#253 Angela C. Walch: The Case for Treating Developers as Fiduciaries in Public Blockchains

Transcript

hey we're core organizing a live event at the San Francisco blockchain week it's called SF blockchain epicenter and will be October 8th and 9 at the Hilton Union Square you can come see members of the epicenter team and a lot of familiar faces from the show there are reduced rates for developers and you can learn more at the SF blockchain week I owe this episode of epicenter is brought to you by top down top towel is addressing the talent shortage in the blockchain space connecting companies of all sizes with

the world's best blockchain in the news if you're looking to scale your team check out top tall calm flash episode and buy microsoft azure configure and deploy a consortium network in just a few clicks with pre-built configurations and enterprise great infrastructure spend less time on watching scaffolding in more time building your application learn more at AKA OMS slash epicenter hi welcome to the epicenter show which talks about the technologies projects and startups driving decentralization and global blocks and revolution my name is sue best ink with you and my name is brian fabian crane we're here today with Angela Walsh she's a professor of law at

st. Mary University School of Law in San Antonio she's also research fellow at the blockchain Center or central auction 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 of the 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 think very good so when did you first learn about Bitcoin and blockchain and start how did it

start rising your interest okay so I was transitioning 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 kind of 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 say 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 I dug in I would say early 2013 and the the questions around the governance drew my attention very early I was it was so interesting to me going to I went to a I remember my first Bitcoin conference in the summer of 2013 in New York and it was an early crowd remember meeting like Marko 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 when 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 decentralized and who gets the right to be the voice and to to say things that are you know on behalf reported 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 I write about it or talk about it in hopes of drawing attention to it and fleshing out inconsistencies which I see as potential risks in many cases so what has the reaction been coming out of the

blockchain community to York it varies there early on I would say 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 technologists do but they also maybe 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 saying things despite that and there are plenty of tech people in this space actually I fight I've met and had good discussions with and uh I think you know I count a number of them as friends and critical thinkers as well so it's a mixed bag I would say is this sort of reaction something that you see in maybe other areas of Technology serve in the broader FinTech space or just

like purely something you see around so watching conferences or these types of events well okay so my argument about software developers as fiduciaries I think has you know it has resonance in the blockchain space and this is where you know I 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 I I feel like when I'm at Tech when I'm at tech

conferences blockchain has like probably a strongest reaction but any software developer anyone involved in software development is probably going to have a strong reaction to the coders as fiduciaries idea when I talk to lawyers I I've been kind of calling out hype where I see it in the space and inconsistencies and people kind of mindlessly I would say evangelizing for things that they don't necessarily understand and I I point that out in a variety of settings I've pointed it out at legal conferences and 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 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 mm-hmm so I mean one of the big inconsistencies or 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 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 the narrative was very much that there were not people involved with it that it was tech doing this right and again not a technologist but 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 there was 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 is looking at software developers in this light but I need to write and I have half written you know one about miners and other validators as that's fiduciary 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 in different levels right and decentralization is relevant in different places decentralization can refer to the number of nodes and a networking 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 in academic works in reports by governments and nonprofits etc as being characteristics of blockchain technology and their their stated as characteristics of blockchain whether we're talking about public block chains or permission block chains whatever as if they they're 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 the term fiduciaries and I think this idea of developers as fiduciaries is probably the most you know controversial idea you have and also an idea that you know if if kind of people went along with it and regulate the spend along with it hat would have enormous consequences we can 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 the analysis out but fiduciaries are they're an important part of our lives generally and people that we think of as fulfilling the fiduciary role commonly are people like lawyers lawyers are fiduciaries of their clients doctors are fiduciaries of their patients you know some some people view like pastures and stuff as fiduciaries of the you know the the members of their their their church or whatever sold such yes yeah yeah 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's a very prominent well-respected law professor who has developed really a theory of fiduciary law I use her description of what a general description of what a

fiduciary is and compare that to what I see software developers doing in these blockchains 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 just someone sits down and spits out code right there's especially in systems that purport to transfer value and do 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 crypto currencies 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 the public who's essentially using these systems meaning you wouldn't want a software developer for theory and more for Bitcoin to be taking bribes from a particular miner 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 tomorrow Frankel's scholarly fiduciary law and and there's there's there's four attributes and so you sort of mentioned them during your description just sort of like go through them one by one because it's interesting to me this this how these attributes it sort of reminds me at the how we test in a sense where one looks at an entity and you know poses these questions and if they if they answer yes to these questions then

