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Hi, welcome to epicenter. So it's talks about the
technology. Projects and startups, driving
decentralization. And the global blockchain
Revolution. My name is Sebastian ink with
you and my name is Brian Pub, and crane we're here today with
Angela wall. She's a professor of law at st.
Mary's University School of Law in San Antonio.
She's also a research fellow at the blockchain center or Central
Block Chain at University College London.
And she's a kind of prolific author of papers that are, you
know, all critical of blockchain, or looking at the
some of the downsides or some There, you know, maybe ways in
which the common narratives around blockchains should be
questions and so, yeah, I look forward to talking with, with
you about that today. Thank you.
I'm excited to be here and, yes, I do write a lot of stuff that's
kind of critical or ask hard questions.
I like to thank very good. So when did you first learn
about Bitcoin and blockchain and start?
How did it start kind of rising you interest.
Okay so I was transitioning. I'm from practice, I was a
corporate lawyer for a while and I was transitioning to practice
and had become very interested in money.
How money Works? How law helps to constitute?
What money is, how money can break?
All those types of questions? And I was very interested in
researching that area for my, you know, research as a
professor. So I was looking at, you know,
thinking about how the dollar worked and stuff and heard of
Bitcoin, I would Kind of like fall of 2011, early 2012 and
didn't dig in at that point. But once I was in Academia, for
real, I dug in, I would say early 2013 and the questions
around the governance who my attention very early.
I was it was so interesting to me going to I went to a remember
my first Bitcoin conference in the summer of 2013. 13 in New
York and it was an early crowd. Remember meeting like Marco
Centauri there and some some other people who have continued
to kind of be prominent people in the space and the
conversation was about, oh, and we're talking about this new
Bitcoin Foundation that were forming, and I was like the
question in my head was wait a minute, how can you be a voice
of a technology that is, you know, decentralised and who gets
the right to be the voice and to, to say things that are
Either on behalf purported to me on behalf of this technology and
decentralized community. So, those questions Drew my
interest early on. And then since then, I've just
kind of been along for the ride when I see things that don't
make sense to me, where maybe the the the discussion around
something doesn't match real-world events.
I write about it or talk about it in hopes of drawing attention
to it and flushing out inconsistencies, which I see as
potential risks in many cases. So what has the reaction been
coming out of the blockchain community to your work?
It varies there early on I would say it there was a lot of strong
pushback that I shouldn't even be saying anything because I
just don't understand anything. I clearly since I'm not a
technologist, I can't possibly get it.
And I am not a technologist and that is that's absolutely fair.
That I don't understand certain things that Technologies do but
they also We don't understand certain things that I do.
So I think that's one of the challenges in this space is for
many, many disciplines to come together and try to communicate.
So, I've been I've gotten a lot of bad feedback on Twitter, I
would say and I've spoken at conferences and when I speak to
tech people, they often hate what I'm saying.
And come up to me later and say, I don't, I don't remember what
you said, but I know I hated it. So I, I guess I'm just keeping
on I'm saying things despite that and there are plenty of
tech people in this space. Actually I I've met and had good
discussions with and I think, you know, I count the number of
them as friends and critical thinkers as well.
So it's a mixed bag, I would say Is this sort of reactions
something that you see in, maybe other areas of Technologies over
the broader fintech space or just like purely something you
see around with watching conferences.
So this types of events. Well, okay so my argument about
software developers is fiduciaries.
I think has you know it has resonance in the blockchain
space and this is where you know I started thinking about that
idea originally, but I do think it has A lot larger much larger
implications. And I think it actually needs to
be looked at in you know, maybe in open-source important open
source software projects generally and we can talk about
that a little bit more but so I feel like when I'm at Tec, when
I'm a tech conferences, blockchain has like probably the
strongest reaction, but any software developer or anyone
involved Volved in software development, is probably going
to have a strong reaction to the coders of fiduciaries idea.
When I talk to lawyers, i-i've been kind of calling out height
where I see it and the space and inconsistencies, and people kind
of mindlessly, I would say evangelizing for things that
they don't necessarily understand.
And I point that out in a variety of settings, I've
pointed it out at legal conferences.
Has and the, the this the feeling that I get from talking
to people, is that okay? It's very different from what
we're used to hearing about blockchain and maybe some wool
being pulled off of their eyes. I don't know.
That's my Hope anyway. So you mentioned these
inconsistencies already it. So what are in your opinion?
What in your eyes? The biggest inconsistencies that
that people talk about when talking about blockchain in the
broader context of the law. So, I mean, one of the big
inconsistencies are things that I think of as problematic and we
haven't gotten a good understanding of yet.
Is really this. What what is decentralized
governance? Mean, and as I said early on I
it was very interesting to me that the conversation around
Bitcoin and then other blockchains was, you know, that
it was just this software that miraculously was running on this
network of computers and it just it just worked and it was the
narrative was very much that there were not people involved
with it, that it was Tech doing this, right?
And again, not Technology is for questions like well what happens
is? There's a bug, surely someone's
fixing it, who is doing this where you know, they're making
changes to the software over time any updates and stuff.
So I feel like there was and there still is resistance to
this in some ways there was the it's been a long time coming.
The realization that governance is actually happening in
blockchains through the development of software and this
this conversation hasn't is is Also still in progress, but I
think there there are similar arguments that significant
validators and miners. In the space Also function as
fiduciaries, the paper that I've written here, the in-depth paper
is looking at software developers in this light, but I
need to write and I have half-written, you know, want
about Miners and other validators as as fiduciaries.
So inconsistencies in thinking that Because we have this, you
know, a lot of computers somehow the running of the system is
necessarily decentralized. I think they're starting to be
more clarity in descriptions of these systems that governance
happens in different levels, right?
And decentralization is relevant in different places.
