BLOCKWALKS 2018 REPORT
KEY FIGURES AND HIGHLIGHTS
AUSPICES, PARTNERS AND SPONSORS
PROGRAM Vision The future of the public sector using blockchain technology Real examples How blockchain is shaping the public sector Issues The question of security, cyber security, taxation, regulation and others Panel discussion Ask me anything Moonwalk Awards
SAVE THE DATE BLOKWALKS 2019
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES
BLOCKCHAIN AND CRYPTOCURRENCY DICTIONARY
behalf of the BLOCKWALKS team, we would like to extend our thanks to all those who supported the BLOCKWALKS 2018 event at Bratislava Castle on October 10th, 2018. To the speakers, partners, sponsors, and attendees – we thank you all. This was the first conference of its kind – connecting top-level governmental officials and advanced technology speakers from around the world, united by the aim to open discussions on utilizing blockchain in the public sector with view to shaping an efficient public service. The benefits of blockchain for the public sector are less frequently voiced, which is why we have organized this event once again this year. This technology could provide public services with more transparency, security, and control across sectors such as digital identification, land registration, certification, and voting. The BLOCKWALKS conference is the definitive event for governmental officials and the general public to delve into the concepts, strategies, use cases, risks, and benefits associated with adopting blockchain technology within the public sector. Despite the overall downturn of the crypto sentiment, blockchain technology is here to stay. So, we’ll meet again at Bratislava Castle on October 10th, 2019 to explore how blockchain technology has continued to develop, and spark your interest in valuable lessons learnt. Save the date! Sincerely, Founders PUBLICUM
KEY FACTS & FIGURES
300+ ATTENDEES 30+ WEB
GOVERNMENTAL REPRESENTATIVES FROM 10 EUROPEAN COUNTRIES
38 000 -PAGE VIEWS PER MONTH
SPEAKERS FROM 16 COUNTRIES (USA, Sweden, Australia, Brussel, UK, Cyprus, Israel, Slovakia, Malta, Norway, Taiwan, Austria, Hungary, Poland, France, Mexico) FROM 4 CONTINENTS (Asia, Australia, Europe, North America)
FROM 8 COUNTRIES (USA, SWEDEN, AUSTRALIA, CYPRUS, ISRAEL, SLOVAKIA, LIECHTENSTEIN, AUSTRIA) FROM 4 CONTINENTS (ASIA, AUSTRALIA, EUROPE, NORTH AMERICA)
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AUSPICES, PARTNERS AND SPONSORS The conference BLOKWALKS 2018 was held by the Slovak civil His Excellency Vice-President of the European Commission for association PUBLICUM, under the auspices of His Excellency the the Energy Union Mr. Maros Sefcovic and expert patronage of Prime Minister of the Slovak Republic Mr. Peter Pellegrini and world renowned professional consulting firm BDO.
ACKNOWLEDGEMENT TO OUR PARTNERS AND SPONSORS STRATEGIC PARTNER
THE FUTURE OF THE PUBLIC SECTOR USING BLOCKCHAIN TECHNOLOGY MAX KAYE Co-founder and CTO SecureVote and FLUX, Australia A Hasty Marriage? The Future of Government and Blockchain Over The Next Two Decades
IF SOCIETY NEVER CHANGES, IT WILL BE DESTROYED. THIS IS AN UNDENIABLE FACT, WHETHER IT'S DESTROYED BY OURSELVES OR DESTROYED BY SOMETHING FROM ELSEWHERE IN THE UNIVERSE, WE MUST REACT TO PROBLEMS.
The world's most secure, scalable, and reliable blockchain voting platform. Experts in creating voting and governance systems. With capabilities for many different types of ballots and voting methods. www.secure.vote
Flux is a gateway Australians can use, to participate directly in parliament, making the need for trust in elected officials a thing of the past. Elected Flux MPs and Senators give up their autonomy and use their votes in line with the outcomes produced by the Flux ecosystem. www.voteflux.org
ASHER IDAN PhD, Lecturer and Consultant at Israeli universities (Tel Aviv University, Bar Ilan), Israel From 50 Million User of Blockchain, to 500 million users
DECENTRALIZATION IS A MAIN POINT OF BIOLOGY, BECAUSE THE DNA IS AMAZING, THE DNA IS A BLOCKCHAIN OF BIOLOGY, ITS BILLIONS OF YEARS OLD BLOCKCHAIN, NATURAL BLOCKCHAIN. 14
JULIO ALEJANDRO CEO Jada Consulting, United Kingdom The Applied Austrian Economics into Immigration and Lifestyles
BITCOIN AS IT EXISTS AT THE MOMENT, IT'S A TOOL FOR SURVEILLANCE THAT CAN BE USED FOR CONTROLLING, FOR CENSORING, FOR ATTACKING AN INDIVIDUAL WITHIN AN IMMUTABLE LEDGER, THAT PEOPLE WILL NOT BE ABLE TO CONTROL OR TO ERASE. 15
prof. Ing. IVAN KOTULIAK PhD., Professor Faculty of Informatics and Information Technologies, Slovak Republic Blockchain in Public Registries - where it makes sense
BLOCKCHAIN CAN BE REALLY A TOOL TO CHANGE DEMOCRACY AND TO CHANGE EVERYTHING. 16
IF YOUR FEATURES, HIGHER LEVEL UP CAN BE ATTACKED, THEN YOU HAVE A VERY IMPERFECT SYSTEM THAT'S OFTEN NOT GOING TO BEHAVE THE WAY THAT YOU THINK THE RULES SAY THAT'S SUPPOSED TO BEHAVE.
SMART CONTRACTS GLOBAL FINANCIAL ACCESS
Nick Szabo, CEO of Global Financial Access, is world-renowned as creator of the earliest design for a blockchain and cryptocurrency, as well as the coiner of the phrase and creator of the concept of smart contracts. Global Financial Access can help your company take advantage of the rapidly expanding opportunities in the smart contracts and blockchain space. www.globalfinancialaccess.com
NICK SZABO Blockchain, cryptocurrency, and smart contracts pioneer, USA Keynote Speech â&#x20AC;&#x201C; Smart Contracts and history of money
PROGRAM REAL EXAMPLES
PROGRAM REAL EXAMPLES
REAL EXAMPLES HOW BLOCKCHAIN IS SHAPING THE PUBLIC SECTOR HENRIK HJELTE CEO ChromaWay, Sweden Swedish Land Registry and its real example of blockchain usage
LAND REGISTRY CHROMAWAY
ChromaWay is frontrunner in smart contracts for land registration that relies on the blockchain technology. By fusioning blockchain technology and real estate deeds, the smart contracts for land registration is a solid answer to the problems that might come up while purchasing or selling a property. www.chromaway.com
RIGHT NOW, IT'S POSSIBLE PROBABLY TO BRIBE SOMEONE AT THE LAND REGISTRY IT DEPARTMENT, TO UPDATE A DATABASE. WITH OUR TECHNOLOGY, THAT'S IMPOSSIBLE, BECAUSE YOU NEED PROBABLY TO BRIBE NOT ONLY THE LAND REGISTRY, BUT THE AUDITING COMPANY OR ONE OF THE BANKS ETC. IT MAKES IT LESS LIKELY TO TAKE OVER THAT. THAT'S THE SECURITY MODEL OF PRIVATE BLOCKCHAINS. 19
PROGRAM REAL EXAMPLES
YIANNIS MENELAOU Co-Lecturer at University of Nicosia and Managing Director of Lykke, Cyprus Certifications on the blockchain at University of Nicosia
ACADEMIC CERTIFICATIONS UNIVERSITY OF NICOSIA
The University of Nicosia has become the first university in the world to issue academic certificates whose authenticity can be verified through the Bitcoin blockchain. Since 2017, UNIC started to issue all university diplomas on the Bitcoin blockchain using its own technology, which is developed as open source and has already been adopted by other universities and diploma issuers around the world. www.unic.ac.cy
LET'S EMBRACE THE TECHNOLOGY AND TRUST EACH OTHER USING BLOCKCHAIN.
MAX WANG Chief Product Officer and Co-Founder LCX, Taiwan Crypto Exchange- the future of finance? The imagination, regulation and realization
GOVERNMENTS START TO UNDERSTAND EXCHANGE IS VERY IMPORTANT, BECAUSE IT'S THE WAY TO GET MORE INVESTMENT FROM FOREIGN COUNTRY, THE TAX REASON AND ALSO MONEY LAUNDERING. 21
PROGRAM REAL VISIONEXAMPLES
JAMIE BERRYHILL Blockchain lead for the public governance director OECD, France Uses and limitations of blockchain use in the public sector
I THINK THERE'S A TREMENDOUS MARKET FOR THE SPACES WHERE BLOCKCHAIN DOES FIT, I THINK THERE'S TREMENDOUS MARKET FOR THE MORE TRADITIONAL PLAYERS AS WELL, WHERE SOMETIMES MAYBE YOU JUST NEED A SPREADSHEET OR SOMETIMES MAYBE YOU NEED AN ONLINE DATABASE. 22
DISTRBUTION OF SOCIAL BENEFITS NEM FOUNDATION
The NEM Foundation is endorsed by an international network, compiled of a wealth of experience in IT, entrepreneurship, business processes, trading, property and asset development, international management and academia. The business’ ethos is to provide NEM’s blockchain technology platform to enhance enterprise whilst being run by the people, for the people. www.nem.io
PAUL RIEGER Advocate of blockchain technology for real-world use cases, Austria TV or Swimming Class? How Blockchain Can Solve The Social Benefit Dilemma
CASH PAYMENTS CAN UNFORTUNATELY BE MISUSED, I DON'T WANT THEM TO BE ABUSED, BUT THEY CAN DEFINITELY BE MISUSED. 23
PROGRAM REAL ISSUES VISION EXAMPLES
BRUNO ALVES Policy Advisor, European Commission Directorate General Communications Networks, Content and Technology (DG CONNECT), Belgium European Blockchain Partnership and the ongoing work between the European Commission and the Member States to develop a European Blockchain Services Infrastructure
THE OBJECTIVE OF BLOCKCHAIN OBSERVATORY FORUM IS REALLY TO GET TO MOBILIZE A LARGE NUMBER OF EXPERTS AND STAKEHOLDERS TO WORK TOGETHER WITH THE EUROPEAN COMMISSION AND DEFINE WAYS TO SUPPORT THE UPTAKE OF BLOCKCHAIN TECHNOLOGY. 24
THE QUESTION OF SECURITY, CYBER SECURITY, TAXATION, REGULATION AND OTHERS DAGFINN BUSET Partner and Head of BDO Security and emergency services, Norway Why should cyber risk be our biggest concern
BLOCKCHAIN TECHNOLOGY IS CHALLENGING THE WAY WE DO BUSINESS AND THE WAY WE DO GOVERNMENT IN CYBERSPACE. 25
TOM WILKINSON Head of MI and Analytics at Department for International Development, United Kingdom Blockchain for public services
THERE ARE FAIRLY GOOD REASONS TO TAKE THIS SLOW AND NOT RUSH INTO APPLICATIONS OF SOMETHING, BUT IT'S STILL NOT FULLY MATURE IN ITS TECHNOLOGY, AND I PERSONALLY THINK STILL NOT FULLY UNDERSTOOD IN WHERE IT'S APPLICABLE. 26
DAVID STANCEL Cryptocurrency Specialist, Trader and Researcher, Slovak Republic The biggest challenges of regulation in Crypto
IT'S VERY IMPORTANT TO REALIZE, NOT ONLY FOR GOVERNMENTS, THAT THESE TECHNOLOGIES, CRYPTOCURRENCIES AND OPEN BLOCKCHAIN ARE HERE TO STAY WITH US. CHANCES ARE, THAT IN THE NEAR FUTURE WE WILL INTERACT WITH THEM IN VARIOUS AREAS IN OUR DAILY LIVES. 27
JOSEF MERCIECA Tax Partner BDO, Malta Advantages which Malta grants from a tax point of view
MALTA IS THE ONLY EUROPEAN COUNTRY WHICH HAS A FULL IMPUTATION SYSTEM, WHEREBY THE TAX PAID AT THE COMPANY LEVEL IN REALITY IS A PREPAYMENT OF THE TAX DUE BY THE SHAREHOLDER.
ÖRS ORSZÁGH Chief Innovation Officer at InterTicket, Deputy CEO Blockchain Competence Center, Hungary Why did Hungary decide to create friendly environment and regulation of the blockchain technology and how it ended up in a nationwide blockchain strategy
BLOCKCHAIN IS SOMETHING MUCH BIGGER THAN ANY OTHER TECHNOLOGIES WE HAD IN THE LAST 20 OR 30 YEARS. 29
MACIEK LASKUS Founder hive.one Reinventing Identity 30
CYBER SECURITY TABOOKEY
TabooKey is building a decentralized cyber insurance network that buys up cyber security risks for crypto custody & critical infrastructure use cases such as controlling autonomous car fleets. www.tabookey.com
LIRAZ SIRI CEO TabooKey, Israel Cyber war and critical infrastructures: building on blockchain to kill security theatre before it kills us
THE BEST SOLUTIONS ARE NOT PERFECT, THE BEST SOLUTIONS ARE DESIGNED TO FAIL WELL. 31
PANNEL DISCUSSION ASK ME ANYTHING MODERATOR David Stancel - Cryptocurrency Specialist, Trader and Researcher
SPEAKERS NICK SZABO - Blockchain, cryptocurrency, and smart contracts pioneer DAGFINN BUSET - Partner and Head of BDO Security and emergency services HENRIK HJELTE – CEO, ChromaWay ASHER IDAN, PhD – Lecturer and Consultant, Israeli universities (Tel Aviv University, Bar Ilan) YIANNIS MENELAOU - Co-Lecturer at University of Nicosia and Managing Director of Lykke Cyprus, Lykke Exchange
MOONWALK AWARD Moonwalk Award 2018 was a unique competition of the most innovative projects using blockchain technology in public sector. Aim of the competition was to select projects with the most innovative distinguishing aspects and utilization in public sector focused on the areas such as cyber security, healthcare, voting, education, supply chain and others. Mission of BLOCKWALKS 2018 was to unlock the world’s blockchain potential and its exploitation within public sector. We supported start-ups and Initial Coin Offerings that address public sector and shape the world’s next economy. MOONWALK AWARD JURY COMMITTEE: Nick Szabo, Asher Idan, Yiannis Menelaou, Max Kaye, Julio Alejandro WINNER OF MOONWALK AWARDS Our jury deeply analysed every single entry. Based on our selection criteria, Nebula Genomics was announced as the most innovative project for the public sector using blockchain technology and won Moonwalk Award 2018.
WINNER OF MOONWALK AWARDS 2018 NEBULA GENOMICS 34
Social funding and impact management platform built on the Ethereum blockchain. - Alice incentivises social organisations (charities, NGOs, social enterprises) to run projects transparently, by making sure that they get paid more when they achieve their goals. The performance of each project is publicly available, making it easier for funders (philanthropic organisations, impact investors, small donors) to identify and help scale social projects that actually work. Shared impact data also helps reduce due diligence and reporting costs, and helps social organisations collaborate more effectively. https://alice.si/
NEBULA GENOMICS (USA)
Nebula Genomics is building the world’s first online marketplace for genomic and other health data. Nebula Genomics will leverage blockchain technology to eliminate the middleman between data owners and data buyers and empower people to own their personal genomic data. Instead, data owners can acquire their personal genomic data from Nebula sequencing facilities or other sources, join the Nebula blockchain-based, directly connected with data buyers. Data owners privately store, on the Nebula blockchain, their personal genomic and phenotypic data and control who can access it while sharing data and receiving payments, data owners remain pseudo-anonymous. https://www.nebula.org/
OPEN SOURCE UNIVERSITY (France)
Open source and decentralized democratic governance protocol for any kind of organization. - OS. University is the first decentralized Education 4.0 platform. It provides learners with a digital credential’s wallet, which enables them to find the best academic and career development opportunities by being connected to Academia and Businesses via the blockchain. https://os.university/
FEED TESTIM BLOCKW
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70% OF THE PARTICIPANTS
WOULD ATTEND BLOCKWALKS 2019
72% 87% OF THE PARTICIPANTS WOULD HIGHLY RECOMMEND TO ATTEND BLOCKWALKS 2019
OF THE PARTICIPANTS WERE HIGHLY SATISFIED WITH THE VENUE
PARTICIPANTS • BLOCKWALKS 2018 WAS GREAT. GOOD ORGANIZATION, VERY NICE LOCATION... THANK YOU! • TOPICS WERE VERY RELEVANT, GOOD SPEAKERS. • GREAT SELECTION OF SPEAKERS, OF THE VENUE AND THE TOPIC WAS VERY INTERESTING.
OF THE SPEAKERS WOULD HIGHLY RECOMMEND TO ATTEND BLOCKWALKS CONFERENCE
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TESTIMONIALS “GETTING NICK SZABO TO AGREE TO BE THE KEYNOTE SPEAKER WAS A MAJOR WIN. THE MAN IS A CYPHERPUNK LEGEND. CONGRATULATIONS!” LIRAZ SIRI, CEO TabooKey, Israel “I REALLY ENJOYED ATTENDING THE CONFERENCE AS A SPEAKER.” PAUL RIEGER, Advocate of blockchain technology for real-world use cases, Austria “I ENJOYED VERY MUCH THIS CONFERENCE, THERE ARE MANY NEW THINGS TO LEARN. MAYBE THE FIRST CONFERENCE OF BLOCKCHAIN AND GOVERNMENT. I WAS IN CHINA, US, ENGLAND, I HAVE NEVER MET CONFERENCE LIKE THIS. NICK SZABO AND OTHER PEOPLE SAID VERY IMPORTANT THINGS. I THINK, THE NEXT YEAR, 2019, WILL BE THE YEAR OF THE COOPERATION BETWEEN GOVERNMENT AND BLOCKCHAIN. I HOPE, THAT SLOVAKIA WILL BE PIONEER IN COOPERATION BETWEEN BLOCKCHAIN AND GOVERNMENT. THANK YOU!“ ASHER IDAN, PhD, Lecturer and Consultant at Israeli universities (Tel Aviv University, Bar Ilan, Israel) “I THINK THIS EVENT WAS REALLY GREAT. BRINGING TOGETHER PEOPLE FROM GOVERNMENT, FROM SOCIETY, FROM INDUSTRY TALKING ABOUT REAL USE CASES, THE BENEFITS AND LIMITATIONS THAT BLOCKCHAIN CAN HAVE FOR GOVERNMENT. I AM LOOKING FOR CATCHING UP WITH ALL THESE FOLKS AFTERWARDS TO BRING THEM ON BOARD TO WHAT WE ARE DOING AT OECD.” JAMIE BERRYHILL, Blockchain lead for the public governance director OECD, France “I AM VERY, VERY DELIGHTED AND VERY, VERY HONORED TO BE HERE AS A SPEAKER AND THIS IS THE 40
GREAT LINE-UP. YOU ALL AT BLOCKWALKS COULD PRESENT HERE. I LIKE THE IDEA AND I LIKE THE EVENT AS WELL. AND I DO BELIEVE THAT THE NEXT ONE IS GOING TO BE MUCH BETTER THAN THIS ONE, AND EVEN IF THIS ONE WAS A GREAT SESSION. THANK YOU.” ÖRS ORSZÁGH, Chief Innovation Officer at InterTicket, Deputy CEO Blockchain Competence Center, Hungary “I AM VERY HAPPY TO BE HERE AT BLOCKWALKS. I THINK IT IS AN AMAZING INITIATIVE AND IT IS EXACTLY WHAT WE NEED. WE NEED MORE ENGAGEMENT WITH THE GOVERNMENT, THAT IS THE ONLY WAY BLOCKCHAIN IS GOING TO SUCCEED IN THE LONG-TERM, OR MAYBE IT IS THE ONLY WAY THE GOVERNMENT IS GOING TO SUCCEED IN THE LONG TERM. IT IS EXCITING TO BE A PART OF IT AND I AM HAPPY TO BE HERE.” MAX KAYE, Co-founder and CTO SecureVote and FLUX, Australia “AT BDO, WE WERE THINKING, HOW WE COULD CONTRIBUTE TO THE THEME OF APPLICATION OF BLOCKCHAIN IN THE PUBLIC SECTOR AND WE ARE VERY HAPPY TO TEAM UP WITH BLOCKWALKS AS A STRATEGIC PARTNER FOR THIS YEAR’S CONFERENCE, THAT TOOK PLACE HERE IN BRATISLAVA. IT LOOKS LIKE INCREDIBLE EVENT, FULL OF THOUGHTFUL SPEAKERS FROM ALL AROUND THE WORLD, AND WE ARE LOOKING FORWARD FOR BLOCKWALKS 2019.” PETER GUNDA, Managing Partner, BDO Slovak Republic “I AM VERY HAPPY TO BE PART OF THE BLOCKWALKS CONFERENCE, WHICH BROUGHT TOGETHER MANY ENTHUSIASTS AND HIGH-QUALITY SPEAKERS FROM ALL OVER THE WORLD TO EXCHANGE THEIR EXPERIENCES WITH IMPLEMENTATION OF BLOCKCHAIN TECHNOLOGY IN THE PUBLIC SECTOR. THE CONFERENCE ADDS LOT OF
VALUE, I HOPE TO SEE THIS CONFERENCE WILL HAPPEN AGAIN ALSO NEXT YEAR.” DAVID STANCEL, Cryptocurrency Specialist, Trader and Researcher, Slovak Republic “IT’S BEEN PLEASURE TO BE IN THE BLOCKWALKS CONFERENCE. MANY OF THE MOST IMPORTANT TOPICS ON BLOCKCHAIN HAVE BEEN VERY WIDELY DISCUSSED BY VERY GOOD SPEAKERS, SO I AM LOOKING FORWARD TO COMING BACK NEXT YEAR, TO BRATISLAVA, FOR THE NEXT EDITION.” BRUNO ALVES, Policy Advisor, European Commission Directorate General Communications Networks, Content and Technology (DG CONNECT), Belgium “I AM EXCITED TO BE HERE AT THIS AMAZING EVENT, WE LEARN A LOT OF THINGS ABOUT BLOCKCHAIN, LEGAL ASPECTS OF BLOCKCHAIN AND I AM EXCITED TO SEE YOU NEXT YEAR AS WELL.” YIANNIS MENELAOU, Co-Lecturer at University of Nicosia and Managing Director of Lykke Cyprus
“FROM MEXICO, CHICAGO, PARIS, LONDON, PEOPLE CAME FROM ACROSS THE WORLD TO TALK ABOUT DISRUPTIVE AND CONVERGENT TECHNOLOGIES. SO, ANYTIME YOU USE BLOCKCHAIN TO INTERSECT WITH THE ARTIFICIAL INTELLIGENCE, MACHINE LEARNING, INTERNET OF THINGS, TELECOMMUNICATION, WITH MIXED REALITY, AUTOMATED VEHICLES, ALL THESE VERY DISRUPTIVE TECHNOLOGIES AND HOW ARE THEY USED WITH SHARING ECONOMY, WITHIN FINTECH, THE TRANSHUMANISM, THE BIO-TECHNOLOGY, E-GOVERNANCE SECTOR AND HOW ARE THEY GOING TO CREATE NEW INNOVATIVE MARKETS THAT DO NOT EXIST AT THE MOMENT, YOU CANNOT HAVE OR PERCEIVE THEM, BUT WE BELIEVE THAT THEY ARE GOING TO BE THE REAL, STRONG FUTURE. THEY ARE VERY FUTURISTIC, VERY INDUSTRY-ORIENTED, SOLUTION-BASED APPROACHES AND EVERYTHING WAS HAPPENING HERE, IN BRATISLAVA IN THE NEW CONFERENCE OF BLOCKWALKS IN 2018. HOPE TO SEE YOU NEXT YEAR. THANK YOU VERY MUCH!” JULIO ALEJANDRO, CEO Jada Consulting, United Kingdom 41
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SAVE THE DATE! BLOCKWALKS OCTOBER 10 th
POLAND CZECH REPUBLIC
WARSAW 650 km KRAKOW 400 km
PRAGUE 300 km
UKRAINE KIEV 1 200 km
VIENNA 70 km
BUDAPEST 200 km
TRANSCRIPTS OF SPEAKER’S SPEECHES
SPEAKER'S SPEECHES MAX KAYE Co-founder and Chief Technology Officer of SecureVote and Flux, Australia Deep ways in which blockchains and governments will change each other over the next few decades, and what governments will need to plan for. We'll look at novel systems of governance, the decentralisation of sovereignty and identity, the challenges around new policy, societal, governmental, economic, and philosophical consequences of this relationship, and the ways these interactions could resolve.