one could assume that they are at video sherry so if we could just go through this again so we have them topped off mine and then sort of yeah through them one by one okay so um Frankel says that all fiduciaries share a certain set of attributes okay in the first attribute she says they have is that they generally offer services instead of products the services are usually socially desirable 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 there are the originators of a blockchain system but also maintaining 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 aetherium Zee cash and and others that all those require 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 and actually right we've seen that even those who have

created these systems still don't have full understanding of them right with the the parity the parity bug and the different ones that have shown up in aetherium it's been the ones who created the systems that you know they're not foolproof yet right so it requires lots of expertise and actually there's there was a computer paper that I cite in my paper that talks about software developers blockchain software developers actually having a higher standard of like developing a blockchain software engineering standards or something like that because it is such a demanding role to play so services that require expertise ok the second factor is that in order to

perform the services effectively the fiduciaries have to be entrusted with property or power ok so you could see that in the context of you know running the mill fiduciaries like lawyers that you know the the client is entrusting the lawyer with power over their most private information for one that you're turning over you're telling your lawyer the full truth you may interest 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 world I see software developers entrusted with with

with power certainly and I think there's actually an argument that they're entrusted 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 block chains 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 guarantee you like 90% of the users of Bitcoin or aetherium are not reviewing 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 there's an argument that these people are actually even entrusted with property in the sense that we're now viewing these cryptocurrencies as assets right there's been discard 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 right 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 these 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 Frankl identifies as being one of fiduciaries is that trusting these fiduciaries poses risks too she calls them in trusters okay so

the people who are relying on the fiduciaries it it poses 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 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 system are using it under false pretenses right if Vitalik 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 by 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 entrust er 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 their relationships okay 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 but 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 block chains like crazy over the past year 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 icos actually bears no relation to the promises made in white papers or in ads for the icos right things like they will have a vesting provision for the founders or they will take away all founder control within the code well when they reviewed the software code and the white paper or whatever else making me promises generally they found that uh 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 were they didn't protect themselves right so enough no

protection was happening for people who were buying into these icos and I I feel it's easy to tatar 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 i cos i think they're actually relevant to even the more legitimate projects like the quaint like aetherium like z cash 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 push backs that I get about about this idea is that people don't see them as fiduciaries because they they feel like the fiduciary has to have a personal relationship with with like there has to be a personal relationship between the the person serving is the fiduciary and the person relying on them and I'm doing 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-to-many actually have you ever considered that one of the biggest factors holding back growth in the blockchain industry is the lack of talented available developers by some estimates there are up to fourteen job openings for every single blockchain developer in the world that's where top dog comes in top tile is a global network of talent in business technology

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right it is and there are there are many application 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 ok well they are 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 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 it 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 that the term coders just sounds like the scribe right and not the the brainpower that's going into creating the code so you know that's it that's those are big questions which ones actually would be treated as fiduciaries figuring out who is actually gonna benefit from this legal cada 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 who 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 you know 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 at there are larger potential social consequences to this categorization right software has a huge role in 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 okay if you are if 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 then are you gonna stifle everything and no one's gonna 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 gonna want to do anything and I think this this really gets at some of these larger questions that we're 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 a software licensing agreement you will

see tons of disclaimers and if you look at any of the open-source software license agreements that these block chains are that the software for the block chains 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 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 will is that is that okay and is in a situation where so much trust is being placed on these

people to you 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 I mean one one of the things that stand out to me is that your proposals don't seem very practical right so what we've we've seen in the blockchain space is that it's a global thing right and then of course you can start and run and and these projects 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 apply

it seems you know fairly straightforward in comparison but you know they're very mobile to move around and so it seems like here if let's say the u.s. said okay developers are fiduciaries this would just push you know an innovation abroad or people would find ways to round around let's say you said okay but only those who have commit access they are fiduciaries then people will probably figure out some way to like so nobody else commit access still things committed or like I'm sure people would immediately right around it so do you think there's actually like what do you think is 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 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 so to say they really want to incentivize people to do this type of software development and creation of these businesses in their jurisdiction like in Malta or in 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 Lord your tech conversation right 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 this is good good good good good we're seeing a real change I think in tone in the 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 and that one of the arguments that blockchain supporters often make is that okay well we can use block chains to essentially fix all the bad things about tech that have emerged right the extreme centralization that we've seen in these platforms they the concentrations of power and doing things in 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 well what do we mean by

