if we went further and actually address the use of public key cryptography and concepts such as non-repudiation which is not a great case in some ways it goes too far we could be able to identify and allocate liability and responsibility in more detailed ways because hey the math is so great why don't we get more certainty in commerce and not leave it so open turns out that wasn't a great idea because as soon as one tries to define roles and relationships, rights and responsibilities based upon technology in a statute it can raise more questions and introduce more problems than you've solved because now what I just said a moment ago about the problem with being technology specific in legislation you've now created again with just to play it out at that point we thought the implementation of legislation with implementation of public key infrastructure would include a trusted third party known as a certification authority and we built that into the law and we assumed that that would be how it would play out not so like the business models and the evolution of this technology to reflect and support the practices in commerce and industry and people it's much more fluid and even very smart people can ever guess and to enshrine that in legislation is actually self-defeating so what we prefer overall is a policy innovation and both of them what you lose is the certainty so in non-common law countries like in civil law countries they're much more specific with statutes they have to take a different approach we have an approach in common law countries that basically encourages usage of trade and common standards to evolve from the bottom up and then to be reflected in standard contracts, standard terms and ultimately in legislation I would guess still have a decade to go before the time of or more, before the innovation has settled to the point where it would be wise in my opinion to reflect specific roles and relationships and usage of technology and so what that means in part I think is that there's a need to fill some of the gap that you're asking about and some of these open questions I identified in a moment to go with not statutory or regulatory guidance because that's bad but instead with practices standards with basically common approaches that people that are doing commerce and transactions together agree upon this can be identified in white papers nowadays and it could be identified in contracts, it could be identified sometimes that something is lightweight as a shared FAQ that becomes canonical for how people do things or in my life it ends up being well-worn issues in GitHub which is sort of describe how we do things and then eventually get to the documentation but it never does and so long as there's some method to communicate for people to agree that way but I think we have a lot more mileage out of just allowing some deliberate ambiguity for a time and then communicating the goals and then allowing even more innovation so there's a healthy tension here as well so that's a little bit of some homespun kind of ruminations on the question you're asking about where's the gap post electronic signature legislation okay so now we're going to have fun so those are some terms of reference so just to go over what we just talked about what we so what this is here is a swim lane diagram so one of the ways that we want to sort of engage people is by so first of all who knows swim lane diagrams there we go yes engineers these are terrific not only when you're trying to engineer a process but also to to do a deeper dive into legal the legal dimension along with the business and technical layers of systems that you could build or that you're transacting with so what we talked about was allocating roles to actors so in technology we'd say you've got actors and actions in the law that might be parties and transactions okay this model might be a role like buyer seller broker something like that retailer reseller trusted third party and and transactions what we do here basically we have a little so what we did is we kind of identified to keep it unambiguous a human party or it could be a legal corporation like Acme Incorporated or Alice at 123 and then we just have a little strategy to in this case indicate her her business and her legal role seller and buyer okay seller buyer so you can imagine if we were doing unified modeling language we'd have stick figures and arrows and circles to describe use cases it's another perfectly valid way to identify a use case the swim lane though allows us to look at sequences and to basically keep roles aligned in a swim lane so we can see the interactions between the roles turns out I've discovered over the years that when you're trying to build a system especially industry and government this technical approach to diagramming out interactions for a system is a perfect match for a legal analysis because what we always want to know what are the rights and obligations of the parties in the context of a given you know I'm set of transactions and so by naming the role the legal role the business role in the technical role we think that we or what we sometimes call BLT like a BLT sandwich has three layers but oh the sum of the parts is like a whole new thing so if you can just put the little role designations in these scenarios for what you call the roles of these interacting parties so the business role what we call the legal role is it a licensure and licensee I don't know is it like a is it a service provider and a subscriber like these roles tell us a lot about the legal nature of the interaction is it a consumer is it you know a high value investor and the technical roles which are usually you know actors and actions kind of stuff so you have like the user you've got the service provider you can imagine the legal roles