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Beyond the Blockchain
EFF Austin
February 16, 2015
Christopher BrownAttorney at Law
512-438-9299
– Satoshi Nakamoto
Bitcoin: A Peer-to-Peer Electronic Cash System (2008)
“What is needed is an electronic payment
system based on cryptographic proof instead of
trust, allowing any two willing parties to transact
directly with each other without the need for a
trusted third party.”
Anatomy of a Bitcoin
transaction
• Alice holds 1 BTC in a virtual wallet with
an associated public key and private
key
• Alice wants to send the BTC to Bob,
who also has a wallet
• Bob sends his Bitcoin wallet
address/public key to Alice
• Alice creates a transaction message
with Bob’s address and the transaction
amount
• Alice signs the transaction with her
private key, and announces her public
key for signature verification
• Alice broadcasts the transaction on the
Bitcoin network for all to see.
• The transaction is verified by the Bitcoin
network through cryptographic work of
miners.
Other Distributable Ledgers
• Title recording systems
• Real estate
• Motor vehicles
• Notarized transactions
• Stock transfer ledgers
• Secured transactions
Smart Contracts• Self-enforcing contracts—from sports bets to derivatives
• Escrows
• Crowdfunding
• Smart stock
• “Trustless” letters of credit
• Proof of existence
• Unbreakable contracts?
Smart Property• Digital property
• Digital assets integrated with
contracts and consideration
• Tokenised software licensing
• Physical property
• Networked things, the rights
in which are digitally
administered
• Example: the self-
repossessing car
Decentralized Autonomous Organizations
(DAOs)
• Charter as contract as code
• Virtual corporation—control
over assets, voting systems
and managerial power
embodied in code
• Flexibility of form—Distributed
Collaborative Organizations
• Representation by self-
sufficient autonomous agents
• Extensions to political systems
Bitcoin 1.0—Wallets and
exchanges
• Coinbase—leading venture-backed
wallet provider; just announced
exchange
• Circle—fully insured Bitcoin wallet
with no fees for use
• Winklevoss Bitcoin Trust—
Exchange-traded Bitcoin
investment fund, to be publicly
traded on Nasdaq
• Distributed ledger as currency exchange platform
• Internet protocol of money—P2P money transfer with
architecture analogous to email
• Transactions denominated in native cryptocurrency (XRP)
or other assets—dollars, Euros, gold, air miles, etc
• Universal convertibility—can send in one currency and
receive in another—supported by market makers
• Plugged into mainstream US banking system
Ethereum
• Decentralized cryptocurrency as
programming platform and scripting
language for digital contracts
• Consideration denominated in native
cryptocurrency (ether)
• Encodes advanced transactions directly
into the blockchain
• Enables self-enforcing contracts, e.g., jt
savings accts, financial exchange markets,
trust funds, DAOs, etc.
• Publicly traded ecommerce retailer; Bitcoin early
merchant adopter
• Proposal to issue “cryptosecurities”—common
stock in a real corporation issued off the blockchain
• Blockchain as transfer agent
• Possibility to embed shareholder rights in code—
voting systems, etc.
• NY-based startup focused on cryptocurrency-based smart
contracts—financial asset servicing and settlement
• Focus on venture capital and private equity-style start-up
capital structure contracts
• Private stock transfer systems with rights of first refusal,
co-sale, etc.
• Blockchain-based contract system ensures all rules
complied with, provides messaging and consent, provides
real-time ledger
Swarm.fund
• Decentralized crypto crowdfunding platform for DCOs
• Crowdfunding conditions embedded in offering
• Securities law issues
• Reinventing as DCO
• Built on Ethereum platform
• White paper: tokenization and digital rights mgmt
Autonomy
• Programmable money + smart
contracts + Internet of things
• Wallet as autonomous agent—like
a digital power of attorney
• Power to negotiate against the
tyranny of click-wraps
Community
• Adaptable, resilient platforms for
distributed governance
• The “Trust Web”
• Social media + smart stock +
DAOs
• User equity for market cap value of
content contributions
• Public benefit corporations—
expanded stakeholders
• Distributed sovereignty? Lessig:
constitution as code
Tyranny of Code
• Economy—and polity—of rights
embodied in unbreakable, self-
enforcing codes
• Digital wallet as ultimate spy for
state or capital
• Corporate cryptocurrency as
ultimate company scrip
• Anonymity versus digital panopticon