decentralized just just slapping this label on something decentralized does 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 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 their regulator that decides what is and what is not as fiduciary no 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 right 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 ERISA is a 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 a 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 that 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 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 how my 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 a theory I'm a you know leaving aside how it was initially issued and it's you know its its initial IC o---- 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 people are not and we're gonna 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 these conversations about power in these systems I mean to me it seems that you know the one hand you're obviously correct that you know just calling something blockchain or even something having this blockchain data structure that it sort of solves you from all responsibility like that that obviously doesn't make any sense and I think there are plenty of you know if for example remember a while ago there was this article about liske I don't know if you read that but in list 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 have like two 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 where this SEC comments go like then there's there's other things where and sufficiently decentralized whatever that means so that you don't treat it like that so but you disagree with this one too so you don't think there's this kind of line yeah well 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 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 who makes a decision you mentioned commit access earlier I think that's actually a hugely important thing right someone is making a decision there 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 for that so what am i learning I think what

you're missing that you know most watching people will point out is that okay like said say somebody changes that that bitcoin repo or the code there but it's still after it's a you know active decision of like you know a minor whether they actually use that code to operate that 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 unless someone has absolute control and dictatorship we're gonna 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 or validators are kind of a check in some ways on the developers and the and 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 u.s. to put something into law doesn't mean that Congress doesn't have any power right there are checks and balances the people are still exercising power and we still want people and we still expect those people to be accountable and owe duties despite the fact that they don't have absolute control of course this is all you know potentially out the window with how our everything is in chaos with the governments 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 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 dictators or Linus Torvalds or whoever are also fiduciaries in that sense now if if if that were to be the case if jurisprudence in the US or anywhere else

were to establish that software developers in any case and now you type of open source software regardless of the licensing or 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 offering everything that we it's everywhere and I think it's something that we would need to think very carefully about I 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 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 in the case of just heartbleed for one write a really important piece of open source software infrastructure function is infrastructure right there's a critical bug in it and it turned out well it happened because no one is 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 um I 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 that so that that that example is

interesting right so hardly you know SSL bug like many people actually in a blockchain space if you said as an example of like exactly why blockchain and token sales and and it's so important because there the problem wasn't that nobody was responsible problem was there was no non-final money no money no money exactly so if you know now treated the developers as fiduciary there are actually there I think they must be much less likely to go in there and and mess something with it so it it seems like your proposal would almost certainly be counterproductive in terms of reducing funding interest and work on all of this infrastructure and III don't think in general right it's not like there was some malicious

person in heartbleed 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 attention and and I think that we need to rethink that whole governance structure potentially generally that whether it's okay whether 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 in 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 I think it's 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 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 and aetherium remains an issue despite all this idea about you know I SEOs

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 if you've listened to previous episodes with Marley Grey and Matt Turner you know that Microsoft is committed to providing enterprise-grade tools and infrastructure for blockchain developers well the azure blockchain workbench is perfect for organizations building consortium networks take the etherium proof of authority template for example it's ideal for permission networks where consensus participants are known and

reputable if the area manager has on chain network governance that leverages parodies extensible proof Authority client each consortium member has the power to govern the network or delegate their consensus participants to a trusted operator and parodies webassembly support allows developers to write smart contracts and for many languages like C C++ and rust Azure blockchain workbench was created on the same principles that drive all production services in Azure so you know you're relying on secure redundant infrastructure that can scale and with built-in services like authenticating api's off chain databases and secure key management services you can scaffold your infrastructure in just a few hours to learn more about Azure blockchain workbench and how Microsoft is advancing blockchain usability and enterprise

check out AKMs slash epicenter and start building today we'd like to thank Microsoft Azure for their support of epicenter so you wrote another paper titled 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 blockchain space watching each industry blush an ecosystem the out there they're there they're wise at least one one sort of terminology that we can even agree on and specifically how all this changing les akan poses the confusion and

potentially is threatening for regulators could you give us a high-level overview of this paper and 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 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 act 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 ok what can this type of technology this flavor of technology actually do can I rely on it to actually create a record that is gonna be permanent and impossible to change well I would argue no generally but certainly some block chains or things that go by the name blockchain they vary in their ability to make this claim right it's all spectrums but 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 and 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 policymaker 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 a course a challenge because the technology is 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 and pin something down like into a standard into a 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 this 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 so of course you're totally right right the