A Hasty Marriage? The Future of Government and Blockchain Over The Next Two Decades Whenever there has been progress, there have been influential thinkers that denied that it was genuine, that it was desirable, or even that the concept was meaningful. They should have known better. I'm opening with this quote because it represents one of the two pivotal moments in my career. The first was in 2010 when I discovered Bitcoin and the second was a few years later when I read this book. Out of the two, Bitcoin was not the more important one. So today, thank you everyone for coming along. As you've heard, my name is Max Kaye. I'd like to sort of speculate with you a bit about what the next few decades are going to look like. Unfortunately, we don't have a lot of time to go into detail, so it's going to be quite high level, but let's get on with it. Just to give you an idea of what we're going to cover, we'll have a think first about the purpose of democracy, then have a look at what I think is the major problem with democracy, how blockchain interacts with voting 1.1 and 2.0 and what they're going to look like, some of their properties, then we'll have a think about error correction, which ultimately is a philosophical topic, but is deeply related to governance, and finally we'll look at how the situation might resolve over the next few decades. I picked the period of 20 years in here, but that's a bit arbitrary, it could be longer or shorter or anything in between as these things are. What is the fundamental purpose of democracy? Have a think about that over the next few slides. Democracy's purpose: I think we can say a few things about it, so if we do more of it, or if it gets better, then life has to get better in general, at least for those people in the democracy. We should have an obvious answer to why, so if we come up with some purpose and ask why and then we want to write a book it's probably not the right answer and it's also independent of the form of democracy. It shouldn't matter whether we're talking about direct or representative or any of that. Why would democracy marry blockchain? It means that it has to, whatever this marriage is, work towards the fundamental purpose. It has to make society more productive and it has to work in the voters’ interest, even if they don't know it yet. It also has to result in better laws, in terms of doing it quickly, then strong an immediate advantage, there has to be no other safe way to implement it and finally it has to have low friction, relatively speaking. Obviously changing anything as big as governance for a nation is not low friction in the typical sense.
So just before we get a bit further, some facts about the universe, a light intermission. If society never changes, it will be destroyed. This is an undeniable fact, whether it's destroyed by ourselves or destroyed by something from elsewhere in the universe, we must react to problems- Importantly, no physical law demands human suffering, which means that all human suffering is a soluble problem. It is something, that we can fix provided that we know how. Knowing how is the important part there, obviously, being able to do it later is then important, but the knowledge is key. More importantly, we cannot choose the truth and so, we have to boldly face the truths that we don't like and figure out, how we can integrate them peacefully. So, this is a bit of a thing to talk about, or a thing to think about now and onwards. So, would you rather have a democracy that biases the will of the people or a democracy that consistently makes good decisions, even if most people disagree with that decision. I think this is an interesting point, that cuts through people's intuition about what democracy should be. So, I think that the fundamental purpose of democracy is to solve problems. The purpose of doing that is to avoid destruction of society. Everything else, I think can be drawn back to this. And as we just heard, the alternative to solving problems is death. So, problems with democracy: There’re three things we'll cover here. There’re some philosophical discussion points, the optimum strategy in today's democracy and then what I think is the real evil. In terms of the philosophy, so it's a way to solve problems, it was never designed to bias truth, I think, this is interesting, because if it wasn't designed to bias truth, it wasn't designed to make good decisions and then, why should we expect it to make good decisions. In terms of the optimum strategy, so I want to play through a scenario with you, let's say we've got a town of three people, it's quite small. We have got Alice, Bob and Charlie. Alice wants all cars to be yellow, Bob really doesn't like yellow cars and Charlie just wants free painting supplies. The issues don't really matter here, but Charlie's thought processes do. He thinks, if I make a deal with Alice or Bob and if they vote from my policy and I vote for theirs, then I can guarantee, that my policy passes, provided I'm not offended by their policy this presents no issues. So, Charlie asks, does anyone want to do this? Alice, having some ideals about democracy, says no, that's wrong. Bob is pretty pragmatic, he says. Huh, sounds good to me, so what happens, well I'm sure, that you can guess, this happens and then this happens and this happens and on and on through every issue that this small town of three people ever consider. Charlie and Bob have just invented a political party, and Alice is now permanently excluded. An exclusive power rests with Bob and Charlie. So, democracy today does not reflect what is right or wrong, or good or bad. I think we can change that. Right now, the optimum strategy is to be the biggest group and I don't think this is a very good goal for what our optimum strategy should be. So what's the problem here, I describe it as something called static majoritarianism and that means, that the majoritarian arrangement that makes the decisions does not change or changes quite infrequently. What I think a better alternative is, is a system, that doesn't still involve some form of majority, though not necessarily based on people and that, for which the majority changes for each issue or on a regular basis. So, we'll go over voting on blockchain for a bit. It would be remiss of me not to include this. In terms of the requirements of a voting system and integrating blockchain, these are the sort of criteria that we need. We need to know that we can submit our vote and be counted, so it must be censorship resistant. We need to know, that it was included and so we need a consen-
sus protocol, so that we can agree on which votes are counted in or not and finally, we need to know, that other votes are not going to change, once they've been submitted. Which is immutability. I believe that these three things simultaneously can only be provided by a blockchain. We can emulate them through traditional organizations like an Electoral Commission, but we cannot guarantee them. However, with blockchain technology, we can guarantee that those outcomes have reached, also in terms of secret ballot. I included this mainly because people think, that it's still an unsolved problem, but I am fairly confident it's been solved. I've got four options here, one of which I'm not certain about. So, we've got homomorphic encryption, some of you may have heard this, it has some downsides currently, like some of the implementations require every participant to vote if you want the results, obviously that presents a slight problem. The zero-knowledge proof, which are quite promising but quite computationally intensive, there's an algorithm that I've created called Copperfield (SecureVote), which is a fully peer-to-peer, trust no one, vote shuffling algorithm for anyone familiar, it's based on a coin shuffle, which was proposed in 2014 for Bitcoin. Finally, there are ring signatures, which are used in some private financial transactions, however it's not clear to me yet, whether this can actually perform secret ballot in terms of voting 2.0, which may as well be called democracy 2.0. as well I think it's going to be quite different to what we experienced today, so, the first is I think it will be designed to solve problems, or at the very least, it will be very good at solving problems. That means, that it's a system that deals with issues, or at least deals with an issue-by-issue basis, for who should be solving those problems. It is not designed to represent the people, you'll notice that if you talk to people of different schools of thought, they all have different ideas about what representing the people means, and so, I think that it's a red herring, it's a distraction the idea of representation. It'll also have massive economic, social and legislative benefits and we'll get into exactly why that will be in just a moment. Furthermore, the optimum strategy within such a system will be to propose the best policy, not to be the biggest group. On to some philosophy and solving problems. So, problems are inevitable, this is, in essence a fact of the universe. There is no way, that we can possibly solve a problem for ever and never have anything else come up. But problems are also soluble. Soluble here just means, that we can solve them, but it also speaks to the idea, that we are able to, I guess they become part of us and we become part of the problem. It's not that the problem goes away, it's that by the way we arrange the world the problem is no longer an issue for us. It's also impossible to make progress without mistakes. So, if something is making mistakes that's not a reason to discount it, this is like an inevitability that we have to go through, and through a process of error correction we can continually improve. Furthermore, problems are solved by explanations. This is the root of how we can understand and know, what to change about the world. One of the issues with our current democratic process is, that explanations are often implicit in the policy as opposed to being explicit. That means, that we can often make mistakes, like mashing two explanations together and expecting them to work really well, which is a technique that has not worked anywhere else in the world or in science. This is a bit of a diagram, anyone familiar with Karl Popper or David Deutsch as epistemology might be cringing, but I think this gives a pretty good idea. Essentially if we identify some problem, everything is going hunky-dory, we have many options and we can't predict exactly which one is going to be the best. We've got a good idea, we can eliminate a lot of the bad ones and while there is an optimal path forward, it's incredibly hard to ever find one. That means, that eventually the progress that we make and the solution to the problem that we implement will start coming back around and it will start causing more problems. and so, if we implement something and then never do anything to improve it ultimately it will become just as bad as the problem, we were attempting to solve in the first place. What we need to do instead is to initiate a process of error correction. Once we decide on a solution, we can implement that, we can run with it, but eventually, that will come to a point where
we either should revise the explanation or maybe we should throw it out and start from scratch. We need to go through this process of error correction and sort of zigzag towards progress. This is how everything works, this is how science works, it's how business works, that process of iteration, I mean this is how evolution works. It's deeply ingrained in the idea of progress and the idea of how the universe can support life and support human society. So, can we make the error correction in our democratic systems better, faster and more reliable? Yes, I think we have a lot of room for improvement. That's not to say, that we're too bad today by the way, like obviously, we're here, it's very like, you know we've got a lot of tech, we enjoy a very nice life, things are good, but they can be better. I think, we should strive for them to be better. So, some requirements for better error correction. We need inclusion, the reason we need inclusion is, that if you exclude someone and they have a good idea, you've now diminished your ability to error correct and so, we need a system at least not where everyone is involved by default, but if someone wants to be involved, they can be. We need explicit explanations, â&#x20AC;&#x153;not evidenceâ&#x20AC;?, now I've included not evidence in in brackets there, because I think, that the term evidence-based policy misses the point a little bit. Rather than evidence-based policy, we should be aiming for explanation-based policy. One of the things about evidence and about data is, that all data is theory-laden and so, without understanding the explanation of why and how we collect the data we can never fully understand how it works, and that means we have to come back to explanations. Finally, we also need experimentation. Luckily, if we have democracies running in parallel, we can experiment across many jurisdictions. It doesn't have to be within one, but this is something, that needs to start happening more and more and I think that's something that we do quite badly at the moment. So better error correction means, that we're going to have more legislative accountability. Both in terms of, I guess, the risk of proposing legislation, but also, that we can take accountability to improve our own legislation. We're going to see a far more dynamic democracy, a democracy, where the people making choices or influencing particular policy changes day by day and we're also going to experience more economic growth, than we could currently have under this sort of system. The reason being is, that while you know, if an economy is playing catch-up, the solutions are already mostly known, so it's quite easy to have a high economic growth. But once you're at the forefront like we are, we have to solve problems to keep pushing that forward, and if we increase our rate of error correction, then we can solve more of those problems, we can try more things and once solutions are found, we can implement them more quickly even if we didn't come up with them. Is this a threat to democracy? I put democracy in quotes here because it's obviously not a threat on the whole, but it's definitely a threat to some systems. Ultimately, it's going to depend on how we react to these sorts of improvements and by the way, for anyone who does work in government, I don't think your jobs are going to go away, just want to preface that as we go through the next few slides. In terms of rejecting better democratic systems, rejection is not going to end well. Rejection of better democratic systems involves suppressing criticism, suppressing new ideas, things like that, there is a term called the precautionary principle, which is roughly summarised as better the devil we know, than the devil we don't. That is possibly one of the most dangerous attitudes that has ever existed in a free society. Suppressing solution leads to things like Easter Island. The question is not why did the people of Easter Island die out, the better question is, why didn't they leave? They didn't leave, because their idea of how to solve their problem, of things like deforestation, was to cut down more trees and make more statues. We should remember, that if we do more of the same when we encounter problems, there is no salvation in that path. So, their reaction, yeah cut down more trees, make more statues. In terms of the new types though, if such a 2.0 system is possible, it means a few things. Fundamentally, it means we're
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES going to have to change governmental structures, we can't rely on what we've got already, but that doesn't mean that things are necessarily going to go away. I think it'll mean, that we have a massively increased meaningful level of participation, it's worth pointing out here, that just increasing participation does not cause this sort of improvement, the participation has to be done in the style and with the explanation for why it will succeed and why this system is going to be better. It means that the role of leaders is going to become far more important and we're going to see, I think many more of them. It also means the role of governors, which by here I mean rulers particularly is going to become much less important.
ASHER IDAN PhD, Lecturer and Consultant, Israeli universities (Tel Aviv University, Bar Ilan), Israel
What does the future look like? I think, good democratic systems will have a massive advantage over the old ones. Particularly, there's going to be a strong comparative advantage and so, these new democratic systems will help uplift the old systems as well, but the main benefits are going to be for those who adopt it. It's going to become untenable to avoid adoption in a free society.
From 50 Million User of Blockchain, to 500 million users
Some predictions: Representative democracy will be terminal within 20-ish years (obviously this could be a lot longer, it could be less long, all kinds of things like that, this is of course, you know, it's the most extreme speculation I can come up with, I wasn't going to you know get up here and be all vanilla and things.) We're also going to see a enlightenment, essentially, I think in terms of the sort of progress, that we'll see within democratic systems and participation ideas policies, what to do experiments, etc. Monomachies between democracies and all other systems, that's just a fancy word for duel, but I think it's it also implies, like to the death. We're going to see, you know, not every society that goes through this transition period is going to pick the right side. I think that the idea like autocratic system, systems which rely on centralized control, are going to have a very hard time in responding against a new sort of democracy, that is better at knowledge creation and error correction. So, what about blockchains, I haven't mentioned them too much, well everything that I've talked about with governance here, I think, applies to blockchains as well. They're currently, block chains, are very bad at problem-solving. I realized this during the Bitcoin block size debate, which went on I think a little too long, two and a half years. It's also basically every blockchain that's out there right now is autocratic, in the Bitcoin block size debate for example, you could be on team core or team cash, but there weren't any other options there, you had to pick one. No blockchain in existence or planned, that I know of, has good epistemic principles, none of them found it from first principles. And like democracy, they're going to fade if they don't change. Bitcoin has been able to survive so far, but if it doesn't improve its ability to solve problems, then I am not confident, that it will continue that way. If it goes against their foundations, which many of them have an issue in this regard, some of them do state philosophic principles, that you know, are not exactly aligned with the sort of thing, some are better than worse, but to changed their foundations, I think will be very, very difficult. So, the test for both, democracy and blockchain technology, in the future, is going to be, how quickly can they adapt, while avoiding all those bad ideas that we like. I think, that's actually one of the main problems, it is that we like things, we choose some of the political ideologies or policies because we like them, not because they're necessarily the best, or that we're convinced they're the best. So, to leave you, finally, basically this is, I think, the message. We're going to have a chance to avoid making the mistakes we made in the past and it's going to be important that we do that. That doesn't mean, we should rush into things, it doesn't mean, that you know, that we have to go with the first option, or that I'm even right in terms of what I think that's going to be, but when we do have that opportunity, I think it's very important that we seriously consider things and seriously consider, that maybe when mistaken in our opinions. In terms of links and stuff, we're about to finish up, so The Beginning of Infinity, if there is anything, that I would recommend you take out of this talk, it is that book. I think it is the most profound book ever written and possibly the most important book published to date in the history of humanity. Feel free to disagree with me about that, but obviously, I feel quite strong and also, if you're interested in what a democratic system like this would look like, then please take a look at Flux (voteflux.org), we've got some resources there, that's one option, though there are others. Thank you very much!
Introduction: Blockchain is the Social Network of Money and Value First time I heard about Bitcoin was in 2011, from my students at Tel Aviv University, they told me, go you work with social network, you have to buy Bitcoin. But I didn't understand what is Bitcoin in 2011. The reality is, that I understood it only in 2014 when I read the paper of Satoshi Nakamoto.
Reducing conflicts and disputes by smart contracts. Privacy AND transparency. A global village with global distributed database, with equal accessibility for all nations in the globe. DAA - Decentralized Autonomic Agencies. Blockchain based voting system, with facial recognition authentication. Saving 10% of all the public expenses. Tokenization of the public assets.
When I read it, I realized that it cannot be one person. For me it's ten genius people that wrote this PDF, but then, after I read it, I understood, that blockchain is the social network of money and of values. Like YouTube can create social video for everyone from his smartphone, I realized that blockchain is a social network of money and value, so it's like YouTube that can create a video, blockchain can create value, money and other things. Saving, Scaling and Trusting Then, two years later, in 2016 I read that the 100 big banks in United States, they want to build blockchain and they say, they will save 30 billion dollars, if they move to the blockchain. Then I ask myself, if saving about 10 percent of all your revenue as banks or a supply chain company, is it a universal law? If it works everywhere? and I go and check many verticals, like medicine, banking for sure, supply chain, universities, can they save 10% of all their revenue from just moving to the blockchain? I found through 2016 that it is universal law, you can save at least 10% and then I thought, if we can save 10%, it means, that we can move from 50 million users of Bitcoin or block chain or cryptocurrency now, how we can move to 500 million, from 50 million people to 500 million, to half a billion people. It goes together with scaling. So, we have the problem of scaling, how we can scale from 50 million user to 500 million? I remember when I was first time programming in Fortran, when I was programming the mainframe of IBM, and then Steve Jobs came with his revolutionary video and says, computers are for the rest of us. Then I asked, what can I learn from Steve Jobs? And if computers are for rest of us why blockchain is not for the rest of us? Then I come to the trust question, so the saving of this 10% enabled me to understand the scaling and the scaling to trust. And the main thing is smart contract and the inventor of the smart contract Mr. Nick Szabo, because I understand that in the paper of Satoshi Nakamoto, it is a special trust for finance, but it's like 300 years ago or 200 years ago, when someone invented the steam engine, he invented a steam engine in order to work only in one special application, 200 years ago, but then not only industrial engine, like in textile, but it can be everywhere, in cars, in airplanes, everywhere, there is a general engine of power. Smart contracts, I think of it as a general engine of trust. So, it's generic, it goes everywhere and if it goes everywhere and it has 10%, we have something huge that we just began to discover. Then, if we come from saving to scaling and we come to trust, we have to understand, what is the main obstacle to this coming from 50 million users to 500 million users, huge amount of saving.