Decentralization can refer to the number of nodes in a network
and can refer to concentration of the validators in a network.
It can refer to how the software process software development
process happens. Right?
Is that centralized is a decentralized?
What is decentralized even mean? So governance decentralization
is a term that I think is that's what I'm working on right now.
So it's top of mind trying to figure out what that actually
means. And then I see just like a lot
of words used as basic. Descriptors of the technology
immutable secure reflects truth. Trustless, I think all of those
are Widely repeated, including an academic Works in reports by
governments and nonprofits etcetera as being
characteristics of blockchain technology and their their
stated as characteristics of blockchain.
Whether we're talking about public blockchains or permission
blockchains whatever as if they are Universal regardless of the
flavor of technology that you're using and that's just not right.
And yet the discussion continues and I think it can have
significant consequences when we expect the technology to do
things for us, that it just doesn't do great.
Now, I think that was a great kind of overview.
Now you've mentioned a few times to term fiduciaries, and I think
this idea of developers as producers is probably the most,
you know, controversial idea you have and also an idea that, you
know, if kind of people went along with it and regulate the
spend along with it had would have a Women's consequences.
We can you talk a little bit about you know, what are
fiduciaries? And why is that relevant in the
blockchain context? Sure.
Okay so the the paper that I have out right now and I've been
thinking about this for a long time, I guess I'm just slow on
this point to actually get that analysis out, but fiduciaries
are they're an important part of our Lives generally.
And people that we think of as fulfilling the Re-roll commonly
are people like lawyers. Lawyers are fiduciaries of their
clients, doctors are fiduciaries of their patients, some people
view like pastors and stuff as fiduciaries of the, you know,
the the members of their, their, their church or whatever.
Souls of that you sure. Yes, yeah.
Yeah. That there's, we could have a
very interesting discussion about that totally unrelated to
blockchain stuff but fiduciaries basically are people that you
put trust in You essentially trust them to give you their
expertise in different ways, they may hold money on your your
behalf. They, they do things that are of
great importance for other people.
And in my paper, I use a framework that Tamar Frankel,
who is a very prominent very well respected, law, professor,
who has developed really a Theory of fiduciary law, I use
her description of what if a general description of what a
fiduciary is, and compare that to what I see software
developers doing in these walk chains.
And a crucial part of a fiduciary is because you're
trusting in them, you are enabling them to make decisions
for you that affect you and that is putting power into their
hands. Okay?
So I think that people in the Software development part of
public blockchains people who are thinking and doing research
in what kind of policies, the software should reflect people
who are figuring out how the software would reflect those
policies and actually doing the coding, perhaps of reflecting
that and then reviewing, right? There's a lot of my
understanding not being a software developer, there's a
lot of different steps that go into it.
It's not someone sits down and spits out code right there,
especially in systems that purport to transfer value and
you significant things for people.
The software development process is extremely important and
fiduciary. I think these people are acting
as fiduciaries in that users of these systems, the ones who, you
know, own the cryptocurrencies, or crypto assets that trade on
these things. People that potentially people
that are building businesses. On top of that using these
public blockchains, as infrastructure for various
things, they are relying very strongly on the software
developers to do two things. One to be good at what they're
doing to be competent, but that's not all.
Okay, they're also relying on these software developers to be
trustworthy and to not do things for their own benefit, over the
benefit of the public, who's essentially We using these
systems meaning you wouldn't want a software developer for a
theory and more for Bitcoin to be taking bribes from a
particular minor or government to push a certain change to the
network right to talk it up. I think people would in the
blockchain space would be horrified to hear of that
happening, but no one owes you that Duty, unless there's
something like a fiduciary. In your paper.
You you make reference to Tamar Frankel's scholarly fiduciary
law, and and there's, there's there's four attributes.
And so you, you sort of mention them during your description of
if you just sort of like go through them one by one.
Because it is interesting to me this, this how these attributes,
it sort of reminds me of the Howey test in a sense where one
looks at an entity. In poses these questions.
And if they, if they answer yes to these questions, then one
could assume that they are fiduciary.
So if we could just go through this again, so we have them
popped out of mine and then sort of, yeah, let's go through them
one by one. Okay, so Frankel says that all
fiduciary share a certain set of attributes, okay?
And the first attribute, she says, they have is that they
generally offer services. Instead of products, the
services are usually socially desirable Durable and often
require expertise. Okay, so she gives examples of
things like Legal Services teaching Asset Management,
corporate management Etc. Okay, so people offering
Services based on their expertise and the way that I see
that applying to software developers is that well, clearly
they are providing Services, right?
The services of creating the code, if they are The
Originators of a blockchain system but also Meaning and
continuing to review the code, right?
And figuring out what changes are necessary and there is no
doubt that the services that the Developers for systems, like
Bitcoin and etherium Z cash, and, and others, that all those
requiring, very significant expertise, right?
That it takes a long time for someone to develop the next
necessary, expertise, to to credibly do the development.
And actually, Ali, right? We've seen that, even those who
have created these systems still don't have full understanding of
them, right? With the parity, parity bug and
the different ones that have shown up in ethereum.
It's been the ones who created the systems that, you know,
they're not foolproof yet, right?
So it requires a lot of expertise, and actually there's
there was a computer science paper that I cite in my paper
that talks about software developer.
Blockchain software developers actually having a higher
standard of like, developing a blockchain software engineering
standard or something like that, because it is such a demanding
role to play. So services that require
expertise. Okay?
The second factor is that in order to perform the services,
effectively, the fiduciaries have to be entrusted with
property or power, okay? So you could see that in the
context of, you know, run-of-the-mill, Series like
lawyers that, you know, the client is entrusting the lawyer
with power over their most private information.
Or one that you're turning over, you're telling your lawyer, the
full truth, you may entrust an escrow agent with your property,
right? And trust that they're that
they're not going to abscond with it.