the technical roles we have a pretty much we know more or less what we need to know to do a nice analysis of the situation including to build so like you don't have to there are other dimensions of these people and these interactions there's a social dimension there's a political dimension there's a philosophical dimensions and religious there's all sorts of ways that you could look at it let's just say for today at least that business legal and technical is sufficient to get predictable results from a system that we would use in commerce so that those are some of the rudiments that we have to play with with a much more interesting scenario now not the sale of a good but a microgrid take it away oh I need to unplug this let's um so I'm going to show a quick clip from the computational law course that we had at the media lab earlier this month because Michael pieces a really fantastic job in mid-January actually in the United States it's still earlier this month I guess sure what you say stands I withdraw my objection who knows Michael Casey anybody he's one of our heroes um he came by the class that um TMI TMA and I collaborated on and um described a very interesting project he has going on it's not power ledger but it's a power microgrid project in Puerto Rico um you guys might know that Puerto Rico had you know some really awful hurricanes earlier this year um their entire power infrastructures are down so I'll play this I'm hoping to get some value there as well so basically what I'm doing is exploring the prospect of students from Sloan and also yes also the prospect of building a distributed transacting microgrid a off-grid part of what everybody knows that the public utility has been sort of decimated it was almost decimated before the bankrupt um and then uh at least technically bankrupt and then the hurricane came through and this was blacked out so much of the infrastructure so you have these communities around the country who have been out without power by ages for energy but they also had this very strong and emerging uh believe for this desire to pursue a new pattern and there are many others who believe that the future of energy is a distributed structure decentralized structure and there's many arguments about one of the strongest though was made clear by the hurricane that is that you get more resiliency I believe you've got multiple nodes of generation so that if you just knock out one of them as we did during the hurricane so major transmission ones that they had then everybody goes down right whereas if you've got to multiple locations there's one of these you've got another this is sort of an architectural design feature of many verses of security now we think you're at the same thing with data security we push control of data out to the edges maybe there's less of a honeypot for hackers to enter into and and so now we have um you know a very different way of thinking about security which is spread around the shoes that's one part of it but we also think that if we can move uh generation capacity and most importantly pricing power away from these centralized institutions and bring it down to small market groups then the learning and the data sharing information that comes in the community can be that much more powerful that maybe there are better decisions that get made around the generation and use of power particularly in an IoT coming environment where devices can be programmed to turn on or off what the price is and what are the signals they get. So right now a centralized model typically it's a sort of take or pay model where the central utility is just setting the price right well that's based on a price that's big and and all the costs of credit all the costs of you know centralized architecture infrastructure I would say a corruption I mean these are all sort of components of what come to the pricing model that you are forced to pay and to receive if you are generating your own power and selling it back to the reader or if you are just receiving but if we have this again this model where multiple nodes are shared and the price is now being set by whatever the local market is you know interesting things could emerge out of it. People could decide that hey I'm just going to add I think that there's earlier when writing opportunity here because the price of power is growing there seems to be greater demand for Wi-Fi services so I'm going to add more capacity to put up a cell tower and build my own you know questionnaire or something or I'm going to put a navigation system in so there's a pump underneath to do it so I can add more power for that or maybe it's getting too expensive so I'm going to figure out how to bring in a more efficient efficient system. These decisions we think become more fluid. That's the kind of economic thinking so we try to think of it not as a microgrid but rather an economic development platform that communities now can do this innovation platform. Okay Does everyone know what a microgrid is? Yes? Okay. Does anyone not know? Yeah. I'm still hazy honestly. Okay. It's technical. So a microgrid pretty much is a isolated energy production community and so one example of a microgrid is LO3's project in Brooklyn so individuals who are part of microgrid will have solar panels or other kinds of renewable energy resource generators on their properties and they all feed the energy to each other so the idea is to have more dynamic energy production because normally what happens is in a traditional utility, energy produced by energy generators is sent into the megagrid and then ISO or a distributor will then send out the energy across transmission lines into individual homes. So I think we should probably plug it into yours. Sure. Connection to electricity is so important here. So the idea of a microgrid is