The DNA as a Biological Blockchain Then I discovered a rule of Santa Fe institute about chaos and complexity, that say, that biological systems can scale much more efficiently than artificial systems, like cities, banks, government and I think they have the explanation of scaling. Why you have to invest 75 percent in infrastructure in biology in order to double your organization? For 100 percent you have to save 75% and why in artificial systems you have to invest 85 percent to double your users, to double your amount. So, I see that decentralization is a main point of biology, because the DNA is amazing, the DNA is a block chain of biology, its billions of years old blockchain, natural blockchain. I see along all the time of the history of science and technology, that we have to learn from biological natural system in order to create efficient artificial system. The last idea is neural networks, because from the 50s when people invent the perception of artificial intelligence, they looked at perception of biological system but then, Hinton came in 1986 and he tried to learn more deeply, how biological neural network work. And from there he invented deep artificial neural network from the biological system. So, if we learn how the DNA as a distributed system, as de-centralized systems that we find in each cell, what happens if every single one from 500 million people, half billion people have the blockchain distributed in each smartphone, everywhere in Africa, China, Europe, everywhere. What will happen? Then I found the answer, that in order to scale faster and deeper, we need to keep the distribution and the paradox between decentralization and scaling, I think we can solve it, if we learn biological system and we try to copy from them to our system. So, you see the scaling from mice, to human people, to elephant. In biology, they do it much more efficiently, so we have to ask all the time, how we learn it if you want to scale Bitcoin and other things. So, the government I see the government's role in infrastructure, like roads 100 years ago, trains, I see it as an infrastructure and we can see a lot of government everywhere, I won't count all of them, everywhere. You look at it, welfare, taxation, medicine, security, safety, legislation, democracy, democracy 2.0, democracy 3.0. The role of the government should be infrastructure of blockchain and learning from the principles of the blockchain. How to take smart contracts into the government, how to take proof of work, the kind of chance or lottery, in order to create more democratic representation, much more than the representative democracy. So, we see, it's everywhere for the government. The Blockchain as a General Trust Machine So, I come to the point of trust and I think, that the blockchain is an amplifier of trust. I take it from economists, in the year 2015, when I finally understood what is blockchain. We come now from specific kind of trust to generic kind of trust. It's like the dream of general artificial intelligence as it's still a dream. Because artificial intelligence can drive a car maybe, but it cannot clean my apartment yet, and I don't think that artificial intelligence will be able to clean my apartment in the coming 10 years. So, now we have the technology of general kind of trust and we can work with it. Saving, the saving that I discovered is, that we have to connect my experience for 20 years, since the year 1995 with social network, with a beginning of social network, the beginning of the social and to understand, that if blockchain is a social network of money of value, then we have the missing link, in order to take all this, what we call sharing economy. It's not so much sharing, because Facebook and Google, Uber and Airbnb, it is not sharing, its sharing for consumer, not for the producer and the stuff Alvin Toffler said in the year 1980, 40 years ago, he said, we have to move to the prosumer, not producer and consumer, but to the prosumer, how to create Airbnb as a prosumer? How to share the profits of Airbnb and uber to the taxi driver, to the people who sublet their apartment? This is a question. So, I think the main point is moving from sharing economies which are not so much sharing, to collaborating economy.
How the people who like on Facebook or search on Google get benefit of it, get part of the money, why not that Facebook which is maybe a five hundred billion dollars, it's been worse only 250 billion dollars and the other 250 billion will go to the user, to people who like, who write posts. You see, the sharing economy is everywhere, Uber, Facebook, Airbnb, everything. From Sharing Economy to Collaborating Economy So, the question is that, if we can move to blockchain, we can really move from sharing economy to collaborating economy, because this is also point of scaling. Because the sharing economy of content is worth now three trillion dollars and we can move from three trilliondollar worth of content social networks to economy to 30 trillion dollars, to sharing everything. Like I said, look at Tesla for example, not as electric car company, but I look at Tesla as social network of electricity, if we can create electricity from solar panels, from turbines. As I saw from plane in Vienna, just six months or one year ago I saw from the plane 50 or 60 wind turbines, now I saw 10 times more everywhere. Wind turbines everywhere, solar panels in Morocco in Africa, in Israel, everywhere I see solar panels. So, if we create electricity, why we need central electricity utility? It's like, you know, like before Apple. We have central television, central everything, but when we have smartphone, everyone can create and share content, video, text, music, everything. So, we are now at a turning point that we can create electricity in distributed manner, everyone can create electricity from solar panel or turbines and we can share it. In maybe 10 or 20 years, we'll have the Internet of electricity. We can share electricity by peer-to-peer, for everyone. From the Sun place from the solar panels, to wind place from the turbines and we can share it. And how we will share this electricity, or car like uber 2.0, like Airbnb 2.0, we need a new financial system. This new financial system of the collaborating economy is the blockchain. We found the missing link of this 30 trillion-dollar economy, of a social network of everything, we connect it to the new kind of finance, the blockchain finance, when we connect it, then it will be the other step for moving from 50 million user to half billion and why not 5 billion, why not all the humanity? All the world may move to this collaborating economy. Now about the point of saving? Why is it automatic? I discovered the rules, that everywhere you move, every vertical, every industry you can save 10% and it could not be an accident, that in the year of the biggest financial crisis, in the first half of the 20thcentury, 2008, the big financial crisis as they say, it is the same year, the same month the white paper of Satoshi was written. The Coming â&#x20AC;&#x153;Blockchain Springâ&#x20AC;? It could not be just an accident. So, it cannot be an accident, this 10% rule, I read a paper, I think of McKenzie, that said, that we can save we can save about 3 trillion-dollar by the year 2025, what is this amount? As I said few minutes ago, all the social economy, social network economy is worth about 30 trillion dollars, so if we take 10%, we suddenly discover, it seems like an accident, but it's not accident at all, that we can save three trillion dollars, so you see, this universal law of saving works everywhere, everywhere we touch, we see that we can save 10%. So, how the government can invest in blockchain infrastructure? To save for business 10%, to save 10% for itself as a government and where to invest it? It's not only saving for business for the firm, it's saving from international commerce, for example. We see the fact, that the world economic forum in Davos, this is their research, that we have 70 percent growth of trade with the DLT. This is a better name for blockchain, digital or distributed ledger technology, because they think include other kind of blockchain without block, like IOT like DAG and things like this. We see a jump of 1.5% of growth of world GDP by this technology. This is McKenzie who checked 15 industry and found the same rule working again. This rule that I discovered in the year 2016, about 100 biggest banks in the United States, it works in
TRANSCRIPTS OF SPEAKER’S SPEECHES every other industry. We can find here, with the red line, what is the role of the public sector. We see, that in public sector it can be efficient everywhere, everywhere in other industries and because it's very cheap kind of movement of money, this is other point of a saving. We can see, that we are now at a point of imbalance, I mean now, in October 2018, there is a big gap between the real economic activity of the Bitcoin and the price of the bitcoin. There is a gap, it is gap similar to the year 2016. The zero where we will it be in the year 2021 the year of the Bitcoin Spring, that come after 2018 the year of the Summer, 2019 the year of the Autumn, and 2020 the year of the Winter. In the coming four years we can scale from 50 million people to 500 million people. Thank you very much ! JULIO ALEJANDRO CEO of Jada Consulting, The CyberSpace, United Kingdom Blockchain isn't money, a technology, or an investment vehicle, but a creation of new markets of social organization, where people will be able not only to transact digitally but to produce and live in unimaginable fashions. Intentioned Communities, as the Free State Project, Seasteeding, Liberland, and, to a certain extent, Bitnation, are their corollary examples. Embodying Cody Wilson philosophy, they can be self-sustained by networks of electricity and material production outside the authorized of forms of coercion, violence, or national-government.
The Applied Austrian Economics into Immigration and Lifestyles Thank you very much. My name is Julio Alejandro, I’m the CEO of Jada Consulting, over the past four years I've been working with a number of companies, organizations, and institutions worldwide on Blockchain, systems of governance, and Tech Smart Cities. Universities & Consulting I’ll share my experience in two areas. The investigative research that I create for colleges and universities and my personal experience with working with startups solving global complex problems through technology and entrepreneurship. We create, implement, test, and fail systems of decentralized political technologies that eliminate violence and create markets of innovation in governance. Such systems, build markets, where technologists, entrepreneurs, and system thinkers would innovate, create, and build products and the services that society needs to operate more efficiently. They are startups, rather than centralized and national governments, which solve complex global issues. Decentralized World How would a world without a government? Without a central authority, central bank and centralized Constitution, legislation, a set of laws operate? Which empirical evidence, examples, and experiences do we have? What is the moral philosophy that underlines these startups? Are there Lessons Learnt, Best Business Practices, and set of practices and conducts they’ve had? Why do they build this? Their ideology, their mindset, and their desired outcome. And why is this all connected to Blockchain not as money, a technology, or ICO investment mechanism, but as a political ideology, a political movement, and the result of this ideological movement which after one hundred years of experimentation, finally concluded into one political technological tool we nowadays call Bitcoin.
Three Markets of Innovations I will begin providing three examples of what I consider to them to be Market of Innovations. Decentralized Autonomous Organizations (DAO’s); 3D Printed Products and substances; and intention communities. It is the evolution from the digital to the physical world. Landing concepts of e-Governance, Game Theory, Austrian and Chicagoan Economics, and positive incentive mechanisms from the digital Cloud to a territorial jurisdiction. Not to ameliorating government, but to create new civilizations. Distinctive and sometimes noncompatible with current axioms of liberal democracies, human rights, nation-state jurisdictions, and voting, redistribution, and lifestyle and commercial restrictionism. Who innovates and builds Markets of Governance? There are entire communities. Ecosystems. Paralelni and Paralelna Polis, Free State Project, Anarchapulco, Liberland, Aragon, Aeternity, Startup Society Foundation, Seasteading Institute, Bitnation, Vote Flux, Newspeak House. Building O2O, Online to Offline, methods of human governance which existed and are mostly used in Blockchain and cryptocurrencies and exist over two radical and substantial principles. Untraceability is key Right to Privacy. Privacy is enhanced by anonymity, untraceability, and non-atribution to the physical (legal) persona. On the digital world, privacy lies within transactions and exchanges. And there are three of them: • Information transaction. Sending and receiving encrypted files, videos, WhatsApp messages, emails, or website access. • Commercial transaction. Building Money, Markets, and Banks. • Ownership transaction. New relations to Assets, collaborations in “social contracts”, relationship platforms, and donations or welfare in communities. The organizations I mentioned, build Consensus Algorithms “offline”. Proof of Work, of Stake, Authority; DAG’s, fault tolerance. Systems in Delegation. Leased. Federations. Etcetera. All systems to decrease hierarchy and facilitate decision-making. All create trust, the trust which was necessary within Centralized models (government, banks, corporations) and now trust democratizes, becomes global, auditable, universal, and available. Now, offline. First Example: DAO’s DAO’s, Decentralized Autonomous Organization, as it name's implies, is to be autonomous and non-submissive of a jurisdiction, government or central currency and is resilient, has no single point of failure, to foreign and malicious actors trying to attack its operations. It collect and distributes taxes without governments or bureaucrats. It is a transnational corporation with no CEO or Board of Directors. It is a Court System which resolves disputes without magistrates or national constitutions. It is a “pool of money” or pool of resources which a community has and organically, on horizontal, organic, and trustable ways decides to build something, a startup, or solve something (unemployment) using Hiveminds, Collective Intelligence, Wiki Politics, Prediction, and Reputation algorithms in real-life. It also enables Machine to Machine trade. It delegates decision-making to mathematics. A computer talking to another computer to find equilibrium on how to serve the best all participants in a hollistic way which harms, excludes, abuses, or has preferences of one group over the other. Being precise: providing membership “rights” and access to the people in this BlockWalks Conference in the Bratislava Castle to decide how to run the public architecture, infrastructure, and
transportation of a city. How can a car travel? How should traffic lights operate? Who should pay for which roads and why? With everyone, not just the bureaucrats, agreeing on its planning, strongly aided by mathematics and such “offline” Consensus Algortithm examples. Aragon, MakeDAO, Melonport are companies-startups building DAO technologies; Augur, Gnosis, Oraclize, build “Oracles” and prediction markets. European mainly, many based in the Blockchain European capital: Berlin. It is crypto-anarchy, anarcho-capitalism, and Objectivism (Ayn Rand). Ideologies and ideologues with visions ----- Hivemind. Collective Intelligence. Prediction mechanisms. Second Example: Intentioned Communities DAO’s exists in the cyberspace, not on the physical world. We cannot see them, we cannot touch them. However, the people who would like to “Build the Roads” and run the city of Bratislava through algorithms, untraceability, and free trade commerce have decided to live together under the same roof or same geography. They decided to build a Blockchain City. That’s too ambitious. All of them have failed, but economists, libertarians, crypto-anarchists have centuries longed to build the Ayn Rand’s Galt’s Gauch and create Special Governance Zones, Special Innovation Zones, and extended Special Economic Zones over the land, the sea, and the outer space. Good luck, right? Why, then, do they matter? Because they provide multi legal systems that are not centralized in one Constitution. In Slovakia, the rules of Austria, China or Nigeria, do not apply. The individual has limited capacity and actionability to oppose those laws or systems. They fear incarceration, detention, torture, or abuse if they’d create a city-state, with different military and defense system, inside of any country. You cannot innovate in government. Liberland, the Seasteading Institute, and the Free State Project. Are well-documented, seriously established, on-going and semi-legal decade-old projects (not Liberland though) to inject competition in a jurisdiction which government starves in innovating governance. They focus on having Open Borders immigration, defense of Property Rights, and radical tech entrepreneurship. Mostly libertarian, they oppose taxation, commercial licensing, and innovation regulation. Bitnation, me as one of the nine members of its Advisory Board, creates the Jurisdiction as a service (JaaS). So you can exchange any kind of “Transactions” (informational, commercialfinancial, or of ownership-collaboration) inside Slovakia without using Slovakian constitution. Yes, laws and government without the honest, transparent, capable, and hard-working ethical politicians you have in Slovakia and across the European Union and Parliament. P2P excludes taxes & government All Peer-to-Peer (P2P). And Peer-to-Peer means no government, no Central Banks, no commercial regulations, and no taxation, of course, involved. If Alice and Bob create an agreement, their adherence to a government should be voluntary. If Syrians, Venezuelans, North Koreans, Cubans, Afghans, Belarusians, or Mexicans decide that their government is stupid and useless. Why are they forced to respect, rather than rationally reject, their tyrannical and stupid politicians, laws, and systems? With Blockchain, there is no revolution. There is freedom for women in Saudi Arabia. There is “free speech money” for journalists, Human Rights, and opposition parties in Russia. There is
entrepreneurship in Africa and Central Asia. There is hope for oppressed Black and Brown, immigrant and illegal, communities in the United States, France, and Europe. With Bitnation and Liberland, you’re no longer a prisoner of geography. You do not have to adhere to Sharia Law, Vladimir Putin wishes, or Donald Trump commercial and immigration restrictions. There are private property, negative, natural, and constitutional rights. Third Example: 3D Products & Substances The third example of Markets of Innovation in Governance is in self-production. Not autarchy (a system of radical self-sufficiency), but the capacity to consume products who are inaccessible due to geographical restrictions or illegal and unauthorized by government. Pharmaceutics is the best example. Drugs which are produced, allowed to be tested, and commercialized only by government allowed corporations in restricted markets (ie: Only certain pharmacies, with a doctor prescription, on small quantities). A small company, a family business, a non-global startup, see too many restrictions in licensing, the barriers to entry are too high, innovation is limited or circumscribed to bureaucrat-tolerated legislations, otherwise, only sold and tested (with deadly effects) on the dark markets. Pharmaceutics is, by definition, an oligopoly, a system of “government approved trade”. Hard, memory, and illegal drugs, proteins and amino acids, prosthetics, gasoline, fast or trash food, superfoods, sexual enhancers, perfumes, and most importantly, life-extension mechanisms like cryonics. Products, entire industries, unregulated or unapproved by the US Food and Drug Administration (FDA) out of their innate inefficiency to understand innovation and trade. How 3D Printers became worldwide known was by Cody Wilson in Distributed Defence in Austin, Texas for 3D printing products for defence. Large plastics and formations, some in refugee camps, have also gained social media attention. 3D Printers can become your own home lab for experimentation. Ideologists & Ideology Blockchain is the technology arising from the Austrian School of Economics. From Scotland and Chicago. The intersection of violence, trade, and entrepreneurship and innovation. Of laissezfaire in your lifestyle, immigration, and commercial choices. It is, in my opinion, the product of Hayek, Schumpeter, and Ayn Rand. But if I might be clear, Blockchain needs to be understood under three interconnected principles: CryptoAnarchy (Tim May), Anarcho-Capitalism (Agorism), and Objectivism (Ayn Rand). BlockWalks Conference Everything you have heard in this conference, from all speakers, explains that most of them didn’t work in disruptive tech and governance. They want a better, more efficient government; we are building new civilizations. They want Sweden, we want Galt Gulch. They want to Centrally Plan; we understand that societies cannot and should not be socially engineered. We want opt-in and opt-out societies. We want voluntary societies: they want enforced through violence and coercion societies. We have multi-currencies, multi-constitutional, multi-legal, and multi-organizational systems. They only want one system. We want to try, fail, and experiment which system is more efficient, faster, honest, transparent, inclusive, and desirable so people can migrate. The one where less corruption, corporatism, abuse,
TRANSCRIPTS OF SPEAKER’S SPEECHES theft, solitude, suicide and depression, lack of integration, mismanagement, poverty and inefficiency exist. Blockchain is about building new civilizations. Building new Markets for Governance Innovation.
many cryptocurrencies, if it's fast enough. Okay, that does not touch the state, because in states, everything's going in very, very slow way. So, if we are able to make transactions within days, it's largely enough for majority of problems we want to solve.
Two Last Messages For those who favour innovation in government and the public administration, it is very important for you to promote less taxes, not more taxes. Less regulations, not more regulations. Less government, a minimum government, and non-obstructive governments, instead of a “smart” government, run by “smart” politicians”, with “smart” regulations, and predictably failing outcomes.
What is very important is smart contracts. Up now, we have a notary and other things which we use to go to and to create huge contracts, to sign it etc., but from having public blockchain, we can use something like smart-contracts which can be implemented in automated way. Okay, as I said, time is not really an issue, concerning time, if you are buying goods with the credit card, use your visa or your master card, you would like to pay immediately, within the second. If you are making something with state, if you want to change, if you want to sell your house or something, it is the process, which takes usually a couple of days or even couple of weeks.
For those who do not understand anonymity and untraceability: understand that Bitcoin as it exists at the moment, it is the biggest wish and the wettest dream to any authoritarian or totalitarian regime. If governments do not want to use Bitcoin, it's based out of their own ignorance and stupidity, it allows you to trace and to provide exact liability to every single transaction that has existed over this web. It is a tool for surveillance that can and will be used for controlling, censoring, and attacking an individual, powered by an immutable ledger, that people will not be able to control or erase. Bitcoin that it is not Monero, ZCash, Pvix, or Dash -or uses the private State Channels that Aeternity provides, will likely lead to more government oppression. Most of the people that worked in cryptocurrencies and early Bitcoin projects 20 or 30 years ago were libertarians and privacy advocates. We need to move, and I speak for the start-ups, to a society of privacy, where we have individuality to exchange into voluntary interactions on a private manner. For everyone who has attended my lecture, I thank you very much for your time, my name is Julio Chandra and I'm the CEO of Jada Consulting. Thank you very much. prof. Ing. IVAN KOTULIAK PhD., Professor at Slovak technical university, Slovak Republic The talk will define required conditions of the blockchain deployment in public registries. The strong and weak points will be detailed. The whole approach will be illustrated on real life, ongoing application and visions. The visions will be used also for discussion entry.
