The Governed Blockchain...Ian Grigg Financial cryptographer Inventor of Ricardian contracts...
Transcript of The Governed Blockchain...Ian Grigg Financial cryptographer Inventor of Ricardian contracts...
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The Governed Blockchain Decentralized - Limassol
2 n d N o v e m b e r 2 0 1 7
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Ian Grigg Financial cryptographer
Inventor of Ricardian contracts
co-Inventor of triple entry accounting
Identity
“EOS An Introduction”
block.one
Cayman Islands corporation
Investors from finance & blockchain
Fully funded
Building the EOS.IO software
Coin distribution on as we speak
All details: http://EOS.IO/
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But - Cryptocurrencies are dangerous places.
Not advocating an investment - Caveat Emptor
Crypto Ahead
I am contributing in EOS.IO, as are many others.
This is an interesting project - code, design, user needs.
I expect it to add value and benefit globally.
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I. Let’s build a blockchain
A blockchain for everybody
Establish from baseline or first principles
Who is everybody? What do they need? Can we provide it?
But 1st, review options
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UNpermissioned Blockchains
THE BUSINESS SPACE IN AN UNPERMISSIONED LEDGER
COMPLEX
SIMPLE GAMING
A N A R C H Y ?
PAYMENTS
TIMESTAMPS
ICOS
(Swanson 2015) - two varieties
Bitcoin & Ethereum ⇒ unpermissioned
Simple things automated within the chain
Complex things - left to users:smart contracts, external logic,Multisig, zkSNARKS, rings, etc.
Wild west? Anarchy?
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Permissioned ledgers
PAYMENTS
THE BUSINESS IN A PERMISSIONED LEDGER…
COMPLEX
SIMPLE AUTHENTICATION
CASHASSET
ISSUANCE
TIMESTAMPS
TRADE FINANCE
SWAPSREMITTANCES
Trade is more complexloans, swaps, trade finance
Exposure ⇒ risk ⇒ protection
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Permissioned ledgers
PAYMENTS
THE BUSINESS INSIDE A ‘WALLED GARDEN’
COMPLEX
SIMPLE AUTHENTICATION
CASHASSET
ISSUANCE
TIMESTAMPS
TRADE FINANCE
SWAPSREMITTANCES
Trade is more complexloans, swaps, trade finance
Exposure ⇒ risk ⇒ protection
Cannot protect with free entry
“Walled Garden” for insiders
1. He who permits, extracts 2. The cost rises, 3. Small players excluded
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Between Anarchy and the Leviathan
COMPLEX
SIMPLE
What do we do above the line?
TIMESTAMPS
WE AGREE:
Automate below…
?
(We agree to automate all below the line…)
PAYMENTS
Context: What is a small business to do?
BUT:above?
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II. What does Business do?
TRADE
REVENUES
PROFITS
LIVING
DEMAND
Don’t ChangeGlobalMegaCorp:
HODLHNWI:
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II. What does Business do?
Trade!For The Rest Of Us:
REVENUESFor the rest of us, there’s trade.
Simple, really.
PROFITSLIVING
DEMAND
TRADE
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Complexity…
If trade were simple,It would be automated!
We would be competed out...
Complexity ⇒ errorsUnpredictability
⇒ need for care, and
⇒ profits :-)
PROFITS
ERRORS
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Errors
Errors are mostly unpredictable ⇒
Business learns to live with risk
What does IT do with risk?
Thefts of value - trading balances, capital
Breaches of contract
Extortions,
Loss of customer data,
Loss of faith, loss of reputation
Fat fingers
Regulation
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SEVERITY
PROBABILITY
CategoriesNot acceptableALARP
Acceptable
IT Bias1.Against users
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IT Bias1.Against users 2.Knowledge
SEVERITY
PROBABILITY
CategoriesNot acceptableALARP
Acceptable
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SEVERITY
PROBABILITY
CategoriesNot acceptableALARP
Acceptable
Won’t Happen!
IT Bias1.Against users 2.Knowledge 3.Can’t see?
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2011500k stolen Mt.Gox
2013bug hard fork
2013179k ‘Silk Road’
2014650k stolen Mt.Gox
2016I - 3.6mm ETH The DAO
2016II - Ethereum forks
2017I - Bitcoin forks
2017II - China forks...