the terminology is very hard in descent Trust is a great example of that like what's the practical takeaway from from this observation like what can we do about this I guess the practical takeaway is be 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 forums write stuff that it just you would think that you could rely on but from my perspective you can't it uses all the language that is misleading so be skeptical so can we speak about the example of the term 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 the lay meaning 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 starting 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 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 for in Bitcoin which was caused by different software being run by different portions of the validating network different nodes running 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 split Ledger's is 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 now fork telling us a similar story right the fact that the the decision was made to treat the the hack as a theft was an active decision made and it

affected the record that appears in what is now called theorem I mean just technically speaking right so I mean I guess in the Bitcoin case it is true right that you had two different chains and then one of them sort of you know never made it into history but in the etherium case I mean the record wasn't you know retro actively change it's just that I guess the reversibility in a way off 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 change ability for the record right it was 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 it exactly yeah so I see those as kind of just proving the idea of immutable so it's always very interesting to me that people continue to use the term and then my other critique of it is that a lot of these features that we use to describe the technology there's a record of that created by the technology right this immutable or secure or whatever are ones that they 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 at all this magical record that's immutable and secure and reflects the truth and all that okay so I analogize it in my paper to baking a cake okay you put this group of ingredients together you treat it 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 - yeah who are validators who are poor 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 as if you change the ingredients of the cake 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 it's just whether or not it'll be a you know cake that you particularly want to eat or not is what's interesting I want to come back on this idea of immutability because I 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 a user you know was the transact were those transactions immutable whereas like the money in your wallet is still there or not and I sort of see blockchains at announcin I analogize them in the following ways that we 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 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 the majority of people now think the earth is round so you could conserve as the chain with the most validators now well if 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 hard fork the data still exists it continues to exist just the consensus and the majority yeah yeah yeah no I absolutely see that argument um I think it 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 were 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 rule 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 it mutable

is the wrong term because humans remain in charge of the system and I think I think that term is it's part of the 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 it's running away from human flaws if 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 in will and I like I think it

may be slightly more appropriate term might be auditable because regardless of regardless of the changes that that occur or the shifts and consensus the data where you went you can see where you went and where you've been and you can always audit that I think that you know that may be more helpful yeah I I have a suggestion for a guest for you actually an archivist yeah Victoria Lemieux is an archivist a digital archivist at the University of British Columbia and these are record-keeping systems right but there's not enough archivists 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've 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 do you feel like this is you know some sort of insane hype and it needs to be deflated or do you think there 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 you're scrutinizing every conclusion every assumption everything and I don't otherwise see that happening to to the extent I think it should so I that's kind of what I the role that I've

been trying to fill in the space to I think bottom line I'm feeling like private blockchains these or these permission block chains whatever you want to call them from technologists who I trust and believe are credible in the space these are nothing revolutionary they're 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 the capabilities that people ascribe to them and that's they I'm hoping that we don't end up in a situation because we're because policy makers believe that they have certain capabilities and adopt them

for important very important systems I mean there are there are is a you know strong push to do block chain 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 government the 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're 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 they're 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 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 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 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 his Street to it because I think just throwing it out is in we know better we know better is it's it wastes time and it's potentially harmful yeah so 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 mm-hm 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 D centralist 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 in I have probably 50 papers that I have ideas for and what 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 that also includes some some other guests that we've had on the show before just briefly tell us tell us about that and what's going with that sure so in past year a group 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 law on kind of in regulation side there are mathematicians computer scientists economists people in finance and it's a it recognizes that

this field is interdisciplinary by Nate 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 disciplines 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 language that we can fully understand which 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 jft calm 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 Penn State University of Pennsylvania I think it's good that it's the coin operated capitalism one right yes to that great cool well thanks so much for joining us today Angela was great speaking with you or thank you you know certainly doing important work that's you know needed there in sort of a balance in the blockchain space and then I look forward to more paper by you thank you it was a real pleasure to talk with you guys thank you cool and of course we're gonna have yeah links to to

a whole bunch of her papers in the show notes if you want to check that out and also her website you just check out the show notes and thanks so much for or listener for once again tuning in if you want to support the show you can leave as an iTunes review that helps new people in show you can of course watch youtube videos on youtube.com slash apps and Bitcoin and yeah we look forward to being back next week [Music] [Music]