Blockchain in Public Registries - where it makes sense I'm happy to be here with you today, a lot of people motivated to change the world with blockchain and especially public world which is particularly difficult to change. We have had very nice speeches about disruptive changes, but we can also talk about the evolutionary changes, which I personally believe in, but maybe I am not right. So, why to deploy blockchain in general. I think, we are not obliged to go deeply in this case, because we all know, we are all fans of a blockchain, of new technology, etcetera, but why to deploy blockchain into public registries, where only Authority can write, can make any record? Up to now, we all agreed that there are states and we have created a mechanism how to believe that what happens is right. There was talk about democracy, how can we deployed democracy, how can we enhance democracy, etc., but still we have the system how to believe, that what is going on is right. In what blockchain can help us, is control of processes, so everything what will be implemented in blockchain is visible, maybe not everything, but majority is visible and may be controlled by everybody. That is very important, so there will be public control over what's going on. The second thing is, that speed is usually discussed problem of bitcoin and of
Okay, four well-known key concepts of blockchain, okay so we have distributed shared ledger, we have cryptographic consensual algorithms and smart contracts and I don't want to go into details, as you all know everything about it, just to go briefly what's going on. So, what are we replacing? We are replacing today existing databases authorities are writing with their own validation rules. So, it's not single point of failure, because there are usual distributors etc., but still, there is authority who writes too and client has an interface, well known interface, they are coming to the office and then you can submit something to these databases. We would like to replace it with blockchain. And to be able to put something in the blockchain, we need the validator, validator who can create from transactions block and from that, he can add to the block to the blockchain and really to create, to validate the transaction, so that everybody from us and everybody who is outside can believe, that the transaction is valid and we can build on it. So, authority today seems to work pretty well, but if we have distributed consensus, we can have dis-trustful parties, who can believe what state we do have. That's very important. Then, we have completely unambiguous rules about the validity, so, we are sure what's valid and what's not valid. Okay, perhaps, we can solve many and many other issues, but we'll come to it. Hopefully, everybody believes, that some basic cryptography works, so we have hashes, which can produce different results from very similar input. So, there is SHA-256 example, which produces always 256 long response to any input and produces, rather randomly output. #2 - Signature What is very important in signatures, in using public blockchain, that everybody of us has his own signature. So, he has his private key, public key and also now, you can communicate with public authorities via electronic way. As we have electronic public services and we are able to communicate already now. So this is nothing new, what we can discussed which is blockchain, that is something what already exists. #3 – Consensus Okay, consensual algorithms, and this is the key point of how to implement the blockchain to public sector in my personal opinion. We know that there are basic algorithms, like Byzantine fault tolerance tool, proof of work, proof of stake, if you with wish to distribute, delegated proof of state and proof of authority. I think, we don't need to go to explanation what is the Byzantine fault tolerance tool, in Byzantine, who needs to maintain good state, maintain credibility and to know if they should attack or should not attack, they are communicating only using messengers and the messengers can be compromised. So, how to be 51 percent sure that you can attack or you should not attack. So, there's mechanism, that is well-known, the Byzantine fault tolerance, that you are exchanging, everybody is exchanging messages with each other. Majority of results you get, is the right response. So, either you will decide finally everybody to attack or not to attack, surrender. The mostly known algorithm today, consensual algorithm, proof of work, well-known as mining algorithm and this is how to help to solve a very complex puzzle and to check, if this puzzle was solved correctly. So, easily I would say, you should tell me the number, which is longer etc. and it will take you many, many hours to resolve this puzzle, but I can easily check if you are right or if you are not the right.
This mechanism is known and it is used in Bitcoin, it is used in Ether and many other crypto currencies and has its limits, because you are consuming too much energy today, to really build your blocks. The good thing on this is, that you are mining, so you are creating new money, which is the incentive for you to proceed with mining. By the way, for are valuable guest from foreign, the first mining academy, the real mining academy was built in here, in Slovakia, in 2017 in Banská Štiavnica, if you have a time, you can go there and visit this place. There was a lot of innovation in that time, what we have learned, but this has nothing to do with today’s mining and bitcoin mining, etc. course. So, next step is the proof of stake, delegated proof of stake. There is deterministic way, who will add the new block, who will take the transactions and how they will be validated. This reduces significantly energy consumption and also is more efficient, there are already crypto currencies, which are appearing, which are built on proof of steak consensual mechanism. Now, proof of authority, which is not so popular, especially in cryptocurrency world. It is the system of signatures which should be distributed from the state and should be distributed in a safe manner. So, that we are able to sign the transaction and add it to the block, sign the block and add it to the blockchain, so that everybody can check if the blog was added by authorized authority. So, the symbol of authority system, so therefore it's approved, I put on the slide approved. The issue here is, that it is not so distributed, so we should agree together, if we would like to use proof of authority, who is the authority and we give to the authority the possibility to create transactions and we all believe in it. So, it's something, we have heard from the first presentation, it is philosophical issue if we believe in democracy as we know it today. Or we would like to make a disruptive change and we don't want to believe anymore into democracy as we know it today. By the way, from today's point of view, in my opinion, it is nearly the only possibility how to have this approach, because today, in many states, the government is divided between legislative, justice and executive. If we accept this differentiation, disparity, then we need really to have authority who can create block and who can add the block into the blockchain. So, if we want to go in evolution manner, we need to have proof of authority. That doesn't mean if you have proof of authority, that we have just one signature. Usually we would like to use multiple signatures, one for signing block, one for signing transaction and inside the transaction, we can use a lot of signatures, so it's not only about one signature, which we should believe, but this could be about many signatures and it can be on multiple levels who and when and why is signing. Of course, we are still applying the rules of cryptoanalysis etc. So, I have taken, by occasion, the example of land registry office and we'll have a very nice a presentation in afternoon given about land registry in Sweden, so, I will go quickly through how and what do we do in general. It is not only in Slovakia, but in general and then the company if you want to sell the house or buy the house, usually the required steps are, that we need sellers, we need to buyers, we need sum, for how much we are selling and buying and of course identification of property, eg. house. So, the first step is to prepare complete documents, usually by the advocate, which states that seller is selling the property to buyer for certain sum. So, we are preparing here the documents, once the documents are prepared, it has to be signed and you should sign it in front of the notary, so it is proved, that it was you, who signed the document. The seller should sign in front of the notary. I forgot very important step, buyer should put money somehow or he should provide a proof that he put money into notary custody or to the bank. Bank gives him money, once the contract is approved. When we have money, we have signed the documents and the then the documents can go to the land registry office and it accepts or denies the transaction. If land registry office accepts the transaction the seller gets money and the buyer gets the property. If not, there is very complex system how to roll back the transaction. What's now? Because we are talking about blockchain and you know all these from everyday life today and you don't need the tools that I explained, because you know how it works. So, why to make paper contracts, we have smart contracts here. And in the future, there is no need to
go to advocate to prepare a very complicated contracts, because we can have prepared smart contracts and, of course, I can sign the contract with my private key, which I have, which was delivered to me by the state already. So, I don't need to go to notary and approve that it's my signature. Still we need somebody, who will put it into blockchain, so we'll address this issue a bit later. But what is a very important, if we accept that we have some public, state, blockchain, then we can have automatic execution, because we can have external interfaces, APIs implemented in land registry office. So, the smart contract can be done in automatic way. Without the need of some manual tracking, or with some manual events. So, we have blockchain now, we should build, we should use it to improve the services of the state, because we can use make it in more efficient way and we can make it smoothly. Okay, there is an example, we can have some code, what we had for smart contract, based on some pseudo-code, which delivers also the functionality, which I described previously. Which goes exactly in the same way, how exactly will it be implemented depends on kind of blockchain we'll accept and what languages we will accept for public blockchain. Maybe there is one issue, which I didn't address, there is the identification of seller or buyer, so we need exact person and maybe we need exact ID of their wallet, because they will transfer money from their wallet to the smart contract and so, we need to be sure, that they have put it there and maybe this is now according to privacy rules that we would like to have. If I'm telling blockchain, I'm not telling that everything on the blockchain is visible to everybody. Part of the blockchain for the sake of privacy, can be encrypted and available only to authorities. Pay attention to these things, even if we are talking about blockchain, not everything in the blockchain is readable to everybody. It is not golden rule, which we should hold. Who will create the block? How will we sign? I have said it, I have my own signature, I can create smart contract, smart contract which can be signed by seller and by buyer, but somebody needs to approve that transaction is correct today. Somebody should approve that this transaction is added to a block. This is the question, this is the big question which should be resolved. In my personal opinion, for a moment it could be notary, who will take the transactions and accept them and bind the transactions into blocks and create the new block in the blockchain. Afterwards it will live on its own. Before finishing my presentation, I will provide maybe some insight of the future, because for a moment I've talked about proof of authority and how it will work, but there was a very nice presentation about philosophy about how democracy can work. Blockchain can be really a tool to change democracy and to change everything, because if we imagine now, that we don't use proof of authority, but some other proof of something, consensual algorithm, proof of stake, proof of work, I don't like proof of work. Then, we can vote as a majority, which kind of contract do we use, which kind of blockchain do we use, which kind of proof do we use. So, this can be also part of an election system, this can be also part of the democracy, selecting how the state including blockchain should work and prepared solutions can be selected upon the votes easily by implementing them by people. Okay, we don't need proof of work for that, because if we give the opportunity to people, to vote which blockchain is a valid, which blocks are valid, then we can let them vote. Thank you for attention. NICK SZABO Blockchain Cryptocurrency and Smart Contracts Pioneer, United States
Keynote Speech about SmartContracts and history of money Today I am going to give a historical perspective on contracts and also talk about the smart contracts and the present and feature of those. So, when we think about society, we can think about it in terms of layers of architecture starting with a foundation and building up, or in tech-
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES nological terms, we can think about it as a protocol stack. You have lower layers of the protocol stack, your basic network, your foundational layer and proceeding up from there. So, in terms of society, we're going to start with security. Because, if your features, higher level up can be attacked, then you have a very imperfect system that's often not going to behave the way that you think the rules say that's supposed to behave. So, we're going to start with security and then we're going to build up to the law level, the level of rules, and consider what advanced digitalization and smart contracts can bring to that. So, without security, there's no law or commerce. By secure, I mean it minimizes vulnerability to outsiders, to insiders, minimizes the vulnerability of any feature that is desirable in your system, that could be corrupted. You want to minimize the vulnerability to that corruption. So, that's a very broad kind of definition of security, it's not just locking your front door to prevent a certain kind of attack, it's a very broad definition of security and with block chains in smart contracts, we can start applying this much broader definition of security. So, we should try to secure all the important features ultimately of what we're trying to do in life. So, I'm going to go back to talk about a very ancient historical foundation of this, at the dawn of civilization, the Mesopotamian and Indus Valley civilizations here, they had a system of securing goods for trade and transport and it basically started with, they didn't have paper yet, they didn't record things on paper, in fact they started the system even before the invention of writing. So, they would put wet clay around the plug of a jar, the rim of a basket, the knot of a rope, around a bale, so that if it was tamper-evident, if you tried to get in and get those goods, it would destroy this seal. They would thoroughly cover the impressions of a seal with a unique seal pattern, which you see here some examples of that, so for example you see the cylinder here and then this is the resulting seal it makes. Leave that to dry, so it hardens, and the seal must be broken under proper conditions in a proper ceremony and these guys mixed up religion and business. So, if your seal is broken before the cargo arrived to the destination, that could bring you divine retribution in these cultures. In our modern accounting terms that means fraud or error had occurred if the seal was broken, something you did not want to have happen. Okay, so with the dawn of writing and invention of numbers another system of tamper-evident numbers appeared up. So, on this one side of this clay token, we have lists: 120 pots of wheat, 90 pots of barley, 55 goats and on side two, as a checksum, it's a total of these numbers so if some of these things goes missing during transport or when they're being stored, you can check and it reduces to the probability of an undetected error, it can actually slightly doubles the probability of an error, because you can make an error recording, but it greatly reduces by a factor of a square the probability of an undetected error. So, this could greatly increase the reliability of cross-border trade, doing trade with people you don't necessarily trust and trusting putting your goods with people you don't necessarily trust. You can trust somebody at the other end, who will check this protocol, but you don't have to necessarily trust all the shippers in between.
Empire, they had centralized a few radio stations, they had centralized newspapers, railroad stations and so, as a result, there were only handful places in St. Petersburg, which changed name to Leningrad after this guy and Moscow, that they had to take over it, that the Bolsheviks had to take over and boom, I was gone. So, it was a very fragile system that was very vulnerable to that kind of takeover and unfortunately, we're starting to see some of that today, with some of our digital services, as central banks go to digital systems and they naively bring the kind of centralized administration that we've had with digital systems. These have become extremely vulnerable to catastrophic failure of this kind or of some hacking cyber threat kind. Similarly, with our social networks, we're now seeing lots of campaigns of censorship going after the CEOs of, if you look at Jack Dorsey for examples, timeline, you'll see an endless amount of people trying to get him to censor their political enemies. These are single points of failure, the Jack Dorsey's and the Mark Zuckerberg of the world, the CEO of Google, these are single points of failure in our global digital ecosystem, that are that are very vulnerable similarly to the railroad stations and the newspapers in Czarist Russia. It's very tempting to do this though, because it makes life simpler when you're trying to think about security, all of us trust some authority and then we don't, then you don't have to think seriously about security, but of course you're actually leaving a security hole when you do that. So, when you really want a system like Bitcoin that can be globally seamless, trust minimized, you need to minimize your trust assumptions that you're making, minimize your dependence on authorities. So, for example, the previous talk on proof of authority, if those authorities conclude and are centralised, you really haven't achieved any of the value of blockchain, because you're still vulnerable to those authorities being subverted or just those authorities making decisions, that are contrary to the rules that they promised you. Physical wealth traditionally has not been very secure. The Aztecs would collect tribute from their tribes and gold, the Spanish looted the gold from the Aztecs, Sir Francis Drake over here looted gold from the Spanish galleons, in World War two the gold standard had a lot of problems, because it was difficult to impossible to ship gold for example between England and Canada and so that destroyed the workings of the gold standard. And of course, vulnerable to Franklin Delano Roosevelt, a president, who confiscated gold from Americans during the Great Depression, and again, a kind of vulnerable form of wealth.
Some modern versions of this is a tamper-evident door, seal and this is an evidence bag and I think I'll talk about this again later in conjunction with the blockchain, but it's very commonly used police evidence, rooms, banks for handling checks and other paper financial instruments, cash.
So, insecurity drives up costs and gets you stuck inside national silos. Our current financial system is heavily dependent politically on that, so if you're using JP Morgan and Chase for example, you're very dependent on United States law enforcement. People who don't speak your language, don't understand your culture or really don't know who you are at all basically, you're dependent on these people if you're using JP Morgan and even similarly if you're using Deutsche Bank for example. So, it depends on government and politics for its security and not Slovakian government and politics, but United States, or in the case of Deutsche Bank, German law and politics. So, you know, when they get hacked, the first thing they do is call a US government agency and try to fix things.
So, trust scales very poorly unfortunately, that's why we need these kinds of protocols. If you look at the crypto currency and in particular the Bitcoin ecosystem, almost all the hacks happen on the centralized exchanges that are on the periphery of this system. The most infamous these being the Mt. Gox hack. Bitcoin itself has been largely immune to this kind of thing, the only attack that's happened was a small attack against what's called the border gateway protocol, which is actually a centralized point of control in the internet topology itself. So again, it's actually a problem of centralization what caused even the small Bitcoin attack. But in general, bitcoin is the most robust, secure and reliable financial system, that's ever been developed, especially for cross-border transfers. It's much easier and cheaper as a previous speaker mentioned than trying to do a cross-border wire transfer through a series of trusted banks, that add their rents to the thing. Centralization is insecure, so when at the last days of the Czarist Russian
Now, computational versus social efficiency, so in the last basically almost a hundred years, computational costs have been lowering exponentially, all our brains been staying about the same size and so, we've got this vast computational surplus, that we can use to start to substitute human authorities and human functions where we can with the computational ones. I'll get later some comparisons of where we can and cannot do this or some feel for that anyway. So, let me guess, the crypto anarchist or cyberpunk ideal was to apply computer science to minimize vulnerability to strangers, so we wanted to solve ambitious problems, like privatized money, there is some history of private money, it's not all just been government controlled and we wanted to apply computer science to create a trust minimized private global money and non-violently protect property and enforcer really, we're talking about its incentivizing or motivating the performance of contracts. So, this is where the idea of smart contracts and
block chains and cryptocurrencies come from this kind of thinking about how to do things, that many people have thought were government functions, in a new way that is more trustworthy and much more socially scalable, globally scalable. So, if we decentralize things per computer science, it's not just any kind of decentralization, it's very specific protocols, like NakamotoÂ´s consensus used in Bitcoin and automate this, we can take some of the functionality, it's currently done by lawyers and investigators and accountants and so forth and so you can think of a blockchain, it's a bunch of robots in green eyeshade, checking up on each other's work and of course, the previous thing had a more in-depth technical explanation in this. But I think this is a good metaphor for high level understanding of what's going on. Society's going back to society's protocol stack, so that was talking about the security, the security layer, which I think blockchains and the associated cryptography are very promising in that regard.
too much for this presentation, but it shows you that these medieval contracts are very simple and they actually make a good models and inspiration for reverse engineering insurance and loans and other assorted financial instruments. So this is instantiation of that one.
Now, I'm going to talk about rules. I'm going to talk to go to the legal level talk about rules and incentives, to follow those rules, so we have highly evolved systems of rules, competition, a procedure of discovery has produced a lot of battle-tested rules over hundreds of years, countless disputes. So, in a sense, we're trying to reverse-engineer the law into software code. We're not trying to reinvent everything from scratch, or at least, I think that's a much more promising approach as reverse engineering these rules, instead of trying to reinvent everything from scratch.
So, security protocol changes control over things, at the basis again is a security protocol, it changes control over assets, conditional on states of the world and conditional on performance. So, you put in your coins again in this old-fashioned machine, it verifies your performance, that verifies you put a coin in and then it automates the return performance, states of the world. So smart contract can verify performance, it'll be doing that often and sometimes it also automates performance. It makes some kinds of performance conditional on others, just as a legal contract would do. So, what do smart contracts buy you? They can save you mental transaction costs or just contracts for difference, that really aren't possible without computers, you want computers to constantly update the price for you. There's algorithmic management, where it's a version or a variation, or extension of an employment contract, or large numbers or people are conducting a large number of objectively measurable tasks, especially things like logistics of space and time requirements and because smart contracts are more predictable, that makes them simpler. Probably the biggest thing right now is the cost of trust and security again, especially in cross-border situations. Because the ambiguity of wet code can lead to injustice, which I will talk about a little bit more, smart contracts are not just dApps and Ethereum contract, what the theorem calls the contract is just one important piece of this, it's on the blockchain, it's trust minimized part but there's also user interfaces for search and negotiation and performance monitoring and there's also performance verification, which typically involves some offline things. If you're transferring cryptocurrency, that can be done online, but quite often, you're interested in off-chain performances like a logistical delivery. So, the phases of contracting, search an Uber app matching drivers and riders, eBay matching buyers with sellers, most the Internet innovation has come in the search phase of making deals. Negotiations, Uber app as a price algorithm, eBay has its auction and this is where the contract is formed, the agreements formed. Performance, Uber has an app that tells the driver or map tells driver where to go, you pay by credit card, eBay has PayPal as usually performance is a weak part, so a performance is typically the weak part so far. So, the focus of my work on smart contracts and I think a big opportunity for innovation in the future is going to focus on the performance phase. Then we also seize or free collateral, courageous motivation, there's a reputation system, such as Yelp and of course, you can go back to the old-fashioned lawsuits, if necessary, but that's far more expensive. So smart contracts, proper, can be negotiated, my company is working on ways to negotiate and then translate that into the blockchain, so we're negotiating a forward financial contract and then these compiles or translates onto the blockchain. work and then run into trust minimize manner and these are the states of performance again our focuses on performance phases can be form performing etc. Each of these stages, the collateral is managed appropriately. So, some of the relationship between smart contracts and traditional law, there's a lot of confusion about this, so the most basic way to think of it as smart contract it's kind of like a repo man, it's a security protocol that controls the burden of lawsuit, the changes controller whereas that's a proper smart contract has the control over the assets, it changes controller assets conditional to performance as it has verified, and so it controls the burden of lawsuit if you want to. If you think the smart contract produced something wrong, then you go back to the traditional legal system and conduct a lawsuit, but that's a lot more expensive. So, possession is nine-tenths of law today, then the smart contracts maybe 99% of law in the future and smart contracts are also security philosophy, makes security protocols correspond to the actual rights and obligations people expect. Right now, we have this hyper-simplified central administration of computers, that doesn't correspond much at all to the rights and obligations that people are promised and as a result, we
Architecture and law design patterns or pattern language are an architectural book and it inspired design patterns in software, really, software is still fairly young. So, we're at the very early stages of all this kind of ultimately revolutionary technology. If we look at what we want to reverse engineer, I'm focusing on business law here, commercial law, so this is what you do what we call â&#x20AC;&#x153;1Lâ&#x20AC;? in the United States, you learn the first year of law school, property laws, probably the oldest form of law, contracts, probably most useful in the modern world and that's going to be my focus in this talk. Secured transactions are related to contracts, it's about hypothecation, collateral, liens that kind of thing, and that also play a very central role in smart contracts and creating that incentivization. I won't get into corporates relations, there was mentioned, there was some talk about decentralized autonomous organizations and that's related to corporations and constitutional law and civil procedures and evidence, adjudication issues, I won't, it's important but I'm not going to get into that neither. So, why do we want to make contracts? Building things or providing services or if we've got three people who won't agree on the colour of our car, it requires combining diverse people and objects in the value producing combinations, this means doing deals. We want to create this engine, it's going to require expertise from Germany a Czech Republic, Slovakia, you know many places around the world, Japan, that expertise goes into making this engine. Why do we make contracts? Alice and Bob want to do a deal that will make them both better off, I borrowed Alice and Bob from cryptography, which shows kind of the parallels between cryptographic protocols which create the security layer including blockchains and smart contracts, which is a higher-level layer, that I'm talking about now. There's a parallel here so we're borrowing Alice and Bob from cryptography, now they're doing smart contracts, they are doing here a traditional contract, even though they may be strategically combative with each other, they may not trust each other very far, they still want to do this deal. They need rules, forceable rules that they'll both have an incentive to stick to and they're motivated to follow. So, contract law really lies at the heart of our system of laws and it is also a place, perhaps not coincidentally, we write your own laws, you can write your own contracts for your own deal. Now, I'm going to talk a little bit about medieval European, some historical context, I'm not going to go in depth and explain all this, this is a loan and they had a very creative system of doing loans with implicit security, because it's implicit interest because explicit interest wasn't allowed and this is where the first shared pool insurance comes from, medieval Italy. If you took a loan contract and had a safe arrival clause to it, you can get one of these early insurance contracts and also, I haven't shown here at a pool. So, a safe arrival is when the cargo arrives, its unloaded, you do that checking to make sure the cargo is intact. This is an example, you can actually fit this on one page, again it's
Getting to smart contracts, you can think of a smart contract as, imagine a lawyer writing the behaviour of a vending machine up, if the party or the first puts in two five cent coins aforesaid party gets a soda, if they put in a ten cent coin, they get a soda, if they put in a 25 cent coin they get back a soda and a five cent coin and a ten cent coin and this would be very tedious right, so you put this in the machine, but since our software capability and our code are getting more and more better, we can put a lot more of this, what we think of as legal code into the machine, into a vending machine like things, which I call smart contracts.