that you can increase resiliency with a bunch of smaller microgrids that all tie into megagrid because they generate their own energy resources but then also have access to megagrid to transact. So during the computational law course, we did a really quick scenario discussion around who the actors, actions and data in a microgrid are so this is a very, very basic swimming model. So like what we want to do today is as a group maybe define more actors, think about how these different actors within this scenario could be expanded upon and look at it like the business, legal and technical dimensions. So I'm going to actually use the board here. Perfect. We have a big plant for the white board. Yeah. This is all very, like, interactive. We'll get them. Yeah, we should have planned that. Sorry. Which means there is either government density or it's still contributor or it's willing to build a microgrid and then they're leveraging on one side, they're leveraging microgrids to store in between power and the other they can't have too much of the microgrid but then they can turn off the main grid construction. So usually private entities will fund their own microgrids and the utility then views that microgrid as this one consumer. So that's in the United States that the regulations differ from country to country which is what makes microgrids so interesting. To be honest I understand United States regulations a little bit more than any of the other countries. We'll talk about microgrids in the context of the U.S. regulatory environment. I guess we're waiting for the dry erase markers. What's your name? David. So to David's observation and inquiry there's some of what we'd like to explore as a group is cutting this different way. So let us say that there's a blockchain that is engineered down to the guts. Let's even say distributed ledger, an energy ledger that's part of this microgrid and let's say it's getting at can meter generation. So one house in a neighborhood say on this grid maybe is generating 20 kilowatt hours another has better sun more infrastructure is generating twice that and then they're also consuming. So that can be metered as well and there may be some smart contracts that can sort out the accounting among them and can and could even have a as Mike was talking about a business model and legal model that would be expressed technically as a shutoff event that one of the parties wasn't paying. So if they don't pay up this power shuts off. Automatic function. You could actually compose that as a not as something that's not connected to a mega grid. You could and then you could say as a matter of regulation one of the things we talked about the following day after Michael's kind of scenario when we dug in was models in the US and in other countries Chris Barron who's one of our speakers introduced us to and kind of mapped out that with the distribution of the power well first of all the infrastructure is all collectively owned by the producers and the users so you kind of create a five oh one see something or create some sort of like organization that is the owner of the infrastructure and the operator of the of the system. Now what we have is a self-distribution not a distribution to a consumer and perhaps or actually in reality Chris showed us some projects that have highly automated contracts you know a merit rank order systems for what the valuation of per kilowatt hour would be and some other things like that. But are not directly regulated by a public utilities commission because it's not a distribution to consumers. So some of what we'd like to tease out is so you're kind of right where we want to be which is like let's see how we could compose the actors and the actions from a business legal and technical vantage point to find to play with optimization of the tools. Your next. The question which I ask is we're making a sum to proposition that the future of solar, wind, water and all of those technologies will be in excess of our reasonable amount and we do not need the micro utility to be developed into the infrastructure and then we'll have an overrun of these serious power that won't just be feeding to the home that will be sold back on the micro grid and then to the micro grid if necessary. See I'm a little out of my depth on the energy stuff but yeah maybe you can tell us if that's so. That's a different question. Tim is deeper than me. That's kind of where I went where I was going is if we have a mega grid we're assuming that someone already takes on a larger risk of assessment of the fact that we do need an mega grid because there is at this point in our technology of power generation there's not enough to justify micro grids operational efficiency and those who haven't dropped down far enough there are some technologies in water generation but we're not sure that we're there yet so we kind of So there are already micro grids that have been developed and made sense financially but to your point it's not this massive movement right now and that's kind of like the thing that utilities are debating right now are micro grids going to be just completely a distributed co-generated network of energy or will it be this integration of micro grids and mega grids where utilities will still have to invest into transmission lines etc For this example we're just going to assume that micro grids and mega grids still exist and they'll transact in some sort of capacity and we can figure that out together It might be interesting to play it more than one way and see what are the part of what we want to ask and you asked me to remind you was here's some additional questions what what other capabilities of blockchain and related technologies could you envision as a good fit for the scenario there may be some capabilities when we're running the