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Programmers, biz-dev, legal & accounting, web Cash - $1mm and up? Time - 3m to 2 years
The entrepreneur invests:
Question - why would entrepreneur invest if …
the blockchain for business is the blockchain that solves the Black Swan
Proposal :
Black Swans ?
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Choice is Stark
Theft
Walled garden Trust outcompetes But excludes!
Fat fingers
Privacy
Disputes
Forks
Sybils, trolls, spam
Borked smart contracts
Anarchy - but risk of loss
IN REAL LIFE, WE USE TRUST
TRUST ! ?
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III. What is this thing called…
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Trust is expensive - relationship, feedback
Multiple rounds, no end in sightShared profit from each roundPunishments outside the game
Game theory:
NOT JUST TODAY’S TRADE, BUT EVERY TRADE!
ANALYSEDECIDE
RISK
REWARD
Based on relationship <==> feedbackToo expensive for one tradeTrust ⇐ many many trades
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(wants) net-positive game(gets) Prisoner’s Dilemma
Game theory:(wants) win-win(gets) win-lose
Negotiation theory:
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(wants) net-positive game(gets) Prisoner’s Dilemma
Game theory:
THE BLOCKCHAIN WITH WIN-WIN
(wants) win-win(gets) win-lose
Negotiation theory:
Goal:
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Let’s Win above the line
GOAL
COMPLEX
SIMPLE
NET-POSITIVE WIN-WIN
BUSINESS
TOXIC
WIN-LOSEZERO-SUM
WIN-WIN
ZERO SUM
CONTENDERS?
ABOVE THE LINE
BELOW
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Belief in the zero-sum game
Suggests we export the win-lose to the business space - BAD.
The DApps are all zero-sum: currency, ICOs, pumps&dumps, gaming, books
Cultural opposition:
Get ahead in an ICO? Fine, run a DDOS.See a fat contract? Hack it.Don’t like an opinion? Call in a SWAT team.
ENTREPRENEUR WANTS MUTUAL PROFIT NOT EXTRACTION, PARTNERS NOT TOXICS.
Toxic customers
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1. A repeated round, no end in sight2. Remember who we are dealing with3. Rules of the game4. A way to trade (the blockchain thing, the smart contracts)5. A way to hold an aggressor to account...
The equation of win-win:
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A wall around the garden
(Fees, fees, more fees)
A gate and a gate keeper\
A set of rules
A method for
applying the rules
Consequences -
skin in the game
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A wall around the garden
A gate and a gate keeper
A set of rules
A method for
applying the rules
Consequences -
skin in the game
Many rounds, no end
Who we are dealing with
Rules of the game
A way to trade Aggressor to
account...
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Tear down the wall
We don’t need it.
A way of knowing who we’re dealing with.Identity… (beyond scope of today)
Proposal :
(IDENTITY IS YOUR PERSONAL WALL)
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Preserves free entryDoes not need a wall
Entry agrees to Constitution
Set of rules == Constitution
Tx signs the Constitution
Community ⇐ Members’ Intent + Constitution
INTENT COMMUNITY
CONSTITUTION
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DPOS ⇐ delegated proof of stake
referenda ⇐ to appoint roles
Dispute Resolution ⇐ solve problems
referenda ⇐ change the rules
Baseline rules include:
Community owns its Constitution
REFERENDA PRODUCERS
ARBITRATION
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V. Summary - (i) - Entrepreneur needs win-win
Wanted: the freedom of one & protection of other
Unpermissioned ⇒ the taking of value, win-lose
Permissioned ⇒ concentrates the value, excludes
Entrepreneur needs to make value not take value
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Summary - (ii) - A third choice
The fallacy is the wall: the real requirement is free entry
The Governed Blockchain
Rules of Behaviour Free Entry
Regulated Permissioned
Blockchain
Unpermissioned Blockchain
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(iii) - The Governed Blockchain
INTENT CONSTITUTION
COMMUNITY
Intent + Constitution == CommunityAgree on entry:
Sets rules
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(iii) - The Governed Blockchain
INTENT CONSTITUTION
COMMUNITY
REFERENDA PRODUCERS
ARBITRATION
Members + Constitution == CommunityAgree on entry:
Sets rules
set roles: Producers, Changesresolve disputes: own forum
Rules to resolve the Black Swan
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EOS is…
Thank you!
REFERENDA PRODUCERS
ARBITRATION
THE GOVERNED BLOCKCHAIN
CONSTITUTION
COMMUNITY
INTENT