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES have this huge mismatch, we have expectations that are destroyed and we have these single points of failure that they make our current centralized digital systems very vulnerable. So, now we're at the very beginnings of this, these are two very different systems are really, they're complementary at this point, logic grounds on subjective minds analogy and software and Boolean logic and bits, you have the traditional violence-based government contempt and imprisonment or your ultimate redresses for motivating people to follow law and you have a replication in cryptography and other non-violent security protocols and software. Law is very flexible, it is highly evolved, many cases, software is very rigid, that makes it more predictable but also less subject to change if something goes wrong, which it might, because again, we have less experience in software than with traditional law. Law is confined into jurisdictional silos, if you want to get outside your jurisdictional silo, you have to trust somebody in Germany or France or some other EU country who don't speak your language and might conduct the trial court in a different language from yours or they might try to translate language which is even worse and freeze this total mess, when it comes to law. So, software is on the blockchain, it's independent from financial political institutions if it's on when these public blockchains like Bitcoin, or to some extent Ethereum, and seamless operation across borders. Law suits are very expensive, the cost of software are typically very, very low and this, despite the fact that we do all these, so-called wasteful things like proof of work, even after you account for all the electricity and all that stuff, the cost of this are still vastly lower than the costs of commercial lawsuits. I'm going to talk briefly about financial contracts, dispute mediation, pools & assurance contracts and I'm going to skip over smart property, that's interesting future things. We can do collateralized versions of loans, bonds, futures, options, right now the collateral, the trust minimized collaterals on change, stuff like tokens and other cryptocurrencies. The future is, blockchains control more off chain assets, then those can be useful as collateral as well for smart contracts. This is an example of future, this is the same language I used to reverse engineer those medieval contracts, so it's very helpful to just go to an old simple contract, you know, one- or two-page contract, but nevertheless fairly complete and reverse-engineer into a formal language, that's very helpful exercise to go through, to go through those exercises. An American option, now a previous talk talked about decentralized autonomous organizations, the basic core of that and a core of a bunch of other things you can do with blockchains are these pools of money and rules that control who can access this pool of money under what conditions funds get put in or released and so forth. Thank you for your attention. HENRIK HJELTE CEO of Chromaway, Sweden The project is being developed since 2016, and after many months of hard work, in April 2018 we released the third phase, in which the partners tested a live solution of the application. The Swedish Land Registry is a solution to reduce long waiting times and procedures to buy and sell properties. The solution also provides a safe way to check all participants involved in the purchase and sale of a property, such as the seller, the buyer, the broker and the bank.
Swedish Land Registry and its real example of blockchain usage Hello, I am Henrik, CEO of Chromaway. When I was 12, I started to do programming and got really into that. So, I started at the university, studying computer science but after one year I dropped out, because I wanted to do something good for the society, it's pretty hilarious, computer science not good for society. So instead, I started to study political science and
economics and wanted actually to go into the public sector, so I applied for a job at the central bank, but I didn't get that job, so now I'm coming back with a decentralized revenge. So, that was good, because I went back into coding and became an entrepreneur and got to know a developer, that they work in that company and he introduced me to his new project, so he introduced me to Bitcoin as well and the coloured coins product. So, he had made this protocol where you cannot only use Bitcoin as a currency, but you could issue shares, some tokens, things like that and have it securely transported on the Bitcoin network, that was the only blockchain at the time, that we were talking about. This was in 2012, that he made this source code and I joined his open-source project in 2013, then in 2014 it sorts of broke up into different products. Vitalik Buterin was in that product for some time and he came out with an Ethereum white paper instead and we decided that we think that bitcoin is more secure than what Ethereum will be, so we instead started to work with a bank in Estonia. So, this was in 2014, we started work I think and in 2015 we had the first release. So, they issued a cryptocurrency, a euro backed cryptocurrency, that was decentralized transfers on the Bitcoin network, it's pretty cool at the time, but then, there was basically no blockchain industry, so we didn't get that much appreciation for it. So, we thought that we win an award, we get a lot of customers on this, but instead, no one really wanted to work with Bitcoin or the enterprises. So, we started to work with the Land Registry in Sweden instead and at core, we are sort of a technology company, but we've been working with a lot of cases also in a public sector. We started off with public blockchains, but now sort of also do private blockchains and also not coming back into public blockchain and so we have a broad spectrum. So, here are some cases that we've been working with in Sweden, with a Land Registry, I will talk more about that now what's it doing, in India also land registry, another concept. We tried to file also tender for the central bank in Sweden, to look at the e-currency, we're not sure if that's going to happen, but at least we got to the interview phase, which is good. We're still working with real estate in Canada and Australia and some other projects. So, the Swedish Land Registry product, it is basically a joint product between us, consulting company, the Swedish Land Registry, two banks, etc. now run board, as we go more parties, a telecom company that has an identity solution, a consulting company Evry, the real estate agent and also some other government agencies that sort of hang around to the products including, tax authorities. So, we have been working on this for several iterations, we now have a basically two white papers, but the third white paper will come soon, that is possible to download from a home page. Okay what we've been doing, you see two apps here, that's what it's about - having a faster and better process to buy and sell real estate. It's now quite a lot of steps involved and we already heard about this and Land Registry in Sweden is involved in process step number 28 and it can take three months to do the sale of a house until everything is recorded in the Land Registry and everything is done, you do this in papers. So what we're doing instead? You know we're taking this process, all these steps and coding a smart contract, an off-chain smart contract. See an example, so it's basically a workflow, we have users using mobile phones that can do this now in a few minutes rather than months, we have the parties involved and someone needs to run the blockchain, since this is a private blockchain and there are reputable companies that are controlling the blockchain. It could also be a public blockchain, we'll come to that later. So, this is basically a demo, a little bit how it works, you can actually create various players that are cooperating in a contract, so I am creating seller now, we're using a digital identity solution, that we are integrating with, so we are not reinventing everything from scratch. And you create a programmatic contract as a seller and you're creating an instance. On the right, there is a blockchain, so you can see that everything you do is stored as a message in this blockchain. And the contract not stipulates that you can offer property on the market, you put in some information and it's stored in the contract, a new block is added with that message containing that data. And you can now create a broker, now we have a seller and broker, this is our simulating environment, so you invite broker, just put in the public key here and invite the broken stipulated by the contract. So that's
basically how it works. So, you have a message chain, where everything you do is stored and you have some contract code. So, this is not a Ethereum, this is an technology that we have developed, it's an off chain, client-side validation protocol so every player validates all the things, but it's intended to be quite easy to read, even it looks a bit arcane, but if you look, first you have the fields, the data points in this simple contract, and then you have the actions that can be done. So, offer something to the market. You put in a property ID, that's an input from the user interface, the first thing you do is garb that you're protecting something, you check that you have the signature of the seller, so only the seller can offer the property to the market. And the state of the contract should be in the initial state, so you can only do this at the start. Then it's quite simple, it's a workflow basically, you save away some information, you save the property ID that you put in in the property field and you set this new state to be invite broker. When a new state is inviting broker, you have another action that can be done by the seller. It's a workflow that's driven and all these changes are protected by digital signatures and are validated on the clients. So, you have a series of messages, that are stored somewhere, on a blockchain and they are replayed by all the actors in the contract. And If you replay the messages, you arrive to the same state of the parameters of the contract. So this kind of smart contracts we are talking about here can actually be stored on different kind of blockchain technologies, because we're only storing commitments, basically secure ordering of messages, so it could be Bitcoin, Ethereum, but we are using a private blockchain, so it's run by different nodes, some reputable actors, the Land Registry might be one, it could be banks, it could be auditing companies, it could be land registries from other countries, it could be tax authorities. If you want to have a private blockchain, which is based on voting and not collusion by the majority, you need to make sure that you design it in a good way, so you have different kind of parties, that are not able to collude, so might be less safe to have only banks in a certain country protecting something, because they might collude, you don't know them enough, but if you have people that are ready to lose something, like auditing companies that have a good reputation, different countries. If you pick participant in a good way, I think that private blockchains can give more security, at least than we have today. We're also doing another case, not about the processes, but about storing or of titles, that use proof or concept, that we did for Andhra Pradesh in India. So, they have the problem of corruption and actually corrupt registries. So, we're basically making a registry for storing titles, where everything is audited and again, not a single party is in control of that. You might not know who to trust. Right now, it's possible probably to bribe someone at the land registry IT Department, to update a database. With our technology, that's impossible, because you need probably to bribe not only the Land Registry, but the auditing company or one of the banks etc. It makes it less likely to take over that. That's the security model of private blockchains. So, the difference, in Andhra Pradesh we're focusing on storage and transparency, in Sweden and some other countries who are more looking at processes and coordinating between multiple stakeholders. What we actually have been doing? Now we are pretty happy with the technology, that's not the main issue, but that there are, it's a legal aspect that is slowing things down, so what actually is the blockchain in the court of law, it's not really tested and it's probably counted as evidence etc, it's not really clearly tested, same with digital signatures. Now there are coming standards for digital signatures, thankfully, and basically trying to make something, that can work now and so one we work around that we're doing is, as you create a document, which is basically something that is regulated out of the current state in the blockchain, but also pointing back to the blockchain. So that's a like a creative legal workaround to make this actually work in the legal system right now. So, making these detached contracts, do not need to go into the details but it is generating the current state, when it's finished in a standard approved format. So, yeah just going to talk a little bit, I don't have slides for everything, but some other legal challenges, of course GDPR, how can we make sure that we can remove information from the blockchain. I think that's quite solvable, both from technical and cryptographic IDs that we have, but also the fact, that it not necessarily applies to public sector solutions, if you design them in the right way and there was also this idea, that you can have identities outside of the actual blockchain and sort of have oracles that can forget you. But even though the things that have
happened are on the blockchain. Yes, a verification of signatures, we have certificate service and we had some issues with identity solutions not being able to work correctly with certificates. The goal is to make something that's legally working. So, blockchain in other parts of government is a lot about finding the benefits of de-centralization and we'll have more speakers coming in the data and the benefits of blockchain, so don't need to talk a lot about it, but it's quite nice, when your customer, the Swedish Land Registry, he goes out to the World Bank and show some slides and saying, this is the ultimate public sector application. Then you are pretty happy as an entrepreneur, thereÂ´s a lot of benefits to having a decentralized system. So, if you want to have a blockchain, of course, there should not be a single party controlling everything and there is a pretty different architecture, compared to it what you have now. Right now, you basically have, yeah, it makes more sense of course, when you do transfers between organizations, but those are the most useless. So, what we have now is basically APIs between enterprise relational databases, so you have data silos. We want to move probably, you have a lot of people here saying that we want to move this to the blockchain, but right now you have this enterprise relational databases, a blockchain, what's that? Linked list of transactions, it's pretty hard to work with. So, the relational database dominates the market share, other includes also the no SQL databases, blockchain isn't even part here. So how will you actually make a transition to this? So, most blockchain solutions use actually key-value data stores. If at all, I'm pretty primitive, and we found out, that by working with the blockchains, you know, from Bitcoin, we need to index information and see how can we retrieve how much money someone has, et cetera. You can't just loop through transactions. Then we came up with this idea, that we can actually integrate a blockchain in a relational database, so we have a practical Byzantine fault tolerance. This is just some benefits of having your relational databases access to developers and platform maturity, so don't have much slides about this this kind of technology. But, it's quite simple, you have a Byzantine fault-tolerance voting scheme, just like any other blockchain, you're storing actually a low-level blockchain in the relational database, but coding is done directly in SQL if you wish. So, it means, that any developer can actually implement the solution. So, a registry that could actually be a table or several tables that you join together. Validation, that's basically what a relational databases do, they validate things in a perfect way using all the features that are being built up since the 70s. So, we think, that's quite a game changer if you want to implement solutions for the public sector as well as a lot of enterprise solutions. So, this is our product for private blockchains, but when I was releasing a new product, basically a public blockchain again, also working with this ID, to have a relational database combined with blockchain, so we heard about two decentralized applications, but it's quite hard to do right now. You know, if you want to make decentralized Facebook using a new SQL key value store. It's pretty hard, you know, Facebook has built quite easily with MySQL in the start, just hacked together a relational database solution. Now we have 1,800 servers, but we want to bring this model into blockchain programming. So, we think, it's quite a lot easier to do implementations as well as more performant. So, we are not coming back to the public blockchain, using basically an alternative to Ethereum, to make really complex solutions. So yeah, that's a little bit what we're doing in public sector from my company. Thank you. YIANNIS MENELAOU Co-lecturer at University of Nicosia and Managing Director of Lykke, Cyprus Hello everybody, thank you! My name is Yiannis Menelaou and today we're going to speak about blockchain in education and more specifically, how we can issue academic certificates in education.
Certifications on the blockchain at University of Nicosia Here are some of the topics we are going to discuss today, we are going to have some basic introduction, some fundamental reminders about the blockchain, we will have a small social
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES experiment with all of us and then we will go and have a look on how we deal with academic certificates on the Bitcoin blockchain. Now you have just 20 or 30 seconds. Please, trust me, it's free, feel free to scan the code that's not my wallet detail, that's my contact details. It's free of charge and I will give you 20 seconds more before I move on. Okay, let's move on. So what blockchain is? Weâ&#x20AC;&#x2122;ve heard the definition today too many times so I will be kind of quick on this one. We see, that there is the participation of the biggest institutions as well, so it's not the crypto community, the hackers community, which is involved into the blockchain space. All the biggest institutions are actually heavily involved into the blockchain solutions and they even try to give their own definitions and understanding on the blockchain. So blockchain is the shared ledger requiring consensus to be updated. It's nothing more than a set of verifiable data which is publicly available. Based on that fundamental property of Bitcoin blockchain, that's how we proceed to issue academic certificates on the Bitcoin blockchain. Blockchain is not only for financial transactions. It's for all the great applications we saw today and some other things we are going to see in the afternoon. At least, in my case it's for academia, for education and generally we conceive blockchain as being the missing element of the internet. Now we have an additional layer of history infrastructure, which is security and how we share data. Before we move on, that's the part of the social experiment, I will show you an image on the next slide and please raise your hand in case you recognize that guy. I know there are people from the government here, but feel free to raise your hands, do not worry. How many of you recognize this guy? How many of you know this guy? How many do not know this guy? Okay, this guy is Pablo Escobar and the reason I have this slide is because I want to show you, that if you like to participate into the blockchain and do transactions and possibly try to do money laundering then blockchain systems are not the best way. Yes, we have systems that they can facilitate anonymity in the transactions, but if you want to be a big money launderer, stay away from the blockchain. So blockchain is applicable in a variety of areas of the industry as well as the accreditation and the certificates. Some of those areas are the supply chain, where we can measure the quality of the products and it's partly related to the certification process, we will see in a bit. Another fundamental area it's the area of the public governance. I'm coming from the financial services sector and I deal with daily reporting and daily issues with regulators. Actually, before I came on the stage, I just got an email from a regulator about missing one of those elements and it's a big headache for the private sector, trying to comply with the latest updates in the financial services industry as well as from the side of the government in order to supervise all the regulated financial institutions. Again, a big missing element from the supervision of the financial services industry is the identity and their certification. Generally, in education we can say, that we have three pillars, where we can focus applications and the research. The first one is focusing directly on the blockchain core technologies, for example we can go deeper and help in establishing new blockchains developing a very own virtual machines for example, advanced topics like those. The second most well-known application which is in relation to education and generating knowledge in relation to those is the distributed or decentralized apps, where we can have a solid solution to a problem to a company and so on. The third pillar though is more horizontal layer of applications, where we can combine the first two elements and we can generate solutions for the government. This solution I'm going to present today is the certification of the academic certificates which can actually be extended to any certificate issuance of the public sector as well. How do we do it and why do we need to do it first? The academic certificates can be verified on the Bitcoin blockchain and it can actually have the same format like any normal academic certificate. Of course, it initially needs to be verified through the Bitcoin blockchain and we need to use a more traditional format like a PDF or a CSV file or text and things like that. What is the need behind doing this process? All academic institutions need to issue certificates, students are following some courses, they need to provide certificates. In our case we first did this process back in 2014, it was too early and actually it's easier than what you think. We can work around a normal PDF file and verify that on
the Bitcoin blockchain. Of course, the PDF files are enriched with some smart capability and you get a hash code which you can use on a Bitcoin Explorer and verify that this specific academic degree is valid, it's not fake and it's done by the specific University. I will show you how that is done in a bit. The reason why we do it is that it looks like there is a lot of scam activity in relation to academic accreditation, but not only for academic accreditations. Most of people working in the financial services industry or in the government have experienced difficulties. We need to go to the notary to stamp and prove a document or a process. Imagine, if you get candidates to work for you, how can you verify that the candidates actually graduated from Stanford for example. It's a difficult process or references or things like that. These can be verified. A small innovation, I call it small because it's not the real innovation we were the first who managed to do that. We issued an academic degree back in 2014 which is publicly released and verified on Bitcoin blockchain and since last year (2017) all of the academic degrees of our university are released on Bitcoin blockchain. So, if you have any candidate studying at our University, you can verify with a click of a button that this person really got a degree from us. And, that can easily be extended to a public sector, or to audit and the similar operations. So, how is it done? Actually, it's simple, we create the certificate in the normal way, in the traditional way, there is the accreditation body which is the authority for approving this accreditation. We have a specific process, which I will share part of it in a bit, where we pass this accreditation on the Bitcoin blockchain and as soon as we verify information, we grab that information and we pass it on the academic certificate. What does it mean, that information comes from the Bitcoin and then passing but the certificate, it's something we're going to see in a bit. There are some fundamental design elements needed for designing the certificate. Other than the traditional accreditation procedures, which are needed, i.e. the accreditation body, the government, the university, the municipality, all of those institutions which are allowed to issue those certificates. Of course, we have some more technical elements integrated. We have chosen Bitcoin blockchain, because it's simpler, it looks like, until today, it's the most secure. We do not pass personal data on Bitcoin blockchain, we simply verify the transaction and we show that these academic degrees are real and valid and it's nothing more than a self-containing PDF for the university, which we can share. So, it's like a file which has digital signature on top of it. Here are the four steps we take, but let's go and have a look on how this process is done. If you like to learn more about this process, it's a fully open source, you can play around with the code, develop a small project for you and play around. So what do we do? We have the PDF which is done by the issuing body, in the specific case, it's the University and we have all the accredited persons, in our case are the students, and that CSV file, you see it's a plain normal text file which involves value. We got it from the accreditation body and we do some coding, we have a system which passes all the information from the individual people on multiple certificates. So, we have 1000 people in that file, we generate 1000 certificates. So, it's one certificate for each individual. What do we do then? We like to pass a transaction on the Bitcoin blockchain, we need to transform the data, we need to hash the data, so they are able to be passed on the Bitcoin blockchain, i.e., we need to make a transaction, which is going to stay there forever and it's the proof, that this student is indeed a graduate of the university. Because we get multiple certifications and we do the process for many people at the same time, we rehash everything in the so called Merkle Tree route and we pass a transaction on the Bitcoin blockchain and then that is done. Is it done though? No, what is missing is the transaction information from the network, because it takes some time for the transaction to be verified. So as soon as the transaction is verified from the Bitcoin blockchain, then we go back to the blockchain, we get the information, we pass the transaction information on the certificate and that's it. We have an academic certificate, which verifies that the candidate is really a candidate of the university. Now, the possibility of scam is not fully eliminated. Though, what if the candidates prints and scans an academic certificate in such a good quality and places his own transaction on the certificate, then what is actually happening? Of course, we have here the intermediary step where, as soon as the process is done, we send all the certificates to candidates and that's the proof of the transactions. But how can we eliminate the risk of someone trying to replicate these certificates? We have a portal and that's the centralized part of the process and that may be the centralized part of the government for example. As I said at the beginning, we passed on the Bitcoin blockchain just transactional data, we do not pass name, surname the title all of the
academic degree and so on, it is not needed. So, the centralized authority or the accreditation body can actually offer this to the public. That's what we do and instead of going to a bitcoin Explorer to verify the transaction only, even more, you can go on the portal and as soon as you place the hash code then you also get the information about the candidate. And, imagine how can that be extended to any real public service, an offering and more or less it looks like that we have the transaction ID we have the issuing body what is a person what he achieved and so on. And, all that metadata can actually be extended to present additional information if you like if we like and we can do implementation horizontal implementation and link together different or authorities of a government so more or less the technology is not fully complete we deal with academic certificates that simple. More or less we can have extended applications and we can even develop the same logic and apply the same logic on private blockchains or governmental blockchain. So, specific blockchains which can actually provide that accreditation or certification of a related process. That may be accounting process, that may be academic certificates or anything similar. So, it's all about blockchain, it's good if we use it, it gives us, it empowers us to develop very nice solutions and as you saw today a variety of solutions not only in academia, but also, in the private and public sector as well. It's global, we can easily access it with a use of Internet and that's more than enough. And of course, it's safe and we should embrace this technology to be possibly the safest technology we have until today. So, let's embrace the technology and trust each other using this technology. Thank you so much! JAMIE BERRYHILL Blockchain lead for the public governance director at OECD, France Hi Everybody, thanks for having me. I am from the OECD and in case you're not familiar, the OECD is the Organisation for Economic Cooperation and Development. We're intergovernmental organization of 36-member countries, we kind of describe yourselves sometimes as a mini United Nations, but for policy analysis and economic research. Within the OECD I'm part of the observatory of public sector innovation, a small team of nine or ten people, and we have a bit of three-pronged mission within with an OECD, within the observatory.