So, that's how we see it in the general fiduciary world.
And in the blockchain, I see software developers and trusted
with with, with power certainly. And I think there's actually an
argument that they're interested with property potentially as
well. The power is that well not
everybody can read the software code, that people are that
people write for these blockchains.
I understand that they're all generally open source.
So the code is available, but people are not reviewing that on
a day-to-day basis. I EU, like, 90% of the users of
Bitcoin, or ethereum or not referring reviewing, the, the
actual underlying software code. So they are trusting that
software developers are doing it, doing it, right?
And doing it in, doing it in accordance with, you know, the
ethos of the community. There's an argument that these
people are actually even entrusted with property.
T in the sense that we're now viewing these cryptocurrencies
as assets right? There's been discussion the
legal World okay, are they Commodities?
What are they? They're these things that have
value. So I get a lot of pushback on
this argument but I think that These digital assets are
completely reliant on the ongoing skill and you know, good
works of the software developers write.
If they screw up, if they put a bug in, if they fail to come to
agreement as a group and don't repair a critical emergency,
then the property is kind of gone, right?
Or loses all its value. The digital assets value is very
much tied to What the software developers do and we can go into
more examples of that, I cite a few in my paper but I could have
cited. I feel like many many more but
crisis moments to me in general are the ones that reveal the
power that people are exercising.
Okay. So the third factor that Frankel
identifies as being one of fiduciaries is that trusting
these fiduciaries poses risks to she calls them in Trust.
There's okay, so the people who are relying on the fiduciaries,
it poses a risk to them that the fiduciaries are not going to be
trustworthy, okay? They may run off with the
property that you give them. They may not perform the
services they promised to adequately, they might misuse
the the property that you give them.
And I've talked about this a little bit already, I think, but
if the software developers are not trustworthy, basically the
people who are using the the system are using it under false
pretenses, right? If metallic or Vlad are, you
know, taking bribes from the Russian government or something
like that, which I'm not accusing them of doing it
anyway, but it would be relevant for the users of the etherium
community to know this, right? If there are secret backdoor
deals and one is getting paid by my someone, People should know
that and right now, there is, there's nothing that obligates
them to do that. Unless we consider them to have
some sort of Duty to the people using these systems, okay?
Number four, there is a likelihood that the in truster
will fail to protect itself from the risks involved in fiduciary
relationships. The markets may also fail to
protect them from these risks and the costs for the
fiduciaries of establishing. Their trustworthiness might be
higher than their benefits from the Oops.
This one has a lot of stuff embedded in it, so I'm going to
kind of simplify it for purposes of this conversation.
Basically, I think that users of these systems to me, the Ico
Market demonstrates, this beautifully that they will fail
to protect themselves from the risks involved in this to do
Sherry relationship, okay? People have been investing in,
you know so-called public blockchains like crazy over the
Steer in a lot of initial coin offerings and a recent study
that came out from the University of Pennsylvania
talked about how the code in these and many, many ico's
actually Bears, no relation to the promises made in white
papers, or in ads for the ico's, right?
Things like, they will have a vesting provision for the
founders or they will take All founder control within the code.
Well, when they reviewed the software code and the white
paper or whatever else making any promises generally, they
found that there were big gaps, many cases, the code again, as I
said bore, no resemblance, the market certainly didn't protect
these people. They weren't they, they didn't
protect themselves. Right?
So nothing. No protection was happening for
people who were buying into these icos.
And I I feel it's easy to Tar. There's clearly a lot of fraud
in the Ico space over the past year.
And I don't want to get distracted by that because I
feel like these issues are not just relevant to what are
clearly fraudulent. Fly-by-night ico's.
I think they're actually relevant to even the more
legitimate projects. Like the client like ethereum
like Z cash. What which have very serious
technologists involved. So I think and as I explore in
my paper, I think there are very strong arguments actually that
software developers in the broad sense that I'm talking about,
actually fulfill all of these characteristics.
And there's one thing that I do, I want to be sure to mention
while I'm thinking about it. And one of the pushbacks that I
get about, About this idea is that people don't see them as
fiduciaries because they feel like the fiduciary has to have a
personal relationship with with like there has to be a personal
relationship between the person serving is the fiduciary in the
person relying on them. And I'm I'm viewing this more as
a kind of fiduciary almost of the public.
There's ideas about fiduciaries such as you know, some people
argue that politicians are fiduciaries or judges or
fiduciaries of the public and kind of have a the public
places, a trust in them. So I don't think it necessarily
has to be a one-on-one relationship between a user and
a developer for there to be a fiduciary relationship.
I think it can be a broader relationship one, too many
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Now if you Sheree, right this is I think many people would agree
that of course as a user were blockchain II rely to varying
extents on different parties including developers but let's
say we actually went ahead with your suggestions as okay, we do
treat the mass-produced shoes. What would that practical mean?
Because that is illegal term right?
With all kinds of implications. Yes, you're right.
It is and there are there are many Patient, implications like
practical ones. There's a lot of practical
questions about it, and in the paper I explore some of the
costs and benefits of this because I don't think it's by
any means like an easy conclusion to decide that.
Okay, well, they are look doing things that make them look an
awful lot like fiduciaries. Do we actually go ahead and
treat them like that in in a legal sense.
So some of the big questions around this.
Are, you know, how do you identify which software
Developers? Which people in this process are
actually functioning as fiduciaries, is it just the, you
know, the the people who are supervising, the research is
that just the people who are doing the review of the code, do
some of the pushback I get is that describing you know,
software developers are I've used the term coders as
fiduciaries, I get a lot of pushback because people think of
the term coders just sounds like the Scribe, write and not the
the brain power that's going into creating the code.
So you No, that's, that's those are big questions?
Which one's actually would be treated as fiduciaries figuring
out. Who is actually going to benefit
from this legal category categorization, right?