systems on blockchain technology that maybe could bend the curve of business models of the past potentially so we'd like to explore that and I'm actually I think this gentleman's next sorry I'm really I look at this stuff all the time actually it's a growing consensus that we're going to see large scale bankruptcies of utilities around the world because of micro grids so I think it's fine your base is following in this assessment because basically there's been the dollars of infrastructure that has been built in the world and that has been predicated on electricity demand and most of the regulations where these companies get paid is they get paid on how much money they put in and will give you a small incremental amount of dollars you spend the problem is is the heaviest use of electricity i.e. with big properties and big land masses are the ones that we need to make a grid and they're the most expensive system so they're on the washing machines all hours and TVs and everything so they're coming off grid testing power wall etc so they basically are free riding on the rest of society by taking us off the grid but having the option to use the grid when they want it and that's not sustainable so what's going to happen is ultimately this micro grid scenario either you nationalize the whole thing the government basically needs the difference of funding infrastructure paying back the people that put the money in the first place there's a company called Repower which is about to ICO which is trying to do that so they're basically trying to repurpose the way the funding is done for the infrastructure projects they'll say you build it so they're saying you build a project we'll pre-fund your project and you sell me the electricity on the blockchain in the assets for the contract in the future and all of this I paid for something that nobody paid for so it is a problem and if any of you want to or any of you on utility charge you can sell me it's not an official official request are you David did you say I think since you invoke David's name directly he has the right of rebuttal or reply and then you're next like any system we're talking about individuals investing into technologies that we're unsure of in the next generation where they might not turn off for example the United States right now solar is still being subsidized but in the process of that subsidization but just a few back a decade ago it was on solar solar farm 4,000 megawatts power we knew about 100,000 megawatts power in the United States and then his entire project was destroyed by traffic and gas so we could run into situations where individuals not unlike crypto and bitcoin where people don't know what they're doing invest in technology which they believe will be the next generation of savings opportunistic their future that they're going back to millions of dollars and billions of dollars and we can find out in a short period a long period of time that technology which is not like the blue energy which is another energy source it comes really absolutely within a matter of a short period of time faculty and individuals who create this new microgrid mega risk even for the individuals where the large scale consumer where the big institution I'm not saying institutions are smarter someone said the other day I don't like banking to be decentralized I want to be broken up and I think it's not a regulation it's an industry they don't want to have to do the same thing so where do we fall when we're willing to accept large scale risk and small scale risk for the individuals in society I'm going to take a note um that's going to elicit from some of these comments just a scenario that we can play with an anchor dialogue I guess just on the side I want to put um identify and addressing systemic risk I think it's part of what that is I'm just going to say systemic risk systemic risk because both of you guys have fair points there's a researcher named Shil Shansi and he literally goes around and interviews utility executives around the world and to your point utilities they call it death spiral utilities this is like a common problem that's being addressed in the utility world but at the same time there's no consensus on a solution like do you change your pricing models whether it's free riders now have to pay to access the grid or will there be new technologies that have been undiscovered that have been completely changed in utility paradigm like nobody has that answer which is why it's an interesting problem utility ads utility ads it's a yeah they have no clue but then also you have but they're also like in the United States because of these microgrids but regulations prevent innovation from happening in the space and the goals for that are actually the scenario and so it's like how do you work within the regulatory environment to onboard technology that actually makes the grid more resilient, more efficient transact better just to add a different perspective I actually do this one of my largest clients is a power generator in the US within the bounds of my multiple ideas with them that's true power in their region is managed by a central organization and it actually flows the price is done as a day at forward auction you look at it auction? it's a day at forward and it's in 24 hours so today you have to save on the offering power access to kill a lot and then the central utility just fills the demand in order from cheapest to most expensive in our bounds the price can flow in a band but it's limited in addition you can sort of power the location delivery is significant because there's transmission loss in the lines and there's something called congestion where there's too much demand of physical metal wire can only handle so much power before it's in a sense full and so if demand is high and