Beyond the Blockchain

Beyond the Blockchain

EFF Austin

February 16, 2015

Christopher BrownAttorney at Law

[email protected]

512-438-9299

– Satoshi Nakamoto

Bitcoin: A Peer-to-Peer Electronic Cash System (2008)

“What is needed is an electronic payment

system based on cryptographic proof instead of

trust, allowing any two willing parties to transact

directly with each other without the need for a

trusted third party.”

Anatomy of a Bitcoin

transaction

• Alice holds 1 BTC in a virtual wallet with

an associated public key and private

key

• Alice wants to send the BTC to Bob,

who also has a wallet

• Bob sends his Bitcoin wallet

address/public key to Alice

• Alice creates a transaction message

with Bob’s address and the transaction

amount

• Alice signs the transaction with her

private key, and announces her public

key for signature verification

• Alice broadcasts the transaction on the

Bitcoin network for all to see.

• The transaction is verified by the Bitcoin

network through cryptographic work of

miners.

The Blockchain

• Decentralized public ledger

• Records issuance and transfer of

digital tokens

Other Distributable Ledgers

• Title recording systems

• Real estate

• Motor vehicles

• Notarized transactions

• Stock transfer ledgers

• Secured transactions

– Lawrence Lessig

Code and Other Laws of Cyberspace (1999)

“Code is law.”

What happens when code is also money?

Programmable Money

Smart Contracts• Self-enforcing contracts—from sports bets to derivatives

• Escrows

• Crowdfunding

• Smart stock

• “Trustless” letters of credit

• Proof of existence

• Unbreakable contracts?

Smart Property• Digital property

• Digital assets integrated with

contracts and consideration

• Tokenised software licensing

• Physical property

• Networked things, the rights

in which are digitally

administered

• Example: the self-

repossessing car

Decentralized Autonomous Organizations

(DAOs)

• Charter as contract as code

• Virtual corporation—control

over assets, voting systems

and managerial power

embodied in code

• Flexibility of form—Distributed

Collaborative Organizations

• Representation by self-

sufficient autonomous agents

• Extensions to political systems

Bitcoin 1.0—Wallets and

exchanges

• Coinbase—leading venture-backed

wallet provider; just announced

exchange

• Circle—fully insured Bitcoin wallet

with no fees for use

• Winklevoss Bitcoin Trust—

Exchange-traded Bitcoin

investment fund, to be publicly

traded on Nasdaq

• Distributed ledger as currency exchange platform

• Internet protocol of money—P2P money transfer with

architecture analogous to email

• Transactions denominated in native cryptocurrency (XRP)

or other assets—dollars, Euros, gold, air miles, etc

• Universal convertibility—can send in one currency and

receive in another—supported by market makers

• Plugged into mainstream US banking system

Ethereum

• Decentralized cryptocurrency as

programming platform and scripting

language for digital contracts

• Consideration denominated in native

cryptocurrency (ether)

• Encodes advanced transactions directly

into the blockchain

• Enables self-enforcing contracts, e.g., jt

savings accts, financial exchange markets,

trust funds, DAOs, etc.

• Publicly traded ecommerce retailer; Bitcoin early

merchant adopter

• Proposal to issue “cryptosecurities”—common

stock in a real corporation issued off the blockchain

• Blockchain as transfer agent

• Possibility to embed shareholder rights in code—

voting systems, etc.

• NY-based startup focused on cryptocurrency-based smart

contracts—financial asset servicing and settlement

• Focus on venture capital and private equity-style start-up

capital structure contracts

• Private stock transfer systems with rights of first refusal,

co-sale, etc.

• Blockchain-based contract system ensures all rules

complied with, provides messaging and consent, provides

real-time ledger

Swarm.fund

• Decentralized crypto crowdfunding platform for DCOs

• Crowdfunding conditions embedded in offering

• Securities law issues

• Reinventing as DCO

• Built on Ethereum platform

• White paper: tokenization and digital rights mgmt

–Primavera De Filippi“Freenet or Skynet?”

Autonomy

• Programmable money + smart

contracts + Internet of things

• Wallet as autonomous agent—like

a digital power of attorney

• Power to negotiate against the

tyranny of click-wraps

Community

• Adaptable, resilient platforms for

distributed governance

• The “Trust Web”

• Social media + smart stock +

DAOs

• User equity for market cap value of

content contributions

• Public benefit corporations—

expanded stakeholders

• Distributed sovereignty? Lessig:

constitution as code

Tyranny of Code

• Economy—and polity—of rights

embodied in unbreakable, self-

enforcing codes

• Digital wallet as ultimate spy for

state or capital

• Corporate cryptocurrency as

ultimate company scrip

• Anonymity versus digital panopticon

Q&A