Uses and limitations of blockchain use in the public sector One is to uncover what's next in governments, identify new practices and trends at the edge of government. Two being providing trusted advice to foster innovation in governments around the world, both globally and one-on-one working on specific projects with member and partner countries. And additionally, turning the new into normal, so studying innovation in the public sector, different contexts, different frameworks and models, governments can apply. Within this mission, we work with government employees and government partners in civil society and private sector on an everyday basis. While not all, innovation in the public sector is digital, we find that there's a lot of questions and a lot of interest in governments, specifically in the digital aspects of innovation. Lately, blockchain has been one of the things that people come to us the most about, with a lot of questions and so we put out this blockchain primer called Blockchains unchained guide for civil servants and while a lot of the discussion, I think I've heard so far today, really kind of goes into a lot of the different interesting uses, but also the technical aspects of it. Civil servants, when they come to us, tend to have fairly, like simple concerns, and things that they're interested in and want to learn more about. We saw a big demand for basically a simple primer and a simple guide on what blockchain is, what it might be used for, what it might not be good for and what some of the other limitations and things to think about are for the government. Part of it was just because of the complexity of the technology and people had a hard time grasping what was, especially on policy level, in the centre of government, where people have a cross-cutting, broad portfolio where it's hard to dive deep into one specific technology. So, we created this guide to explain what it is, make a case for public servants to build knowledge and capacity around blockchain
and understand its potential impacts and to do a few case studies. I will provide more of a broad overview of kind of governments use of blockchain and maybe touch on a couple case studies, but not like this specific deep dive into particular applications. As of a couple months ago, so we need to update a little bit, we're seeing about at least two hundred and three distinct blockchain initiatives in 46 different countries around the world, when we did similar research about a year ago or about a year before this came out, it was about half that. So, we're seeing tremendous growth, tremendous and the rapid acceleration in government's interest in blockchain and desire to kind of start experimenting in that space. There's been a lot of different barriers that have come down in the last year, so that are helping to facilitate this, but I would say that, if we did this research now as we did this in April, it would even grow much more than that now. The things, that we're seeing the most, the biggest one, I think, which demonstrates the tremendous growth in the future is that most of these implementations are, excuse me, these projects aren't actually in implementation stage quite yet or they're more in the area of government-wide strategies and different initiative strategies, before you even, kind of open the door to really get in these projects, most government applications of blockchain that we're seeing are more in the strategy development phase, before they actually even start implementing. A lot of interest in identity and credentials, which is often one of the more complicated ones, but governments are really diving into that, personal records, economic development, financial services, land title registry, which I really like and I like the case study from earlier, because I think it really seems kind of like the clearest cut, easiest to understand use case for blockchain, experimenting with digital currencies, benefits entitlement and compliance and research. Most of these are in the government services realm, less of financial, but actually a lot less than I would have expected and then, kind of like working your way down to the different sectors within government, but we're seeing tremendous interest and people come to us every day with questions and want to kind of get the ball rolling on this. One of couple case studies that we cover in our blockchain primer, guide for civil servants is an experiment and proof of concept that Denmark is doing, where they're trying to track cars from their life cycle, which is a fairly simple clean-cut use of blockchain. So, during a car's life cycle, it goes from various phases from the time it's built to the time it is purchased from the first party to the time that's handed off, until it's kind of down the line, until it's decommissioned. The Danish government partnered up with a start-up, to help build a blockchain tracking system which isn't fully implemented yet, but they're still experimenting with it and hope to deploy it larger. It kind of addresses a problem of like more secretive hand offs of vehicles and sales to ensure, that things are being done, that minimizes the risk of the buyer, minimizes the risk of the seller but also to ensure that government is getting all of the tax benefits and taxes it's due from those sales and purchases. Just another quick one is an interesting use in land title registry, so BenBen in Ghana is a private startup, that has partnered with the government to develop a new land title registry system across the country. Before, this was a super fragmented process, there wasn't a universal way of conducting this, the sale of a home or the sale of a building would often take months or a year or more - to fully conduct the transaction. Afterwards, there were incredible disputes about who owned what, whether it was done properly, whether the person who sold it to the other person actually owned it in the first place, so they've actually gone down to reducing the transaction times by 75% and reducing tremendously the disputes as well. I think that, what we're witnessing in the observatory anyways, the governments are more and more trying to do the land use as an initial test case, because it is one of those simpler applications. So, we have some limitations up here and these are based on the questions that civil servants have to us, when they come and they're starting to explore blockchain and they're interested in learning more. There are things, that they have, kind of conceptions they have in their head about what blockchain can be used for and what its limitations are. I think, that to them, one
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES of the biggest benefits of blockchain, but also one of the biggest limitations is the immutability aspect of it. So, as we all know that blockchain is just an add only list and once you add it, you can't really remove it, you can kind of layer on top and layer on top, but most of what governments are doing on a day to day basis, they come to us and wonder, if blockchain is a valid use case for. It is simple kind of data entry and data maintenance, on records that can change on a regular basis and if they're constantly updating. We work with them to perhaps think of a different solution as this might not be something that governments would be wanting to use blockchain for. Another one would be data storage a lot of policy makers and their staff are looking for solutions for data storage and like, oh, we want to use blockchain, we have a lot of files that we want to be storing and we have a tremendous amount of data and they will have some conceptions, that blockchain is a good storage solution. But as we know that it's designed for kind of small pockets of data and isn't really meant to be a storage solution in itself, there's a lot of misconceptions in the public sector about how you can put something on the blockchain and something off the chain and connect them in some way, with like links and keys. Another common one is, that if a data storage solution is what is really needed, blockchain might not be the best fit. Another common challenge that we meet with government officials is just simply talking about blockchain or understanding blockchain, so the pockets inside the civil services of the countries, that we work with, there are groups of folks, that really do know a lot about blockchain and part of the difficulty for them is working with other pockets or other parts of government and actually just explaining what the technology is and how it can be used and how perhaps it might not be used. We're seeing a growth of technology offices emerge, that specialize in emerging technologies, like blockchain, whose essential duty is to talk about the technology across the public administration of the country and to get people on board with what it is and how it might be used and to kind of convene people, who are like-minded and interested in the technology, to see how they can experiment with it. I think a good example of this would be in the United States, they've launched an Emergency Distant Technology office, so it's an office at the centre of government, that is all about teaching civil servants what emerging technology is and how it can be used in engaging in experiments with them. Another one, a challenge limitation, that is going down and down over time is the cost. So, there's oftentimes a higher short-term cost associated with emerging technologies like blockchain. I think over the last year, year and a half or so, we've seen a lot of this particular barrier come down, especially with blockchain, as the service technologies that are getting spun up, where you're able to kind of start experimenting with instances of blockchain without having to build a whole operation around it. This has been a particular interest to governments, partnering with private sector companies that can help them, kind of get off the ground, without a huge investment upfront, for small experiments, before they do, in order to kind of really get their feet wet, before they decide if they want to learn more. Number five here is actually, I think, number one to me. And almost all of the folks that we talk to, at first go out and they talk to people in government about wanting to experiment with blockchain and they get a lot of blockers that aren't actually terribly relevant. The most common one that we hear is, that somebody's interested in experimenting with a blockchain process or application for something like land title registry for example, and they'll get blockers that shut down their project, because someone says that it's going to require a tremendous amount of energy consumption, for example, which is the most common one we hear. But, for most of the applications that governments are going to be using, or at least starting with, that wouldn't really apply, the energy restriction is just for a very specific type of blockchain implementation, that most of these people won't be facing or have to think about at all, except for the fact, that they need to be able to explain how it's not relevant for what they're trying to do. But I'd say, at least half of the projects, that we've seen, kind of trying to get started off the ground, will be knocked down and kind of like put to rest because of some of these limitations. Another one being, like the association with Bitcoin, is another blocker that people
raise, because someone says they want to do a blockchain implementation for an identity program or experiment with that and they think, that there's all these connections with illicit trade and just the volatility of the Bitcoin market even though, a lot of these implementations would absolutely have no association with Bitcoin or even currency whatsoever. I think, the sixth one here, that we really try to talk about with the civil servants who we work with is, that the kind of somewhat of a misconception, that blockchain will allow them to totally decentralize a process or the belief, that blockchains full purpose is to totally decentralize and remove the need for any sort of centralized authority for conducting transactions. But it's really important, that especially in public sector, when you're using blockchain, to consider the coding and the governance models behind the development of it, because although there are ways that blockchain can reduce the need for third parties, there's always people that are responsible for governing the decisions behind the way a blockchain is built and for coding it and developing it. These are often hidden parties, that are where you often have, in a traditional data implementation, you have an obvious third-party authority, that's managing things, but a lot of times with blockchains, the conception that it's decentralized and there's no third party almost makes the people that do make the decisions a little bit more hidden. Governments are doing most of these things with the private sector and the responsibility will always fall to the public sector, so it's really important that the civil servants and the policy makers are aware of all the decisions and all of the people that contribute to the decisions on how the blockchain implementations are built and governed. I think my last slide here is just something that I saw just on Twitter this past week, where the US National Institute for Standards and Technology put out this kind of their own primer for blockchain implementation. I thought this was an interesting flow chart in helping civil servants consider the different options that are available to them, a lot of times they come to us and they just want to use blockchain from the purpose of using blockchain, because they hear other people are doing it and they want to get on board. But for a lot of the use cases, that they're trying to do it might be the best fit, but there's other things, that they should consider and weigh the pros and cons of actually using blockchain for these services, because in a lot of the cases, there's a simple cloud solution and a software-as-a-service, or a database, or an encrypted database, that could do the job best. There's a lot of instances, where blockchain would be incredibly valuable to them, so I think thinking about things like, do you need many people to be having hands in the data and contributing files, you really need to have that immutability aspect that everything's kind of set in stone. Do you have trouble with governance and deciding who's able to contribute these things? I think these are all things that governments really need to be thinking about, when they're kind of getting involved in blockchain and starting to think about what kind of services and applications and things like that, they might want to start developing. I think there's a tremendous market for the spaces where blockchain does fit, I think there's tremendous market for the more traditional players as well, where sometimes maybe you just need a spreadsheet or sometimes maybe you need an online database. I added this in last minute, because I thought it was interesting. So just wrapping up, if you're interested in the work that the OECD is doing in this space or you're interested in other aspects of public sector innovation, we'd invite you to check out our website at www.oecd-opsi.org or on Twitter or sign up to our newsletter, we work primarily with centres of government in OECD countries, but we are also on an increasing basis working with cities, are working with sub-national governments like States and regionals and working with private sector partners of governments and civil society organizations to build a community around public sector innovation and to try to connect the different people in the different groups in the digital ecosystem, to learn from each other and understand each other's kind of barriers and limitations and methods of work. I think that as we probably all know, there's a sometimes difficulties in crossing the different groups and part of our role is to try to bring people together, to have these kinds of conversations, where we can all learn from each other. So, it's been great being here and thanks for having me.
PAUL RIEGER Advocate of blockchain technology and head of business development for NEM Europe, Austria
TV or Swimming Class? How Blockchain Can Solve The Social Benefit Dilemma Hello everybody, my name is Paul Rieger, today I will talk about how blockchain can actually solve the social benefit dilemma. I work for NEM Foundation, which is an independent protocol that has been life on a public chain since March 2015, focusing on plug-and-play features and actually ease of development. So, what is the problem? Well, if little Else, she wants to take a swimming course and her parents receive social benefits in the form of cash payments, now unfortunately, there's a TV on sale and her father decides, well let's spend this money on a TV. So, that means so little Else will not go swimming. She can't take the swimming course because it's not possible to direct the payments to a swimming course in this example. Now, wouldn't it be great, if it was possible to have a solution, where you can actually make sure that any government social benefit payments go directly to the intended cause, and little Else can go swimming? I think that would be awesome, but back to reality, so right now, there are two popular systems. One is cash payments and one is vouchers. Cash payments, of course, have high acceptance because everybody can use cash and spend it. At the same time, you cannot direct spending, so the problem is, that it's not transparent and that causes lots of issues like I just explained in the example. On the other hand, you have vouchers, vouchers are great for directing payments into certain direction, but the acceptance is low, because at the same time, when you issue the voucher you need an acceptance point and businesses don't want to wait months to get paid for the discount they provided, because they need to actually prove, ok, this was a valid voucher and so on and so on. Now, maybe, there's actually a third solution, that can combine the two positive attributes of high acceptance and transparent spending, and maybe, that solution can be a blockchain solution. So, what I want to talk about today is actually a small project, that together with a municipality in Waalwijk, which is in the Netherlands, we proposed something with a local blockchain advocate, because they already do quite a lot of initiatives to tackle poverty and they're quite advanced in connecting their IT systems for certain agencies, government agencies. So, it looked like a good open call, that we could participate in. So, what's the approach? They have something called the Paswijzer, which is a program that allows you to give vouchers to families that earn less than a certain amount per year, so they're eligible for these benefits. Paswijzer is already in existence in this municipality, so the idea is, well, if we want to make use of blockchain we have to digitize Paswijzer. Same time, we need to harmonize some data between agencies, that are already existing, because it involves a few agencies to actually issue, in this case a social voucher, and use it. So, the result should be, that a user can use a product or service, perhaps at discount, perhaps for free, just using a QR code on a mobile app. Now, how does it work? Well you have a registration process, that's in Dutch, so first, a user would download an app, of course, and go through a registration process. In the current world, you actually need to fill out forms for every single initiative. The idea here is, that you go through the application process once, of course, with your real details, your passport and so on. You need approval by the government, there's no way around it, otherwise there can't be a link. Now, if they approve you as a user, there will be a link established on the blockchain, that means there will actually be an account that represents the user in the real world, plus there will be the municipality knowing, that this account actually refers to real person, but there were no one in between that can verify that information. So, this link is transparent on the blockchain, but it doesn't give away any information and it doesn't cause any GDPR compliance issues whatsoever. Legs up, well how would you actually use it? So, I am a user, I get the Paswijzer app, I will be seeing all the services that are available. Now, in this example, you might have the swimming course I just mentioned before, you might have some other discounts. You can look at the app, select whatever is available to you, choose it and apply. So, what happens in this instance?