something's congested routing power around we can take a longer route and add a larger component to the price to make it more expensive so certainly a very complex formula so I want to double check that we basically can accrue the value of the last few comments so can I can I get your attention one more time baby just briefly so I'm going to come to you in a moment and ask you to just encapsulate the nugget that you want us to take away as a group the micro gate grids as a concept is fine on a small scale but the minute it comes bigger it's going to be life-threatening utilities and the number two that big mega grids themselves have a static risk of imploding yeah that's what I'm saying so the mega grids themselves have a static risk as well so we need to think only paradigm for funding or charging people who are owners of micro grids because the problem with micro grids is that it doesn't take into account the externality of the cost I heard you say a few things I'm so light in this topic could you just encapsulate the fundamental that you want us to draw one of them is technological products we're unsure of what that will entail so how long is this destructive technology to survive in the next one another one is we're placing in place a mechanism where the individual small investors are making those decisions for the grid which can actually harm them financially or even destroy the grid because it's done improperly because some of the micro grids are risk of not knowing to build an assistant that might not work or it can create all the grounds and we're also looking potentially for those cities or groups of people who tend to be more in areas of concentration yet the majority who use the US is not large cities so therefore we have communities that are already on the spandex and these people don't have the money to build the infrastructure so what happens if the major utility leaves and now we're helping that the micro grid will come up and she might just take a note of what the major defense logistics agency so when we went through this defense logistics agency and six lawyers or five lawyers at MIT that were learning with us from a lot of infrastructure one of the things that she pointed us to was a model of the world co-ops basically in the US and apparently those have been pretty stale for decades if you're thinking we might want to fix that for more resilient systems that are enrolled by some systemic risks because they had some risk goals they had some more sophisticated financing and I guess risk management that you'd identify if you want to explore and actually we don't have to write that down there's one large I think we found out what's it what's it what's it what's it what's it what's it simple terms the pricing is significantly more complex than just putting a micro grid and feeding it fast right in fact from a technical component power in the US runs at 60 hertz 60 seconds per second and that's partly defined by the rotation of the motors of the generator spinning and it's often synchronized to other regional control areas and there are borders where they cross it's a variable process so simply just having a solar farm and plugging in and plugging in the solar panel on your roof it may work for a few people but it's much harder to ship the economy from a micro grid system there's so many other components to the pricing and the components and maintenance and so I think like the takeaway here is that this scenario is insane we should move over to a fully micro grid you know like dominated markets what would like a small economy within a micro grid look like and how could that system exist in a place like Puerto Rico or maybe like LO3 like in Brooklyn and how is that doing that's great we think it'll be a nice cannabis to paint on to kind of elicit interesting ideas and to communicate so now that we've set the table let's put food on it so I wanted to quickly ask so there's two scenarios that you can go through for the micro grid one in like the traditional creative peer scenario where each individual household will have a micro grid on top of it or we can kind of see that there are people here who have some industry experience so talking about how a micro grid that's funded by like a larger corporation ties back into a larger utility so is there like a raise of hands utility and larger grid or individuals transact with each other I don't understand that question option one, raise your hand one, two, three, four, five, six okay, option two one, two, three, four okay, option one wait, we will do this okay, so I'm going to put this no longer existing we have so first of all we will define the actors in this scenario so does anyone want to volunteer thinking about like what entities are involved in a scenario where you have the company utility well you have consumer who knows this people seem to know enterprise based so you have the consumer of the energy you have the incumbent utility then you have the startup the generation the individual generation it's kind of like generators and consumers just the different styles of the case let's find out you got it regulated in the corner yeah when the utility is financed there is some time someone that's financing it someone that's financing the utility so creditors maybe what utility does oh you said financing so it would be more like a creditor or a funder that's big like a lot of what Michael talks about is that model and how to fill that in and the funder side is that there are existing states for example for co-op electric grid systems and they do that exactly they're finding great costs for communities they create great grid they can build it out and they fund these it's co-op co-op co-op but they meant that oh yeah so Michael last summer had a good thing going for general electric where they