Is it anyone who owns or has ever owned potentially the
cryptocurrency of the system is it can can we extend it to
people who have built businesses on the system like exchanges or
wallet companies? Absolutely are similarly relying
on the developers to do a good job and not cheat.
So identifying those parties is important and I mean of course
there would be challenges to figuring out what to blame
people for, right? Which bit of code is the one
that caused all the problems. That could be also an area of
controversy. But there are and I think you're
getting out, there are a larger potential social.
Consequences to this categorization, right?
Software has a huge role and how Society runs today.
It runs a lot of our most important infrastructures, right
nuclear weapons systems the internet itself.
Like, all of these things, run on software and blockchains want
to run important things. I mean, that's one of the things
that people are excited about them for, right?
They want them to be used for important social systems.
If you are, if you decide to treat software developers of
these systems, which are kind of bubbling up, there's this, you
know, great activity and Entrepreneurship in the area.
If you're treating those software developers as
fiduciaries that are you going to stifle everything and no
one's going to do any development at all, right?
Because they are worried about the liability that they may
face, right? If someone can sue you for
screwing up, you're probably not going to want to do anything.
And I think this Is this really gets at some of these larger
questions that were wrestling with in Tech now?
Right, what should accountability be for people who
create really important systems and mess up Tech has had a lot
of protection. I would almost call it a subsidy
in the sense that people who create have created software
have been very much insulated from liability and the If you
look at any agreement software licensing agreement, you will
see tons of disclaimers and if you look at any of the open
source software license agreements, that these
blockchains are that the software for the blockchains is
is tied to you will see full disclaimers of all sorts of
liability, right? And that the developers are
basically responsible for nothing.
So I don't think the the discussion stops just looking at
what the license agreements say. I think that this is actually a
policy question. Right?
Fine. So that the contracts have said
that. No one Bears any liability it
was that is that okay in a in a situation where so much trust is
being placed on these people to know take care of Large amounts
of value. Should we impose more things?
That can't be disclaimed potentially?
So yeah, basically, I would be described as an innovation
Killer By Any Tech person. If you want to boil it down.
Yeah, I mean, one of the things that stand out to me is that
your proposals? Don't seem very practical,
right? So, we've, what we've seen in
the Block Chain spaces that it's a global thing, right?
And of course, you can start and run and and these It's from
anywhere and you know even if you look at something like a
token sales which I think the case there that there's some
regulation applied teams you know fairly straightforward in
comparison but you know the very mobile can move around and so it
seems like here if let's say the US said okay developers are
fiduciaries. This would just push, you know,
Innovation abroad or people would find ways to Route Around.
Let's say you said, okay, but only those who have MIT access
they are fiduciaries. Then people probably figure out
some way to like so nobody else commit access but still things
could committed or like I'm sure people would immediately route
around it. So do you think there's actually
like, what do you think is Paul realistically possible?
Yeah, those are all very good points.
I mean, people definitely respond to laws that are passed
by trying to get around them. Absolutely.
And we're seeing some of that play out in the laws that are
being developed in the blockchain space already, right?
There's kind of there's some regulatory competition
happening. I would say, some jurisdictions
have decided they really want to incentivize people to do this
type of software development. Creation of these businesses and
their jurisdiction like in Malta or and Bermuda or Gibraltar and
crypto crypto Valley right in Switzerland.
So the multi-jurisdictional, the global aspect of it is certainly
an important consideration? I don't know.
I don't think it's impossible that we could come to consensus
on the fact that software developers, fulfill an important
role. And I don't, okay.
So I feel like we're early in the conversation on this as well
and it's sort of I see it being part of my job as an academic to
ask hard questions to describe things in ways that I'm seeing
them and for the world, then to figure out, well yeah, do we
need a change in this area? It would be a really important
change, but it's not necessarily out of line with what we're
seeing in the larger Tech conversation.
For the longest time, the conversation around social media
platforms and all these big Tech platforms, like, Google and
Amazon, and Facebook, and stuff has been, you know, let him go,
let him go. They are doing so much good for
the world, all the real excitement at the, you know, as
the internet and social media were developing that these is
good, good, good, good, good. We're seeing a real change, I
think. In tone in the conversation and
things that would have been impossible to imagine that maybe
Facebook could be broken up or maybe it will be regulated in
different ways. Those are impossible to imagine
just a few years ago but I don't think they're impossible to
imagine now and I think that the the tide can shift very rapidly
and I see the the blockchain conversation kind of
intersecting with that in that one of those.
The immense that blockchain supporters often make, is that
okay? Well we can use blockchains to
essentially fix all the bad things about tech that have
emerged, right? The extreme centralization that
we've seen in these platforms. The the concentrations of power
and doing things that a decentralized way is is going to
be what solves the problem and that may well be true.
But I think we need to ask hard questions about what do we mean
by decentralized is just Slapping this label on something
decentralized, is that absolve people and are we comfortable
that we understand how power works in those systems such that
we're not just handing power to a different set of people,
rather than, you know, dispersing it or making a
meaningful change. So I'd like to bring up who
regulates fiduciaries in the u.s.
Is there a sort of a governing body like the SEC decides, what
is, or isn't a security? Is there a regulator that
decides what is and what is not as fiduciary know?
So a fiduciary characterization or categorization could come in
different ways. Okay, it could come from just
common law. So, in the u.s., a lot of our
law is, is made just by courts deciding actual disputes between
people. They decide cases and over time
the law, very gradually might shift.
And that's generally what happens with the development of
fiduciary law. Now, it also can happen through
a legislature, making a decision that a certain party is a
fiduciary, okay? So in some of our statutes
certain parties are treated as fiduciaries, like in there's a
Rissa is a statute in the u.s. that governs like Employee
Retirement. Plans and certain parties acting
within that are de facto fiduciaries, right?