Well, there's an automated approval process. This is only possible, because the government already knows who is allowed to use which benefits. So, what happens actually, when they say whichever benefits they're going to pay out, they have already this acceptance criteria and they, in the Netherlands, it's already all-digital, so it's actually quite possible to combine these two systems. So, they said, who is eligible for what in the beginning, so the process of applying for something is actually automated, you don't need to have a manual check. Right now, if you actually go and want to apply for something, there is a manual check, you need to go to an office and they will actually check and you need to apply for that. So, this automates it, because it has already been decided and it's automatic. So, what happens there? Now, if you want to use this, the user goes to shop or any acceptance point, that is part of the Paswijzer program, they generate a QR code based on the request they originally issued and that was approved automatically. Now, this QR code is a onetime used QR code and it is actually working with blockchain. In this whole example, I keep the blockchain part actually quite light and for this very specific reason, because in this example, it's not important to slap blockchain onto something, but we only want to use blockchain to make a certain aspect of the whole process more efficient. So what happens here? The creation of the QR code, after was approved, is registered on a blockchain. So, there is actually a link to this onetime voucher. So, we already have that as a shared source of trust now. If I go to the shop and I redeem the voucher, that will be registered as well and since it's based on QR code it's very easy to implement that in an existing system, because QR codes are already common standard for vouchers and other mobile payment solutions. Now, once I have used this voucher, of course, it's registered, I can't use it twice. There are multiple ways to achieve this, one can be a token solution, one can be actually just transacting or recording multiple transactions that represent this voucher usage, but it's only these two points that are really needed on a blockchain, because I already linked identity of the user before. Now, for the businesses, what does that mean, the acceptance point? Before, you had to wait months and months, because you needed to prove, that you actually accepted something like a social voucher from a person. In this case, since you already have the shared source of truth, payments can happen in a reasonable amount of time. That means, instead of waiting months, it can be 7 days, 14 days, something like the normal common business world is used to. So, you will have a lot higher acceptance in this case. Now, of course, the question, should settlement also work on blockchain? In my opinion, in this example no. You can represent payment to the business from the government, for the vouchers accepted on the blockchain, yes, but there's currently no real incentive to also put the payment on the blockchain. At least in my opinion, because then you also need to have the problem with a stable coin and so on and so on. So, keep it simple, just focus on the voucher itself, have one shared source of trust they can be used to make this process more efficient. So, benefits are quite obvious. You definitely have less fraud if you use a system like this. For a simple reason, because you can't really abuse it so easily. Cash payments can unfortunately be misused, I don't want them to be abused, but they can definitely be misused. In this case, only the person that actually holds their own app and that has been registered, it's actually part of their own, they own this access to the vouchers, it's not someone else that can just take it away and use it and abuse it. So, definitely a chance to reduce fraud. Well, obviously you reduce bureaucracy a lot, because well, you only need to sign up once, register once, only fill out forms once, in this case it can actually be digital forms. You do not need to apply for every single process and for the government it's also simplification, because you already reduced the number of Records you need to keep, especially for the pay-outs to the businesses. You already have a record that is being kept, I mean for double bookkeeping, blockchain is actually quite good. Well, you give some control back to the user and this is great. At the same time, you reduce the potential risk of exposing private data, because first, you don't need to have that many forms, they could potentially be a risk. The same time, the user doesn't need to always identify himself personally at acceptance points, it's already being taken care of,
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES because we use a common identifier that we share among all the participants. The main benefit of courses is, that the user, the citizen will actually benefit from this, because it has less friction, you have more choice, because you can actually have more acceptance points, business will be more likely to join this program, if it's easy to use and it doesn't cause any issues in there in a normal business process. So, for the end user, it's a great result. Now, what I just explained is something we proposed earlier this year and I actually hope it will go into production. Of course, the municipality needs to decide that it is going to happen, but I think the key takeaways are here, that actually the technology and the public sector, in my opinion, it is ready. You can already use it to implement something like this and this is not, you know a fancy concept, this is actually something very practical. We figured out the solution, the architecture, it's up to the municipality if they really want to go for it. There's, in my opinion a good chance that if they're not going to do it, someone else will do it. So, it's really up to the decision-makers in this room and in other rooms, that are considering doing something like this, to go for it. At the same time, the NEM protocol in this instance offers a very good solution to implement something with already existing plug-and-play features, so you save a lot of time, so what I explained before, the paths that are actually live on the blockchain, you don't need to invent something new, you actually use APIÂ´s, that are already available, talk to the public chain and you just focus on the application logic. In this case is the digitalization of the Paswijzer, connecting it to the existing services that are already digital and then basically connect it to improve this public use case. That's it for me, if you're interested in such use cases and you'd like to actually talk about it, please feel free to contact me. I think someone has to do this, at least in my opinion, because it's easy, but at the same time, the complexity is somewhat limited to a certain use case. So, I would love to talk to someone in maybe local municipalities, if they believe this could be something or something similar could be implemented. Thank you very much! BRUNO ALVES Policy Advisor, European Commission Directorate General Communications Networks, Content and Technology (DG CONNECT), Belgium
European Blockchain Partnership and the ongoing work between the European Commission and the Member States to develop a European Blockchain Services Infrastructure As you know, I work for the European Commission I work for a particular department within the European Commission called Digi Connect, so that would be described as the technology department of the Commission and within that department we have a blockchain policy team. We are working in the technology department of the Commission we have a dedicated blockchain team and it's looking at blockchain policy beyond the financial sector and the cryptocurrencies. We're working very closely across policy portfolios with other European Commission departments working on education, on financial services and on other things, but we take a look at policy development from the technology perspective. I guess what most of you are asking yourselves is why do these people in Brussels from the European Commission get interested at all in in blockchain and what are they actually doing about it and that's what I will try to explain you a little bit in the next 10 to 15 minutes. I think one of the things that we've heard today already this morning and that really goes to the point of why the European Commission is interested in this field has to do with two things really. With trust and with the fact that this is a technology that can support trust in digital services and particularly in digital public services. Trust is becoming an ever more appreciated asset and so
the European Commission, as the member state governments are particularly sensitive to the potential of trust in digital services that this technology brings and then there's the other aspect which is the aspect of opportunity, and we think blockchain for Europe is really an opportunity because of several things, but not least because we have a strong agenda. Some of you know of public sector modernisation digitization of public sector across Europe and this technology is particularly relevant in that context particularly when we're looking at decentralized distributed solutions between member states, the sub-national level, the European Commission level and secondly because we actually think, that this technology can create opportunities. Opportunities for European companies for SMEs and companies operating in in our in our market so trust and potential are really the two things that led us perhaps a couple of years ago to start thinking about blockchain in a different way. What are we doing in this field? For us, the starting point has been to look at all the different things that were happening and we've seen many examples already this morning, you see applications of blockchain technology in public service is happening all over Europe, in some cases at the national level in some cases at the sub- national level. What we've realized and I think a lot of the member states of the European Union realized is that there was a great deal of fragmentation. There were lots of interesting initiatives there were happening, there were lots of proof-of-concept, sorts of pilots going on in different fields and in different places, but we were not really sharing this information and we were not sharing the learnings of these experiences. In our assessment the fact that we were not doing meant that this fragmentation of initiatives also delayed the potential uptake of this technology by the public sector. So, in other words, the fact that you're testing a new technology for a particular service on your own without taking into account what else has gone on or is actually going on in other member states could actually increase the risk that you have associated to your project. It could mean that you're repeating work that someone else has already done and so create inefficiencies and all of that in a way undermines potential public sector investment in this type of technology and so that was the that was really the starting point. I'll tell you a little bit about how we are trying to deal with it while in EU initiatives we have running and hopefully some of them may be of interest to you. Something we did, and this is not exclusive to the public sector, it's much broader than that it's. We've launched it in February 2018 and it was a joint initiative by the European Commission and the European Parliament was the European Blockchain Observatory Forum, so this is a very broad group of stakeholders, it's an engagement platform with experts and stakeholders involved in blockchain and what this Observatory is working on is on identifying the main obstacles to the uptake of blockchain technology in general terms and trying to work together with the experts and these experts are not only European experts, so we have experts from all over the world, trying to work with them to find â&#x20AC;&#x201C; to prepare recommendations, policy recommendations and technical recommendations on how we can overcome those challenges and obstacles and accelerate the uptake of blockchain technology across Europe. Amongst the many things they do, they have kind of a map listing, I think at the moment over 400 blockchain projects that range from public sector to healthcare, to industry and are identified in the map and then they have specific expert groups, that are working on very specific themes or topics associated to blockchain technology. Some of them we've heard today, for example data protection regulation compliance or a blockchain compliance with GDPR, smart contracts, what's the legal framework. They're working really on automatic basis, trying to come up with suggestions and solutions. Again the objective with this initiative was really to stop creating these ecosystems in Europe, that are there to accelerate the uptake of innovative technology and again, it includes civil society organizations, it includes private sector, it includes public sector as well, academia etc. Some of you already asked me today, is it open, is it closed? The Observatory working groups have been established, there was a call for experts, there were applicants and they were established and they are working so only once they finish this work, we will launch a new call for experts to work again on specific themes. Having said that, the forum is a completely open platform, so anyone can join in, there you can contribute as much or as little as you want and you will get invited to a lot of the events that this organization organizes mainly on the on the topics, on the themes that we want them to work on. As I said, this was one of the first steps we took, we took as European Commission
and we took together with the European Parliament and the objective was really to get to mobilize a large number of experts and stakeholders to work together with the European Commission and define ways to support the uptake of blockchain technology, but it is not public-sector exclusive. After the launch of the of the observatory, we started seeing a very strong interest also from the public sector, from member states, from governments and from the sub-national level from the region's, from the local level in saying you know, can we start working together to overcome this fragmentation, to overcome the fact that I don't even know what my neighbour is doing in testing new blockchain applications and I would be very interested to learn more about it. In April 2018 we've launched what we call the European Blockchain Partnership and this partnership is really the result of a joint declaration that was signed by the European Commission together with 21-member states at the time and we are now 27 member states plus Norway so 28 countries really working together with the European Commission as part of the European Blockchain Partnership and this blockchain partnership, according to the declaration has two objectives. The first one is precisely to exchange information on the implementation of Blockchain solutions for government services, from the perspective of what has been your experience, what's been the impact of that , have there been studies and sharing that more broadly so that other countries and other public authorities can also start examining and projecting their own strategy for the uptake of blockchain technology so that's one extremely important side of it, because just from the first two meetings of this partnership, we suddenly realized that there were three or four countries already working in diplomas certification in Europe and there was a strong interest from the education Directorate of the European Commission, because there are so many students that study across different universities in different countries to actually work together and start looking at the potential project involving several European countries, but many other areas that we've identified could benefit from cooperation, so that was one of the big chunks, one of the first parts of the of the blockchain partnership. The other one is perhaps a little bit more technical, but not less interesting, is that this 27-member states plus Norway and the European Commission have committed to developing what we call a secure resilient European blockchain services infrastructure and this European blockchain services infrastructure will be an infrastructure that will be developed to support cross-border digital public services in Europe. A lot of the infrastructures and a lot of the things we've seen and we've talked about today have been mainly focused on delivery of public services in a particular country, or in some cases in a particular region, what we are building together with the Member States is a service infrastructure that can be used across different applications, that will be focused on supporting the provision of cross-border digital public services which as you will imagine is the main mandate of the European Commission. Before I get to this, and to tell you how fast this work is progressing on the blockchain services infrastructure, the joint declaration that was signed by the Member States and by the European Commission is very clear, before the end of 2018, we need to come back to the ministers who signed the declaration with three specific deliverables. Number one with the list of use cases, in other words of cross-border digital public services at the European level that will be deployed through this blockchain infrastructure and that has to be agreed and it's been discussed it has to be agreed before the end of 2018 a second deliverable is a description of the functional specification of what this blockchain services infrastructure is going to look like, that will characterize what the functions are and what technical specifications will underpin them, and the third thing which we're really full-on working now with the Member States is defining what is the governance model for this future European blockchain services infrastructure, who will develop it, who will maintain it, how will it operate, who will be responsible for it. That will be the third piece, that will be finalized before the end of 2018, submitted to the ministers and to the heads of state and government that signed that declaration and hopefully we can then move on to what we call the implementation phase of this service infrastructure sometime in early 2019. What we want with the European blockchain services infrastructure, even though we haven't fully developed the functional specifications and the technical specifications, we know a little bit in broad terms what we will be looking for. We would be looking for something that
is cyber resilient, that meets the highest cybersecurity standards, that it's interoperable, it's based on open source applications, it's scalable, that it has privacy by design, means it complies with privacy regulations at the European level, its energy efficient, it uses some of the building blocks of European projects, notably on identification the AI. This regulation was mentioned before by the colleague from Sweden that was already being used in some of the applications, so this is in a nutshell what we would want to see in the future European blockchain services infrastructure. More details we're working them now it will be finalized before the end of 2018. As someone says you know, show me the money, we have some financing resources to support some of this work going forward, we have a significant share of investment that comes from research and innovation from our horizon 2020 program and that's really focused on the early development of blockchain technology and eventually on some piloting of some applications, but then we are preparing another fund called the Digital Europe program, that would come in 2021 that will further boost the implementation of some of these chain initiatives and there you have a total of 9,2 billion. They split according to many different headings and some of the blockchain initiatives are actually spread across the five areas that that you have there. This is work in progress, but we're not in the business of signing joint political declarations just for signing them, we sign those declarations with the Member States on the premise that there is a commitment also from our side and from the side of the Member States to make significant investments in advancing the uptake of blockchain technology across public sector in Europe and that's why we have this. I hope I was successful enough to keep you here despite lunch and I will leave you with just three things for those of you who want to get more involved in the observatory. Please feel free to reach out to me, while we're having lunch and if you're already there and you have any feedback up, I would be more than happy to hear that. Number two, for the blockchain partnership, this is only for the Commission and the Member States, the governments of the Member States, but if you need to know who is your contact point, which is the ministry that is representing you in the blockchain partnership I'd be happy to tell you that as well. Number three is an initiative that I didn't mention here, but we're only just starting now, we've heard not only in this conference but over the last few months about legal uncertainty what are the regulatory obstacles for the uptake of blockchain technology, is it to do with smart contracts recognition, is it to do with something else. We've initiated an internal discussion within the European Commission and with the Member States to really try and identify what are the legal or regulatory obstacles for people trying to deploy blockchain solutions. Any input that you have on that front will be very welcomed as well from me here informally by email, whenever you're ready, it's an assessment that we're carrying out now. We will probably open a formal consultation relatively soon on these, but we would like to have experts and those of you who are involved in it also providing us input. That's it for me, thank you very much for your attention. DAGFINN BUSET Partner and Head of Security and Emergency Services at BDO Norway, Norway What are the risks in the cyber domain, and what are the potential consequences if these risks are not mitigated? What is Best Practice in cyber security, and what is the smartest way to manage cyber risk?
Why should cyber risk be our biggest concern According to Greek mythology, the great warrior Achilles, was invulnerable in almost all of his body except for one heel and this was because his mother had held him by the heel when she dipped him in the magical river Styx to make him invulnerable. The hero of the Trojan Wars was killed by an arrow that hit his heel and today we use the term Achilles heel to describe a point of weakness
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES in someone or something, that is otherwise considered invulnerable or secure. Now, I'm invited here today to talk about cyber risk and why cyber risk should be our biggest concern and let me right away start by saying, I'm not an expert on blockchain, there are a lot of people here today that know much more about blockchain than I do, but I know a lot about cybersecurity, I used to work for the Norwegian National Security Authority, which is an intelligence and a security body, responsible for protecting critical infrastructure. One of the things, that I've always been very concerned about is how we manage risk in a highly advanced and constantly evolving technology. Since the birth of Internet, and the interesting point is, that Norway was a part of the original internet, but since the birth of Internet, in the beginning of the 70s, society has become completely transformed. Today we are 3.5 billion, perhaps 4 billion users on the internet. In 1993, we were 14 million, that's only 25 years ago. think about that. Now, it's obviously more appropriate to talk about this infrastructure as a digital domain, much like land, sea, air and space, we call it cyberspace. As we've heard today, blockchain technology is challenging the way we do business and the way we do government in cyberspace. Now undoubtedly, it will have enormous potential in almost every sector of society and some security specialists embrace this technology and say it's the Holy Grail, others are sceptical. No matter what your perspective, it's extremely important to fully understand the risks related to the use of this technology. Now, I guess we're all very much aware of the fact that risk assessments form the basis for an effective cyber risk management regime and now, this is also true when applying technology such as blockchain. In my opinion, doing risk assessments, we need to focus more on the consequences of incidents occurring and less on the probability, and in the case of blockchain, what is the consequence of loss of confidentiality, loss of integrity or loss of functionality to our assets. But before I get into that, what or who poses a threat, now the characteristics of the antagonists are often blurred and it is usually difficult to identify the perpetrators or understand their motive. We call this the problem of attribution. State actors are potentially the most capable, because of access to resources, personnel and available time. State actors may attack or conduct espionage towards blockchain technology. Transnational actors, are formal or informal organizations, that are not confined to national borders, such as terrorist organizations. These actors may use blockchain technology to raise funds and also target this technology to destabilize confidence in governments and conduct direct terrorist actions. Criminal organizations may be national or transnational in nature, depending on how they are organized, these steal information for their own use or to sell it and last, but not least we have individuals or small groups of people that can illegally disrupt or gain access to a network or a computer system, now these people are better known as hackers.
The more we rely on blockchain technology in critical societal functions, the more evident this technology is as a target. Now, what kind of assets are targeted by the threat actors? When I ask business leaders if they have any of the digital assets that you see on this screen, most of them say yes, several, and this is of course the case for any business and something that forms the basis for security objectives and priorities in any business, it is also crucial to bear in mind, when implying new technology, such as blockchain technology. Okay, I've talked about the threat actors and their intentions, their capacities and their capabilities and which assets, that can be targeted. But when managing cyber risks, I believe, the most attention must be on identifying vulnerabilities and finding measures to reduce these vulnerabilities, that's where you have to put the pressure and in so doing, we need to have a comprehensive approach, taking into account vulnerabilities, relating to human resources, technology and organization. The reason for this is, that when a threat actor conducts an operation and exploits vulnerabilities, he exploits both technological vulnerabilities and vulnerabilities related to human resources normally. In all the attacks that I've seen, there has always been a human interaction, regardless of how secure the technology is, it can be highly encrypted, still it's possible to get the information. Now, why is this relevant for blockchain technology? First of all, it is fairly undisputed as we've heard many say today, that blockchain technology, both public blockchains and private blockchains are highly immutable. This means, that the integrity of an operation is very high, furthermore, the transparency and accountability of blockchain technology can, if applied correctly, substantially reduce the risk of fraud and malpractice. It may also enhance quality control and quality assurance. This technology has endless possibilities of use, both in the private sector and in government. I believe we've only begun to understand the potential and much like the evolution of internet, cyberspace, I believe the security risks related to this technology will develop in parallel with the application. And when I look into the crystal ball, I can see some security challenges, that need to be addressed while they still can be handled. First of all, who is liable for potential loss and damage due to security incidents? This is of course something, that can be clarified in private blockchains, but not so much in public blockchains, like cryptocurrency blockchain. If someone steals all the money on your bank account today, your bank will most probably cover your losses, they're liable for the losses due to security incidents.
So, what can the potential consequences of cyber-attacks towards blockchain technology be? To understand that, I want to take you back to the Second World War. In February 1943 a team of Norwegian saboteurs succeeded in destroying the factory, that you see on this picture, thus preventing the German nuclear weapon project from acquiring heavy water. Heavy water could have been used for developing atomic bombs by Germany. This successful sabotage mission was codenamed â&#x20AC;&#x153;gunner sideâ&#x20AC;? and it was later regarded as the most successful act of sabotage in all of the Second World War. It literally changed the course of history. Now I've had the honour of speaking several hours to the commander of this operation, learning from his experience and he said something very interesting, the key to the success of the sabotage mission was good intelligence and good luck. We have to remember, that today, traditional weapons and tactics have adapted to the cyber domain and they will adapt to blockchain technology. We all know, that this technology will be an arena for espionage and sabotage. For instance, nearly two years ago now, a quarter of a million people lost power supply in the Ukraine. Everybody thought, this was due to poor maintenance of the grid, but it was not, this was due to malicious software that was implanted in the transformers, that made it possible for the threat actor to actually turn the power off.
But is this the case if you're operating with cryptocurrencies outside traditional financial institutions? How do we regulate surveillance and interception? Again, in private blockchains this can be done, for example, we in BDO Norway have a service, that can do this, it's called video search, or similar security monitoring capabilities, but in public blockchains this is unchartered territory. Another challenge that I see is related to risk management. Who is responsible for risk management in public blockchains? Do we need a risk management regime, like the one we see here, that the UK have developed? I believe we do. And I think, it's naive to think, that a community without hierarchy where risk mitigation is adjusted and assessed and managed can exist. In the end, there is always someone, who must carry the cost. And on the philosophical note, what information do we want to be distributed on a blockchain? I touched on the digital assets that all businesses, government and private have, and the need to be aware of what your digital assets are? Where they are stored and how they are processed? Some can be processed through blockchain technology, some perhaps not and for governments around the world, there might be differences in opinion on this due to differences in popular trust in government services. Whereas Scandinavians have a higher degree of trust in their government institutions, this might not be the case everywhere else in the world. And finally, it is a significant security challenge, that there is great uncertainty regarding this technology. We actually risk making significant bad decisions, even irreversible decisions, if we don't understand the technology correctly. Again, this risk can only be reduced by an effective risk management regime.
Now, could this happen to other critical functions of society? Could this happen to services and functions that rely on blockchain technology? Yes, I believe it could and it probably will.
I'm going to sum up by reminding you all about the lifecycle of digital vulnerabilities. What every security professional has learned over the years is, that the technology that you think
is secure today, is certainly not tomorrow. The cyber domain, including both, public and private blockchains, is constantly under attack. New vulnerabilities are discovered every day and please, don't be fooled by those who claim to be selling secure and absolute secure solutions. This is never the case. And the reason for this is, that the threat consists of motivated and highly adaptable people. Think of a burglar, that wants to break into your house, he meets a locked door. Does he return home, if what he really, really wants is inside your house? Probably not. He starts looking for new and different ways of entering, sure you might have remembered to lock the door, but you left the windows open. Thank you! TOM WILKINSON Head of MI and Analytics at Department for International Development, United Kingdom Thank you very much. I thought I'd changed these slides to have my DFID email address, but they’ve not been updated. I do work for the UK government! You'll notice throughout, I don't have particular branding in place on the slides and that's partly because I'm a good civil servant and I don't believe in wasting public money on lots of snazzy visuals, but it´s also because, you should be aware, there isn't a single UK government position on blockchain and so a lot of what I'm saying today will be my own view on this as someone who acts as an advisor to departments within the UK government, when they're approached about applications of blockchain.