were very much a big part of the equation sometimes they do the financing right exactly so we can go back to finance and supply repair on and on it's often a fixed cost for our generator runtime any other parties distribution network the operator the operator is an interesting one the grid the grid itself can I offer a way to do this one way to do this and this is where we start getting fantasy is to say just arbitrarily if there was an entity that was forming the co-op in theory we could be collaboratively owned by these parties not necessarily by those parties but they could have ownership states not these parties not these parties so we could start to represent some of these clustering maybe with like rock with bigger different colored markers and then play with that that's all I got any others but then you keep saying any other parties so nothing happens landowners the grid okay so that's actually an interesting question so with the grid that's a distance question who owns where is the distinction between the micro, so we'll call this the micro grid who is responsible for maintenance of that grid these are the big questions it depends on the country because transmission sometimes is played sometimes is over I have some good arguments with this blue marker you can have some good arguments with this blue marker right that's why we want to convene this group on this topic today we have a strong suspicion based on good information that people here have terrific ideas and creative solutions and listen to those and then put them up in the sunshine and talk about them what other business problems do you guys see with the micro grid and the bigger grid's interactions who owns the micro grid there's a current issue watching what's all this with what they call settlement which is if I'm producing power or just assuming it at the end of the day my formula and math on what the price should be the piece ODAR might be we're measuring different points and it's this floating thing it's really messy settlement is terrific on the blockchain one especially when you look at the potential there's some very interesting hacks out of the digital currency initiative where they were doing interesting stuff about the metering of generation and consumption and printing that basically or entering that onto just like a grid-wide micro grid-wide blockchain it might collapse several steps and reduce some costs in ways that could even change the economics of it and also I just wanted to point out some of the corporate micro grid owners right now are using merit-based algorithms to kind of decide whether they're going to use the energy that they produce on the micro grid to produce something or to sell it back to the grid that's another thing to keep in mind a lot of times these micro grid generators they're trying to make arbitrage off of the energy production so we're assuming also here the micro is the only generator not a store electricity these would be storage as well so you can actually have a negative price in electricity with the pay you take off the grid especially on hot sunny windy days well you should have two generations this week generator and that should be storage so like you can have a battery that you can get paid for exactly and that might not be interesting if you generate a number of your neighbors or the grid so this is the unit so if you're buying the utility yeah well the utility pays then if you're like let's say you're away for the weekend it's a sunny day and the utility was a storage for use at night then this would pay you the grid the battery makes a decision that I'm empty I'm not being used I could have it on my own as a way so I'll just store electricity so do you see this as an application for blockchain yeah yeah absolutely that couldn't happen without it so as a prompt here are the questions just as a reminder so we've been talking we've been really stressing what other actors we could surface a few more what other actions could occur are there other types of actions other types of transactions Michael a big part of his concept was could we build more apps and services that would be beneficial and we haven't talked about this yet but five or six years ago here next what's your name again Isaac oh okay we gotta talk some five or six years ago there was a grad student in the human dynamics group at the media lab that did an interesting what we call computational social science project with a grid in a Nordic country to test the use of an app for energy consumption savings and what we did was use some political social physics basically to look at giving up teams of people that are playing in a game in return for some very little money that they would get to as a pool reduce their home energy consumption so we had little meters that the grid permitted data to come from that went to an app through an interface and the teams could see there's a week basis or something how are they doing and turns out the the social pressure of seeing the friends and the workmates and seeing how we're doing and being able to allocate to people in the group who was leaving their lights on and who was not really pulling their weight was tremendously valuable to get the overall energy consumption down dramatically for these teams that were playing for like peanuts so it was like not big money that was incentivizing this energy savings and there's a paper on it I have to find I want to say it was something like 17% across all of the participants in terms of the overall energy savings and when they matched it up to the financials and the deal terms for a huge tax break to incentivize that or a lot more infrastructure to basically make up or better energy it would cost a lot of money to achieve that much energy efficiency by other traditional methods are there