There's just been a big, big tussle in the u.s. about whether
certain investment advisors are fiduciaries, okay?
And it was passed into law, that they would be.
And now I think it's been taken back so it can also come from a
legislature but just because a court hasn't found it to be the
case doesn't mean They couldn't view.
You couldn't be persuaded by arguments like those that I'm
making that. Well, this sure looks like
fiduciaries that we see in other contexts.
Maybe we're going to treat one like that.
In this case, it's certainly not impossible for the law to move
gradually over time or to persuade, right?
Lawmakers that they are fiduciaries and to your question
like how am I? I think it's getting at, you
know, like how might this Manifest.
We know to look to the SEC for what is a security, right?
And we've seen a ton of discussion about that over the
past year or two and this this very much relates.
I see the SEC having made in that the speech that got a lot
of attention by Hinman earlier this summer where he said that
you know, based on his read now, aetherium met.
You know, leaving aside how it was initially issued and it's,
you know, it's its initial Ico, right?
I guess that's initial initial but its initial fundraising, it
may have been a security then he didn't say for sure.
But it doesn't look like one now because it's sufficiently
decentralized. Okay, I see that being exactly
the same conversation that we're having here because making a
conclusion about whether something is sufficiently,
decentralized is talking about how power Works in that system.
So the conclusion there seems to be that people are no longer
needed to make important decisions to keep the system
running. And at least a central group of
people are not, and we're going to say, it's sufficiently
decentralized. Well, that means to me that.
Oh, well, maybe we don't see any fiduciaries operating there.
Okay, people who have positions of trust and power.
So as you might guess, I completely disagree with that
analysis, but it's absolutely interconnected these
conversations. Is about power in these systems.
Yeah. I mean to me it seems that, you
know, the one hand, you always lie, correct that, you know,
just calling something blockchain or even something.
Having this blockchain data structure that is sort of
absolves you from all responsibility like that, that
obviously doesn't make any sense and I think there are plenty of
you have example. Remember a while ago, there was
this article about liske. I don't know if you read that
but in liske they have this sort of this proof of stake
blockchain but there's two cartels that control the entire
network and they figured out basically some way to like
punish and push out. Anybody who doesn't agree with
them. So essentially I would like to
sort of organizations, you know, governing that blockchain.
And so, you know, it seems obvious to me that like to some
things, you know, you should probably should really treat as
okay. You know, these people are
responsible for what happens there, but then at the same time
when you look at something like Bitcoin and I guess that is also
where red is SEC comments. Go at like then there's there's
other things where it's sufficiently decentralized,
whatever that means, so that you don't really like that.
So but you disagree with this one too.
So you don't think there's this kind of line.
Yeah. Well so I do think it's
important to recognize that decentralization is something on
a spectrum, right? Things are more, some things are
more decentralized, some things are more centralized I guess,
less decentralized and we kind of have to figure out what we're
we're measuring in that sense for me.
A lot of it comes down to looking at how the software is
developed and who actually plays a role in that and who makes a
decision. You mentioned commit access
earlier. I think that's actually a hugely
important thing, right? Someone is making a decision.
They're about. What actually ends up in the
code that is going to be released.
Someone is without their password.
It's not going to get in. I mean, of course, what about
you think? They're, I people mad at me for
that. So what am I right?
I think what you're missing that.
You know most blockchain people will point out.
Is that okay? Like I said, say, somebody
changes that that Bitcoin repo or the code there but it's still
afterwards, you know, active decision of like, you know, a
minor whether they actually use that code to operate at code but
you know, of course, Influence is a blurry line and it
certainly happens. That's true.
Yeah, yeah. So I'm still messing with this
idea, but I feel like the conversation has been sort of
like if son, less than one has absolute control and
dictatorship. We're going to say that they
have no power, right? So because there are checks and
balances in these systems, right?
You could argue that the, the miners are validators, are kind
of a check in some ways on the Le purrs.
And then vice versa, right? So in our system of government,
right? Just because Congress has to
have a signature by the president to put in the US to
put something into law, doesn't mean that Congress doesn't have
any power right there are checks and balances but people are
still exercising power and we still want people and we still
expect those people to be accountable and oh duties
despite the fact that they don't have absolute control.
Of course, this is all, you know, potentially out the window
How I love everything is in chaos with the government's
anyway, but but I think that is something that's important
that's often left out of the discussion.
So there's one thing that we sort of alluded to in the
conversation but not directly and that, is that.
This this idea that software developers should be
fiduciaries, doesn't only apply to blockchains but it that it
might also apply to all open source software.
So if we go back to the four, the four characteristics of a
fiduciary, you know, you could potentially apply those
questions to something like, Linux and argue that the
benevolent dictator is or Linus. Torvalds or whoever are also
fiduciaries in that sense. Now, if if that were to be the
case, Asif jurisprudence in the US or anywhere else where to
establish its software developers, in any case in any
type of Open Source software regardless of the licensing,
where have you are? In fact, fiduciaries, what do
you think this would do to the software industry?
Is this something that's desirable in today's world offer
because or something everything that we do and everything?
It's everywhere. And I think it's something that
we would need to think very carefully about Don't think for
one, I don't think it's every open source, software project, I
think there, maybe we, you know, there needs to be some Nuance to
it in the sense of how critical it is, like, how many people are
relying on it potentially, right?
We saw that it was a problem, right?
In the case of just Heartbleed 41, right?
It really important piece of Open Source.
Software infrastructure, fund function is infrastructure.
Right? There's a critical bug in it and
it turned out well. It happened because no one was
really looking at it and only had like one or two people
wrote, you know, responsible for it.
And whoa, this is critical infrastructure and nobody's
doing anything for it. So I feel like we need to take
this stuff seriously, and in the past accountability, for
important stuff. That makes you take it more.
Seriously, if I may interject there, I think so that that
examples, interesting, right? So hardly SSL bug like many
people actually in the Block Chain space of use that, as an
example of like, exactly why blockchain and token sales and
it's so important because they're the problem wasn't that?
Nobody was responsible problem was there was no not funny, no
money, no money, tacitly. So if you know, now, treated the
developers as fiduciary. The I actually do think there
must be love. Less likely to go in there and
and may something with it. So it seems like your proposal
would almost certainly be counterproductive in terms of
reducing funding interest and work on all of this
infrastructure and I don't think in general, right?
It's not like there was some malicious person in Hartley that
you know, they didn't, you know, if you had given them some legal
obligation, they would have done a better job but it's just that
there wasn't enough Ian. And I think that we need to
rethink that whole governance structure potentially generally
that, whether it's okay weather for society, right?
Whether it's a good idea for society, kind of from a risk
management perspective to use this governance model where
people do it kind of, you know, just on their own and their free
time for things that are critical to the ongoing
operation of the world and our economies, right?
It's so and this has that the Heartbleed issue.
As you probably know led to this creation of this, like the thing
is called the core infrastructure initiative or
something like that, where a bunch of tech companies have now
contributed funding and are trying to provide funding for
will to identify open source software projects that function
as infrastructure and to provide some more funding.
But it's a work in progress and I agree with you that the token
sales and stuff are groping or trying to get to a solution to
this problem the funding issue. that, that is relevant here, but
the funding of The core Protocols of Bitcoin in
aetherium remains an issue. Despite all this idea about you
know, ico's fixing this problem, right?
I see it talked about as a continuing issue, who should pay
the Bitcoin core developers. Should it be companies within
the ecosystem? Should they be sponsored?
I don't know. But they're, they're very
important. People from the perspective of
every single person who relies on this system who should pay
him. Nobody knows right now.
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We'd like to thank Microsoft Azure for their support of
epicenter. So you wrote another paper
title, the path of the blockchain, Lexicon and the law.
And this paper explores the ever-changing and evolving and
sometimes confusing lexicon used in the Block Chain space and
Block Chain space botanique industry watching ecosystem.
There, there's wise at least 11 sort of terminology that we
can't even agree on and specifically how all this
changing lexicon poses. The confusion and potentially is
threatening for Regulators. Could you give us a high level
overview and of this paper, we can sort of dive into the sure.
So you've done a pretty good description but basically the
paper Is trying to draw attention to the fact that the
lingo in blockchain world is all over the place.
Nobody knows what a blockchain is versus a distributed Ledger.
Nobody knows what a smart contract.
Is nobody knows what any of these terms like that have
already come up in our conversation today.
What is decentralized mean? What is immutable mean what is
secure mean? What is trustless mean?
What do any of these mean? And people are using them as if
they do and I think that leads to Mass confusion about the
capabilities of the technology and it makes it really hard for
people to get down to the facts. Okay, what can this type of
Technology? This flavor of Technology
actually do, can I rely on it to actually create a record that is
going to be permanent and impossible to change?
Well, I would argue no. Li but certainly some
blockchains or things that go by the name blockchain, they vary
in their ability to make this claim, right?
It's all spectrums. But the the terminology in the
space, often speaks in terms of absolutes, okay?
Right. Unchangeable unhackable
permanent secure, right? Those are all like absolutes.
It's decentralized instead of the spectrum idea and I think
that that that all of this has significant consequences.
I framed the paper in terms of the trouble that it can cause
for Regulators in that you have to be able to understand the
facts about what you're regulating order to make good
decisions about it, but it's certainly much broader than just
Regulators, right? It's every policy maker.
Evaluating how to treat the technology and also whether to
adopt it at, all right? So anyone making decisions about
the technology is affected by the problematic language in the
space and Unfortunately language is this kind of weird thing
right? You can't get rid of terms just
because they seem to be used badly.
We kind of get stuck with them and maybe we figure it out in
the end and come up with a better lingo.
But right now it's a mess and we're seeing a lot of different
initiatives to try to pin down the terminology more.
But that's of course a challenge because the technology is moving
Moving at such a pace, right? The experimentation is happening
so rapidly. So it's really hard to know when
you can actually pin down pin something down like into a
standard into a technical defined terminology and just the
pace of it. Like I feel like I'm running as
fast as I can and just you know, grasping it to try to understand
anything it's impossible to stay on top of things in the space
because of the pace. And I think that all creates
potential for A lot of bad decisions and the reason I kind
of try to draw attention to this is because these systems are
talked about as being useful for lots of critical critical
functions, critical to social like our societies like voting,
right? Or finance and when you, you
better know what you're putting in, and not have a mistaken
impression of it. When you're dealing with big
social systems, Yeah. So of course you totally right,
right. The, the terminology is very
hard and decentralized is a great example of that.
Like, what's the Practical takeaway from this observation?
Like, what can we do about this? I guess the Practical takeaway
is the extremely skeptical in that.
Anyone who is considering adopting this any regulator who
is considering how to treat this anyone and everyone should be
extremely skeptical and critical of everything they hear.
Or read about the technology. So basically join my team.
So Recognize that words don't mean what you think, they mean,
right? And you need to dig further, you
can't take anything at face value, unfortunately, and that
includes academic work from the most prominent of forms, right?
Stuff, that it just, you would think that you could rely on.
But from my perspective, you can it uses all the language that is
misleading. So be skeptical.
So can you speak about the example of the ERM immutability.
Like how do you think of that term?
Sure. Okay.