opportunities for other actions that could be achieved through the deployment of an application or a service among the people in the context of the community that could also make a difference or other actions that would be called financial or innovative or other kind of transit what are the roles of the actors could be useful so if these are if this is the let's just say for a moment we just decide to snapshot it here and not surface even more actors could some of these actors be crossover artists basically and hold more than one role depending on the context like a store and a consumer is one that you just service could that bend the economics in some way that could allow for a breakthrough efficiencies or productivity that could change the math on the model would Ethereum or other crypto currencies or distributed ledgers offer a better footprint like proof of stake to a proof of validation of transactions is something that people are talking about here and what are the capabilities of blockchain related technologies could you envision that may that could be useful all this is moving toward how could one imagine structuring the technology I would say legal and business models in ways that legitimately would allow something like in that blue spare to be non public utility not regulated like such as the self distribution model I was describing from Chris Barrett so those are some of the prompts I think the obvious one we haven't talked about yet is what interplay does the regulator contribute to the system so like what is what are the different incentive mechanisms to achieve optimal outcomes on behalf of either the mega or the microcrits yeah so like regulator maybe incentivizing funders into the system or incentivizing consumers or incentivizing transactions between stores and potential consumers who can't produce yeah just like it would be interesting to talk through from everyone what are the key components for regulator's reliability and that you know when you turn on the white switch you want your power to turn on and get the same quality of power as it's always here in front of you but one of the key components for regulator's which are reliability availability of electricity you want and the quality of the electricity so it's always the same exact measure which is like the white switch on at least in a personal country so the regulator has a primary role of ensuring things are standard did you see something like a smart contract being applicable for the regulator's standpoint or not? yeah the regulator needs to have some teeth to be able to enforce reliability of all of that regulator okay I was just looking at your face I'm like in theory smart contracts can handle a lot of cases like this but while looking at a lot of high sales in America it's mostly the same with concepts like this regulator is contractually a high-definition process usually it's already out and you won't get and if you do that it doesn't work because actually smart contracts can only handle part of it I mean kind of stepping away from the blockchain component though regulators could have a high degree of control over hardware for example that determines power output so this would be like a way that they could either subsidize or subsidize it's good work too and I just added some experience there's exemptions like this is lots of old things they can do in innovation zones or what have you there's potentially something interesting going on between regulator and what is asked of the regulator and how microgrid is defined defined I mean in a sense that is it always going to be the case that microgrid will be defined by geographical area or could it be defined by certain types of people who have a specific political persuasion wanting to generate and send power to other people of that same persuasion geographic there maybe that starts to lessen the load on maybe a generation of collectives potentially and something like the rural subsidy and the primary context would be the human system that they all play a part in not necessarily the geographic location I understand there's no ideas for actions other technologies yeah so security from energy by the way spread setting securities that's so could those possible be encapsulated in I don't know a token good idea right some collateral secured actually yeah like a tokenized energy tokenized energy sounds like a good legal hybrid project then the microgrid uses to transact potentially yeah or it's created by the consumer but it's backed by energy or created by consumer yes these could come from different different stakeholders who really creates it it's like who has power within the system and how could that be encapsulated and reflected and supported within a system that could design it would be more economically efficient lots of ways okay and these are good ending points this is kind of the highlight of all different scenarios that a microgrid elicits and then from here you can extrapolate new ideas that can account for the new business right now there's companies like LO3 tower ledger they're always going to ask but no one's quite figured out a solution yes these are really awesome ideas so good job everyone so now we come to the now we come to so basically what we just did was a very very very quick squid of a kind of modeling exercise that Isaac was mentioning a group called legal hackers it was called legal hackers not illegal hackers what do you call those words that is who here is sort of of legal hackers oh so those of you that didn't raise your hands are in for a treat legal hackers there we go it's an international organization Jim and I are both members of and we've got chapters all over the world oh absolutely legal hackers is a fast growing global movement of individuals passionate about developing creative solutions