I think it's completely wrong because I think it's again, one
of those absolute terms. So delay meeting of immutable
would be unchangeable, right? It can never be changed and the
term is omnipresent in the discussion around blockchain
technology. I feel like it's starting to
shift a little bit and I don't know if I've had anything to do
with that, but I'm happy that I feel like it's Going to shift
but I think it's I think it's inaccurate for a few reasons and
one of those is that we have definitely seen even in public
blockchains which to me have the certainly much more than any
permission. Blockchain would have a stronger
claim of being harder to change. I feel like permission
blockchains, I see them as just joint-venture databases and it's
hard for them to claim that they have actually any of the actu.
Attributes that public blockchains have.
I see them as just totally different beast and it's bizarre
to me that they go by the same name at all.
But okay. So but just focusing on public
blockchains, we've seen instances.
Where the record that was created was not immutable, it
was not unchangeable, in fact, it was, it was altered.
I mean, people, I always go back to one instance, being the 2013
4 in Bitcoin, which Which was caused by different software
being run by different portions of the validating Network
different nodes, wearing different versions and some
miners you know had to essentially abandon a chain that
they'd already earned money on when the core developers
decided. Nope, that's wrong.
We're going to go to this change.
This we're going to choose which of the the split Ledger's is
authoritative which one is actually Bitcoin.
And a small group of people decided which one it was and
went there. So a let Ledger that appeared
legitimate, that should have been immutable and used forever,
right, was rejected as no good. I see.
I see the the post Dow Fork telling us a similar story,
right? The fact that the decision was
made to treat, the hack is a theft Theft was an active
decision made and it affected the record that appears in what
is now called Theory. Mm.
I mean just technically speaking, right?
So I mean I guess in the Bitcoin case, it is true, right?
That you have two different chains and then one of them sort
of you know never made it into history but in the theorem case
I mean the record wasn't you know retroactively change.
It's just that I guess the reversibility in a way of
transaction was sort of it was changed in a way that was not in
accordance. With the rules that people
thought there was for the changeability for the record
right there were certainly not in accordance with the you know
the sort of ethereum vision or description of code is Law and
being above the, you know, reproach or sort of the control
of ordinary people and developers.
That's exactly. Yeah.
So I see those as kind of disproving the idea of
immutable. So it's always very interesting
to me that people continue to use the term and then my other
other critique of it is that a lot of these features that we
use to describe the technology the record of that created by
the technology, right? This immutable or skewer or
whatever are ones that they're like, emergent properties, okay?
Of these complex systems. So somehow when we put together
this particular consensus mechanism and certain
cryptography, and whatever All else these ingredients are we
get that all this magical record that's immutable and secure and
reflects the truth and all that. Okay so I now adjust it in my
paper to baking a cake. Okay.
You put this group of ingredients together.
You treated a particular way, you run it a particular way and
you get these great properties. Okay, what we're seeing with the
development in the blockchain space is tons of
experimentation. Right.
Everything every possible thing is being varied from the
consensus mechanism to yeah. Who are validators, who are, who
are developers. What cryptography is being used,
everything is is up for grabs, right?
But people still persist in talking about every system that
might be considered a blockchain as giving rise to the same
miraculous set of immutable records, these magical emergent
properties so it's as if you change the ingredients of the
cake, Make you change the temperature, you bake it at you
change. How long you bake it at and
you're still expecting to get the same cake in the end.
I think that is doesn't make sense.
I think you're expecting to get a cake just the whether or not
it'll be a cake that you particularly want to eat or not,
is what's put in my question. I want to come back on this idea
of immutability because I sort of see immutability is something
that you can apply that property and think of it in different
ways given the context. So what I would tend to agree
with Brian was saying earlier that, you know, the data itself
continues to exist. However, as from the point of
view of the user, you know was the transaction where those
Transactions immutable whereas like the money in your wallet is
still there and I sort of see blockchains analysis and
analogize them in the following ways that we used to think that
the Earth was flat. There was a consensus around
that and the majority of people were to think that the Earth was
flat. And at some point there was a
change in consensus. And so, you know, one can
consider that to be sort of a fork and the majority of people
now think, although there's still a small, Majority of
people that think the Earth is flat, but the majority of people
now think the Earth is round, so you could consider that as the
chain with the most validators. Now, when we still, we still all
agree that at some point, we thought the Earth was flat, we
just don't think that's, that's true anymore, but the
information and the data is still there.
So to me that sort of resembles what happened with the etherium
heart Fork, the data still exists, it continues to exist,
just the consensus and the majority of people Yeah.
Yeah, no. I absolutely see that argument.
I think it intertwines in an interesting way with the
governance conversation because kind of like what we were
talking about earlier, right? It changed in ways that we're
not in line with how people expected it to be able to
change, right? So the change happened that the
change taking away the money from the right, the the hacker
or whatever, the thief that change was not in line with the
rules. So I there's some interesting
conflation here that maybe I'm making with immutability and
governance. I think they're intimately
related though. I'm not sure quite how to
articulate that but I think immutable is the wrong term,
because humans, Remain in charge of the the system.
And I think I think that term is, is part of the way that
people talk about these systems as not involving humans, right?
Tech is going to fix these problems.
We don't have to trust in humans.
It's it's Tech, it's running away from Human flaws, it we've
escaped the human flaws. So the tech is going to just do
these things for us and Immutable acts as if the humans
who are running the system. Can't continue to make decisions
about it and they do and we'll and I I think I may be slightly
more appropriate term might be auditable because regardless of
regardless of the changes that that occur of the shifts and
consensus, the data were you went, you can see where you went
and where you've been, and you can always audit that
information. I think that, you know, that may
be more helpful. Yeah.
I have a suggestion for a guest, for you actually.
An archivist. Yeah.
Victoria Lemieux is an archivist at a digital archivist at the
University of British Columbia and these are record-keeping
systems, right? But there's not enough archivist
in the conversation who actually know what record keeping is all
about. So she is an expert on
blockchains and records and I think Enjoy.