to some of the most pressing issues at the intersection of law and technology that's fundamentally we have a mission statement as well basically it's mostly attorneys not exclusively also you could say hackers or use rapid development techniques in the modern web and now blockchain stack we get together on off hours in this voluntary association and we'll talk about issues but a lot of us will have had some stickers here we'll do we'll get together on the odd meetup and we'll actually do a rapid prototype of something just to try it out that mock trial I mentioned was actually it was held at MIT but it was a legal hackers event we got access to a lot of interesting people that wanted to share ideas and learn together we've got a lot of chapters all in Europe some in Africa what's this? Hong Kong legal hackers Australia, Latin America and it's this is actually dated less for our we grow every August we all get together in Brooklyn the origin point of legal hackers and that's terrific and what we wanted to invite to tell you about and to invite you to is the computational law and blockchain festival we decided not to do a blockchain this time excuse me not to do a hackathon this time because a lot of hackathons a lot of us like hackathons but we wanted to try a different type of event across the world that's more community building and that focuses not just on sort of like the power like 24 hour red bull pack but something where there's a learning track so we'll have lots of tutorials and lots of knowledge sharing from across the world a hacking track which is typical hackathon thing or build something and a discussion track we've got 20 policy and legal oriented discussions that will be convened across the world in very interesting ways we will be helping to hold down the Cambridge, Massachusetts venue of this weekend in March 16, 17 and 18 and Ryan, Isaac, David, Donald and I will be working on the Hong Kong note woo hoo and hopefully more people and hopefully more and so if anyone is interested in hosting a note or if you're in a place that doesn't have a note and you'd like to host one, if you're in a place that has a note and you'd like to go to it, we strongly encourage you to do that and we'll have an opportunity to build together and to raise everybody's vote in a sort of voluntary creative community so legal hackers, computational law and blockchain festival do you want to bring us home Camie? I just want to thank everyone for raising participation and yeah, if there's any questions reach out to us and constantly we're trying to think of new projects to work on and developing ideas so yeah, looking forward to having you guys. Should we invite people too though? Oh yeah if you guys were here in town for a couple more days and we're thinking of hosting people at our hotel this evening so if you guys are free from 5 to 7 then it's all the overload overload every time we'll be in the lobby reception area we have a happy hour then so yeah, we're happy to be in this session it'll be festive yeah, so yeah, Camie kids are free can you maybe dive into a little more what kind of stakeholders you'd be looking at to engage with the legal hackers festival? there's probably at least three major kinds one kind would be people that have a challenge if there's folks that have an interesting business model but they're not sure about the legal issues or there's a legal challenge they may have counsel this is not free legal advice specifically but there may be some systemic issue where a lot of creative people looking at for example, structuring in a certain context collective that maybe would be legitimately outside the scope of a consumer distribution of power for microgrid or innovative ways to do computational contracts or anything the evidence hack I think people will be doing you can pose a challenge and then teams can come together to try to oh, thank you, to try to basically develop a project that solves that legal use case or that challenge and so people that are posing the challenges will get involved in the forum that you can fill out and you'd be responsible for adjudicating who the winners are describing criteria we've got five or six some challenges already including lots of them of the other type are people that are participants and so people that are hackers or developers attorneys, business people others are welcome to come and to learn together, to build together and to converse together and then to party together and then the final one would be I'd say the local community and so we've got one of the best things about these events is when the local merchants maybe local law schools, local government people that are interested in this stuff come and it's a very neutral safe sort of place for people to let their hair down and talk in a very informal way so we get a lot of we get judges and politicians and captains of industry and people that are fundamentally invisible in the middle of huge enterprises but we were very curious about things and you can kind of come out of your, come out of the box and play together those are some of the stakeholders and I just wanted to add if anyone's interested in like our energy future I think energy and microgrids are going to be one of the topics for the one of the challenges so we can continue hacking on this and actually think of a more robust solution right and perhaps Michael Casey can take one of those solutions and start to deploy it or elements of it in Puerto Rico where they've got a series of schools and other sites and they've got a very credible team of MIT students and other collaborators and partners and there is a legal layer that needs to be engineered, you know not merely lawyer but engineered in the MIT way and so yeah join us let's hack together, let's hack the law okay great thanks guys