Yeah, she's awesome great. Now I would love to dive in a
little bit on your so, you know, you written a lot of these
academic papers looking at some of the you know, maybe flaws or
questionable aspects of the blockchain discussion.
Like, what's your personal stance on this?
You feel like this is, you know, some sort of insane hype and it
needs to be deflated or you think they really is great
promise in blockchain and we'll have a lot of great effects.
Like how do you think about this?
I'm unconvinced I think at the moment of the the great
potential for the tech, I'm still I'm still needing
convincing the reason. I think that I'm I'm so
interested and have wanted to contribute to the conversation
here is as I've said, because people want to use it for
socially significant things. And I feel that if you're going
to use something for big things, you need to make sure that
you're having a That you're putting in the right amount of
thinking to it that your scrutinizing every conclusion,
every assumption, everything, and I don't otherwise see that
happening to to the extent. I think it should.
So that's kind of what the role that I've been trying to fill in
the space. I think bottom line, I'm feeling
like private blockchains, these are these permission blockchains
whatever you want to call them. From technologists who I trust
and believe are credible in the space.
These are nothing revolutionary. Their stuff that we've been able
to do for a long time but the marketing around blockchain and
stuff has made people more interested in doing it
potentially. But I'm skeptical that they have
the capabilities that people ascribe to them.
And that they, I'm hoping that we don't end up in a situation
because we're because policymakers believe that they
have certain capabilities. Abilities and adopt them for
important, very important systems.
I mean, there are, there are, is a, you know, strong push to do
blockchain based voting, which I again, another topic for a show
for you. But the again, the
cryptographers and the people who are respecting the space or
like, no, that's crazy for many, many reasons.
So I'm skeptical of private blockchains on the public
blockchain side. I think it's very interesting.
I think the The gun, the governance and the idea of
humans doing something in this way, is very interesting, but
right now, I feel like they can't actually be useful for
things of social importance, unless they get governance.
Worked out because governance I think is a core flaw and no
matter whether you talking about the on chain stuff, or, or off
chain governance, it's all experimental at this point.
So unless you figure out the governance there too unstable I
think for anything. That more than a small group of
people can rely on. That's where I am right now.
Okay. But then I guess you are looking
positively on you know many blockchain projects today.
You know explicitly think about governance and talk about
governance mechanisms. So you do think that well I
think that's I think that's a step forward to acknowledge that
governance is inevitable and has to happen but we'll see what
happens. The deal is So you can look at
governance over time in a number of ways, right?
I guess dip. Every every governance method we
have is a work in progress, right?
We like to think that democracy is perfect but now, we're
finding out about, you know, how much of in the u.s. right, how
much of democracy is you know stuff that's actually written
into a constitution versus just Norms that have put limits on
the behaviors that we think are acceptable.
So maybe I'm romanticizing, you know, our Or overstating what we
know about governance, generally in other contexts, but I think
that it's really important for people designing governance
systems in blockchain systems, to learn from what humans have
done before, and to bring multiple, disciplines to it, to
bring history to it. Because I think that just
throwing it out as and We Know Better, We Know Better is It's
it waste time and it's potentially harmful.
Yeah, so you've written a bunch of paper is what's coming up for
you. Are there still some, you know,
some big really important areas that you feel you want to look
at in the next year's. So I'm thinking a lot about
decentralization right now. I'm working on a paper kind of
trying to deconstruct the term and think about its potential
legal implications, whether we're thinking about decentral,
something that's decentralized as a way of You know, a code
word for, we don't have to worry about power, that's being
exercised and something that can claim to be decentralized.
So I'm working on a paper on that.
I've been, I'm teaching a course, totally devoted to
cryptocurrencies blockchain and the law this semester.
So trying to stay on top of that is fun and there's just so much
going on in the space that it's hard to figure out what to
prioritize and spend your time on.
There's just, there's And I have probably 50 papers that I have
ideas for and want to write, but, you know, time time time.
So before we wrap up, I just want to ask you about this
initiative that you're a part of which is the Journal of
financial technology which else that also includes the some some
other guests that we've had on the show before.
Could just briefly tell us, tell us about that.
And what's going on with that? Sure.
So in past year, a group of Of academics, kind of, from a bunch
of different places, around the world have gotten together to,
to try to. To create the field of fintech
financial technology as a real academic discipline.
And I'm on it for the long kind of in regulation side, there are
mathematicians computer, scientists, economists, people
in finance. And it's it, recognizes that
this field is interdisciplinary by nature and that the different
disciplines need to be talking to one another so that we can
understand what's going on, right?
We can each inform the conversation in different ways
so it I mean it is intended to bring pieces from, you know, the
perspective of their discipline. So you would expect to see
articles written like law review articles, you expect to see
ones. Economics ones written like
economics papers, Etc. So I don't know that we all
speak the same We can fully understand what each other is
saying, but I think it's important to at least get us all
in the same room so that's what that's what the goal is.
So if people have papers look up journal for financial
technology, I think it's the JF t.com and send us something.
We'll have links for that in the show notes, of course.
And also the you were mentioning a paper earlier by the my
researchers at the University of Penn State University of I think
it's good that it's the coin operated capitalism one, right?
Yeah. So we'll also link to that in
the show notes. Great cool.
Well, thanks so much for joining us today on July was, it was
great speaking with you. I think, you know, certainly
doing important work, that's, you know, needed.
Then there's sort of a balance in the blockchain space and that
I look forward to more paper by you.
Thank you was a real pleasure to talk with you guys.
Thank you cool. And of course we're going to
have your links to to a whole bunch of her papers in the show
notes if you want to check that out.
And also, Rep side. You just check out the show
notes and thanks so much for listener for once again, tuning
in, if you want to support the show, you can leave us an iTunes
review. That helps new people find show.
You can, of course, watch YouTube videos on youtube.com
slash Epson Bitcoin. And yeah, we look forward to
being back next week.