Blockchain for public services I've heard the UK government criticized for not having a position where some other governments, like Singapore do have a very clear position. Personally, I think it's not unreasonable to be staying quite cautious and sceptical in this space, because fundamentally we still don't understand very much about how blockchain can be effectively used. The technology is still evolving and certainly the public versions have issues with scalability, that have promising solutions in the works, but have not yet been delivered. Where did the UK government's work on blockchain start? It started in 2015 with the chief scientific adviser for the UK government, Sir Mark Wallport, pulling together a round table of academics and officials, to try and understand what the potential applications of the technology were. This report was published in 2016, there were a number of recommendations made, such as establishing a regulatory framework, applying the technology for identification and authentication, making use of the technology in live trials, a proof of concept and my particular suggestion to the report was, that we make sure we built internal expertise within the government. Since then, until now, I've been coordinating a community of interest across the UK government to try and raise officials’ understanding of what the technology can and can't do, through engagement with academia and the start-up sector. Over three recommendations are piloted here are still a work in progress but as I say there are fairly good reasons to take this slow and not rush into applications of something, but it's still not fully mature in its technology, and I personally think still not fully understood in where it's applicable. Let´s talk about some of the applications that have been tried in the UK. Before 2015 in that report, the Government Digital Service (GDS) in the UK was already using one of the components of blockchain, something called Merkel trees, to establish what it calls canonical registers, so where you want to have a definitive list of something that everyone can share and use and that might sound like a trivial thing to have, but as someone who works with databases all day, every day actually having a single version of the truth across lots of different applications is really, really hard to achieve. These canonical registers use the components of blockchain, something called a Merkel tree to achieve a very quickly checked consistency of information across a bunch of different places. Now more recently than that, the Government Digital Service
has been helping the Land Registry in the UK look at the applicability of blockchain to securing land rights and the exchange of these. The Department for Work and Pensions in the UK, as early as 2015, was exploring a proof of concept to deliver people's welfare payments to their mobile phones. From that point onwards, it was claimed the blockchain was a part of this solution and you may well have heard that you would have seen it, if you've read the chief scientists report, it's still not clear what part blockchain was playing in that system and the reason for that is because essentially, if the message hasn't landed already today, blockchain is a data decentralization technology. It does very little more than just making sure that there's not a single point of attack on the data to change the data. Now, if you have a centralized distribution system where you have another obvious point of attack on the data, decentralizing the data may not deliver all that many benefits and I'll come back to that in a second with some criticisms of a lot of the proposed applications of Blockchain. How about, DFID, my own organization. So, we have a number of proofs of concept out there being explored, for example tracking humanitarian stockpiles of resources: how many bed nets, how many first-aid kits are held by different humanitarian agencies, so that there's a clear record of that, when it comes to deploying those to the field. Why would blockchain, why would a data decentralization technology, be useful here? Because we've got a number of those intergovernmental organizations, all interested in this space and no single central authority that spans the whole world, that one might trust to keep track of data for them. So, we're exploring that and equally we have a project to look at digital identity, to try and understand whether blockchain or other digital solutions could help deliver identity in fragile states, in refugee situations around the world. Equally we have a project that is running at the moment, with support from a Barclays accelerator start-up and Provenance and a number of other key players in the blockchain world looking at tracking supply chains, specifically for tea, and this mirrors some other proofs of concept, that other government department in the UK are looking at. Another application that's been explored, the Cabinet Office in the UK, a central function of the UK government brings in academic researchers on secondment to help do research into the feasibility of emerging technologies. One of the things we explored, and there are some blogposts about this recently from the Ministry of Justice, was whether blockchain could be used to secure criminal evidence chains. Again, although generally our public institutions are trusted, to make sure that they're above reproach in terms of the handling of evidence, having an immutable ledger that can't be tampered with, even by a single database administrator looking after it, could provide extra assurances in the administration of civil justice. Back to supply chains, the tax department in the UK, HMRC, DEFRA, which is our agricultural and food agency, and our Food Standards Agency (FSA) have all been exploring their applicability of blockchain and wider DLT for securing supply chains. Understanding the provenance of goods as they come into the UK and all food goods as they move around within the UK. I'll talk shortly about my personal opinion on how effective those uses are. Another application being explored by our department for international trade and UK export finance, again with support from the Cabinet Office and academic secondees, is the use of blockchain as an infrastructure, to support the delivery of exports with loans in support of UK exporters operating around the rest of the world. This is something that lots of banks get involved in, and they need the UK government to vouch for part of the risk, that comes in when they support these smaller exporters, so blockchain seems to an extent like a natural infrastructure to support that peer-to-peer system of banks potentially into lending. Outside of government, there's a thriving UK research scene on blockchain. I sat on the panel for the research council in UK in awarding funding to a number of programs exploring potential applications. Voting, a key one of these, first of all in corporate votes, but that project will move on to look at national elections as well. Again, coming back to blockchain as a decentralized data infrastructure, it's quite obviously a setting, where one would worry more than others about the
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES incumbent decision-makers controlling the data infrastructure underneath the vote. They have the most incentive to tamper with that data, that's why that's an interesting application. The National Archives of the UK do things like recording the outcomes of criminal proceedings and the video from them, because in precedent-based common law in the UK, these will then affect the outcomes of subsequent hearings. This of course means that attacking that data, changing that data could have dramatic repercussions for the outcome of subsequent criminal hearings and so there are plenty of incentives there to tamper with that data. So, of course, securing our National Archives to prevent tampering with that data is obviously beneficial use of blockchain and one, where that decentralization of data could pay off. UK financial services with the increase of algorithmic trading at very, very high velocities, there becomes a problem with regulating that. If a trading actor can change the algorithms monitoring trade for a short space of time, commit an illegal transaction and then change them back, you go very much undetected. The volumes of data are beyond our human's ability to process and so they have to be monitored algorithmically. To prevent those algorithms being tampered with, a decentralized solution like smart contracts on a distributed ledger could be one way to prevent fraud in in financial trading, and that was one of the other projects we funded. A final project, or two in fact, were around micro energy production and micro trading of energy. These peer-to-peer settings where you don't have an obvious central actor because two parties are trading electricity are an obvious one to secure with DLT, because you already have a decentralized system, and so having a decentralized data layer just makes good sense. Now the two projects we founded, one was focused on the UK and another on sub-Saharan Africa. We're still waiting with all of these projects to get the final outcomes, but there are some really promising developments already, that I think could inform wider use of DLT. What is the market doing, so you have heard already today about lots of exciting potential applications and they are exciting, but all of them so far, I think there are some obvious criticisms just logically, before you get to the proof-of-concept and we need to be very wary about thinking that blockchain is ahead of where it is, that we know, how to use it yet. For example, applications for trading diamonds and keeping track to prevent conflict diamonds from entering supply chains, well that's all well and good if you can attach a digital identity to each diamond, if you can find physical properties of the diamond that you can log in a blockchain. Because blockchain will only protect data, it won't protect physical assets from changing. Then, maybe you can track the diamonds, but what's to stop a conflict diamond being brought in by one of these mines, that is able to certificate the diamonds and there after being treated as if it is above suspicion. So, there are still points of attack, as long as there are other bits of the system, which are still centralized. The same could apply with fish quotas, where we might trust a fish quota to stop within a particular market any fisherman selling more fish, than they're allowed to, but unless the whole world's market is covered by that blockchain solution, how do we make sure, that the fisherman doesn't just buy in, or sell out their over catch to the part of the world economy that isn't using blockchain to secure the fishing rights. Quite popular, and one of the earliest examples of proposed applications of DLT was the financial institutions, so R3, I'm sure you've all have heard of, and to me this makes fairly good sense, you have a system of peers with no trusted central authority, the big banks need to keep track of their mutual financial position, it costs them quite a lot every year in accountancy fees and legal fees to work out who actually owes what and in terms of their customers transactions across the bank, their banks boundaries and yet they have no single trusted central authority. If any one of them held this single ledger, then the others wouldn't trust them not to tamper with it. So a good application, I think we're still yet to see, whether R3 can actually deliver a solution that the banks will cooperate with and much like, and I've not mentioned it here, but the Maersk an IBM pilot that has been going on and may be faltering now for international shipping, where, although decentralization makes good sense in this peer-to-peer setting, you've got two big players there, in terms of IBM and Maersk, who have incentives for it not to be fully decentralized and still have to be careful there. Academic records, we have to be careful about what is
the list of people or institutions that can award academic credentials, because ultimately, you don't need to attack the credentials on a blockchain if you can just add an extra university to the list and submit fake certificates through that, so, again there's a point of attack, because it's not fully decentralized. With land rights and one of the biggest problems in less developed countries, where a decentralized land rights solution might be a benefit because there isn't a good centralized option. One of your biggest problems is, we don't know who owns what now. The informal land rights in place, we need to find a way to digitize that information before sticking on a blockchain could help. So, with all of these potential applications, great, promising, but there are still hurdles to overcome, before I think any of them actually make that much sense. So, what are the key questions that I'd ask (in my last 20 seconds) about any proposed application of blockchain. First of all, can you deliver the efficiency that's being proposed through some central mechanism? Because if you can, then you don't need decentralized data infrastructure. Second, is it actual decentralization? Decentralizing the data infrastructure, great, but actually if there's another easy point of attacking the system, no one's going to trust the data anyway, because it can be manipulated through there. Last of all, does it scale down? Like that example with the fisheries, it's all well and good, if your decentralized solution would work for the whole world, if everyone is already brought in, but if it doesn't work for a small group, to get it started, if it needs everyone involved to have the critical mass, then it's not going to work and grow. These would be the cautionary questions, I would ask to any of my colleagues in the UK government when they were approached by someone trying to sell blockchain technologies. Like a lot of the technical problems, like scalability, energy consumption, I'm sure there are ways that we will overcome these things, some of them in the near future, but I still haven't seen solutions which address a lot of these problems. That's my challenge to the people here, who are from the private sector and academia. Answer these questions please. Thank you very much. DAVID STANCEL Cryptocurrency Specialist, Trader and Researcher, Slovak Republic Emergence of cryptocurrencies and blockchain along with other decentralised technologies created a parallel world where regulations do not always apply. Governments all over the world work on regulatory frameworks in order to create functional interface between the two worlds. There is a fine line between reasonable security measures and regulations killing the innovations. We'll look at the biggest regulatory challenges related to the cryptocurrencies and the blockchain technology.
The biggest challenges of regulation in Crypto Hello everyone, Good afternoon. Today, I would like to speak briefly about a very exciting topic. The biggest challenges of cryptocurrencies when it comes to the regulation. So, let me start straightaway with the first one. That being, to get the trends right. A lot of things are happening, not only in the cryptocurrency space, but also in the AI, machine learning, drones and all other possible buzzwords and for the government, it's very important to watch these industries very closely and to try to find out, which directions these industries are going and also, where the new industries are being created. The reason for that is, because we don't want to end up like this. Who in the audience knows what is this picture about, raise your hands? Okay, not many, good. So, this is the later part of the 19th century in the UK. It is the so-called Black Flag Act which introduced a law that said, that each car had to follow this very nice gentleman walking in front of it, walking with a black flag, warning environment around it the source or like a dangerous object is coming and these overprotecting ambitions
of regulators resulted in a situation where, like the whole economic activity within automotive industry, has shifted away from the UK into other countries such as Germany.
onboarding with the old banking world actors on board. All this needs to be wrapped in a stable regulatory framework.
Today, we can see very similar pattern in the cryptocurrency market. There are a lot of countries that realized, what kind of economic value and growth can be generated by this whole industry and now I'm not talking only about billions of dollars raised through ICOs, but also about the whole transformation of the legacy kinds of assets, new infrastructure and possibly many more. So, there are few countries that seem to get it right and are trying to tackle this issue, there are few countries that are trying to fight it. Nonetheless, it's very important to realize, not only for governments, that these technologies, cryptocurrencies an open blockchain are here to stay with us. Chances are, that in the near future we will interact with them in various areas in our daily lives. The reason for that is, that they foster the paradigm shift into something what is often referred to as Web 3.0, where legacy kind of application systems can be rebuilt in a completely novel and distributed way.
So, when we talk about crypto friendly jurisdictions, there are a few countries, especially here in Europe, that always pop up. As you can see, all of them have government support, fewer of them have actually some proactive regulators willing to deal with this issue and very few, if not the only one so far have actually the financial system aligned as well. In the case of Liechtenstein, it is because of the back of the Bank freak which is at this point probably still the only Bank Frick willing to serve cryptocurrency businesses. So, when we take a look at these countries and what they are doing, we find different approaches. In some countries, such as Malta, there are very specific and explicit rules that directly regulate ICOs, that create new regulatory authority and that explicitly regulate centralized service providers. In some other countries, such as Gibraltar, we see a little bit different approach, a principle-based approach where there are no strict and explicit rules and rather project that are applying for approval from the regulators needs to in their applications convince the regulators that they are compliant with the nine very broad principles. Again, different approach we can see in countries like Switzerland, where there are again no specific laws regarding the cryptocurrencies, rather we have some guidelines, that are dealing with ICOs from financial regulators, such as FINMA.
Once we overcome this challenge, there is another one ahead of us and that is to get the actual facts right. Because, when we talk about cryptocurrencies, there are good chances, that one may encounter a lot of myths and rumours, that are very common in the space. When we think of Bitcoin and cryptocurrencies as a new kind of parallel financial system and we can compare it to the legacy financial system, we find out that actually the new one is not so bad and there are certain merits to it. Especially, when we compare all kind of socio-economic and environmental costs that either of the systems incur. To be fair, these numbers are a bit older, so probably all the numbers for the Bitcoin would be doubled or tripled by now. But still, if you look at it and compare it, it is still just a tiny fraction compared to the legacy system. Many of you have probably heard about the recent scandal of the Danske Bank from a few weeks ago, when amount of money, that was laundered through this bank was somewhere around 200 billion dollars, which was at that point bigger than the whole cryptocurrency market capitalization. I don't even think, there is much else needed to add here, because when we talk about money laundering and cryptocurrencies, fair enough, the potential is there, but we have definitely much bigger fish to fry. So, once we can overcome also this challenge, there is another one, even more complicated one ahead of us as well. Of course, the approach to cryptocurrency regulations might be quite problematic, because, in many countries we see the debates and disputes over which actual supervisors and regulatory authorities should apply their regulations. The reason for that is that we simply deal with a new asset class. Of course, many ICOs and maybe coins are very similar or even equal to the legacy assets but many of them are simply new asset class, that we have to deal with. Once we answer this question, the first one, it has tremendous impact on other areas, such as taxation and accounting. But more importantly, blockchain based solutions raise really important legal questions in both, financial and non-financial applications. Especially, when we talk about implementation of blockchain into the public sector, the challenge is not only to transform the old business processes and the old ways of doing things under the new infrastructure, but also to innovate and re-think these processes, because what we know is, that the middleman can be skipped, the rules can be baked into the code and the role of a regulator can be distributed over the network. Of course, regulators have a plethora of actions and legal tools they can use to do so. But, before they do so, it might be beneficial to follow advices from institutions such as European securities and market authority, which released very interesting research last year, where they concluded, that all kinds of attempt for regulation at this point might be premature and most likely wrong. We heard similar things from the G20 meetings earlier this year as well. That being said, a lot of countries are competing now in the race to become the best and most crypto friendly jurisdiction. So what does it take? You definitely need government support, but government support alone is not enough. It takes more â&#x20AC;&#x153;hash rateâ&#x20AC;? to do this and you definitely need sufficiently enough developed business ecosystem as well. It's good to have proactive regulators, this can be especially helpful with
When we compile all this, we get four, maybe simple principles, that is good to follow when we talk about crypto regulations. First, it seems to be reasonable for government to create a dedicated team for this issue. It doesn't have to necessarily be a new regulatory institution, but it's okay to have at least dedicated team that consists of different teams from different regulators. More importantly, it's important to, it's crucial to allow for breathing room, to allow the innovators, the FinTech businesses and all these companies to bring in their innovations and to give them freedom to develop their product, without having to be worried about some regulatory fines. Equally important is also for regulators to work closely with these companies, to listen and learn in order to be able to adapt the old rules for the new, upcoming age. Last, but not least, it is not good for governments to try to enforce some specific standards on the industry, rather it is crucial to let these standards and best practices to be evolved from the market, ideally from the free market. Thank you. JOSEF MERCIECA Tax Partner at BDO, Malta At a time when countries around the world are expressing ambivalence about cryptocurrencies, if not cracking down on them, Malta is writing rules that should give exchange owners and users certainty about the future. The rules are covering how brokerages, exchanges, asset managers and traders operate, making them among the broadest set of regulations for the industry.
Advantages which Malta grants from a tax point of view Hi, Good afternoon, so following from the previous presentation, Iâ&#x20AC;&#x2122;ll try to deal with an even more boring topic, which is tax. What I'll be trying to do is, I'm going to compare what Malta has aimed at achieving and in my personal opinion achieved over the last few months, and what Malta can offer to the global ecosphere in the blockchain industry. In the previous presentation, we looked at the comparison of five different jurisdictions, I'm going to literally latch on to that and move ahead. One particular point was that there needs to be a financial ecosphere, which supports the blockchain industry. Malta does offer
TRANSCRIPTS OF SPEAKER’S SPEECHES that, there are two banks in Malta plus a multitude of PSPs, which in addition to the banks do provides that legal certainty, which is required. What Malta has done, in comparison to other jurisdiction is that it has moved into providing legal certainty in an area, where other countries have shied away, which is taxation. Malta has a taxation model, which not only encourages cryptocurrency businesses but also provides legal certainty, but I come to that in the second part.
Taxation aspects of issues through Malta So, let's assume that you have an issue of a security token, that is a token which gives the right to assets in that company. Issues of security tokens do not trigger a taxing event in terms of the guidelines issued by the Maltese authorities. In the case of payment tokens, currency tokens, these give rise to an asset and a liability on the Issuer’s balance sheet and there are no P&L transactions, again no taxing event.
So, what are the directions in which Malta has moved? Malta has created a different asset category. Until I would say a few weeks ago, a few months ago, we had this ongoing debate, what are crypto currencies, with many, many jurisdictions, in my personal opinion, making a huge mistake of assuming, that equity tokens, security tokens, payment tokens and utility tokens are the same thing and they fall within the same basket of currencies. What we've done is, that we have created a financial instrument test which analyses whether these tokens, cryptocurrencies are, regulated already or we need to have a different asset category here?
In the case of utility token issues these are taxable events, but Malta does not tax the issue per se at the time of the of the ICO. In fact, the funds collected during the ICO represent a future liability of the issuer towards those investors. When those investors decide to cash in their utility token by purchasing goods and services on the platform, this is the point in time when the taxable event is crystallised by shifting that original future liability into the income statement and thereby bring it to tax. So, not only does Malta provide a deferral opportunity in addition to that the deferral opportunity, the income which is eventually be brought to tax will be taxed at an effective tax rate of 5%.
The Financial Instrument Test utilises a funnel approach to analyse such distributed ledger technology assets, where we compare and analyse the exact characteristics of that instrument, to establish which is the best legal regime applicable to it. The first thing we ask is, do have a virtual token? Is it a digital medium recordation, with its use, application and utility exclusively restricted to being utilized on one specific DLT platform, and that particular classification would typically be yes, in all cases? So, what Malta has done is provide a regulatory ecosphere which allows such a token, which is already passing this parts of the financial instrument test, I need to give some legal certainty, some peace of mind to the investor, if you're going to list that utility token on an exchange, Binance and so on, you need to have that little peace of mind, that this issuer knows, what he's doing, that his white paper has been reviewed and approved by the policing agent and the regulator. So, it has passed a dual fit and proper test. Once it is established that a token is not a virtual token because it has a use outside of the platform on which it was issued, we need to assess whether such token is a financial instrument in terms of MiFID II. Do I have a financial instrument here, a security giving a right to a profit, a right to assets on winding up, a right to vote, to a fixed rate of return, exposure in terms of a derivative, a swap, a future contract, a future, a contract for defence? Is this particular instrument, an electronic money instrument, which is a regulated class of assets on its own? Do I have an instrument over here which binds the particular issuer to redeem at par value that particular amount deposited as electronic money? Once you manage to go through these three tests to establish that the token is not a virtual token, electronic money or a financial instrument, you would end up regulated by this infamous VFA act (Virtual Financial Assets act). What the VFA Act creates is a special type of regulated utility token. We have a special type of utility token, which isn't a payment mechanism, which isn´t a stable coin, (although there are ways how an issuer could have a stable coin without triggering an electronic money license and/or an EMI license). So, if an issuer manages to avoid all those classifications referred to above and you the token has at least one of the following three characteristics, that is, a medium of exchange, a unit of account, or a store of value, the token is classified as a virtual financial asset. Although there is a requirement to go through a soft regulatory regime, this achieves a win-win situation, whereby the investor is given the necessary piece of mind to invest, whilst at the same time allowing the issuer to actually carry on the business in a business-friendly regulated environment. In addition to that, both the regulatory authority and the tax authorities have issued further guidance on the applicable treatment of the various transactions involving crypto assets.
I'm going to focus in the last five minutes of my presentation on this slide, which explains the applicable tax treatment when the ICO proceeds are eventually brought to tax. When the user of the particular token, (the investor), cashes in the token for the actual good or service, at that point in time the Issue becomes liable to pay the tax on the proceed. This typically happens from our experience, 2 - 3 years down the line after the ICO and if the project is successful. At that point in time, the Maltese company, the issuer would have an income of for example a hundred euros, which is always taxed at a tax rate of 35%. However, upon a dividend distribution from that Maltese company to the foreign shareholder or to a holding company Malta, that shareholder becomes entitled to a tax refund under the full imputation system. Malta is the only European country which has a full imputation system, whereby the tax paid at the company level in reality is a prepayment of the tax due by the shareholder. When that shareholder receives a dividend, he is always entitled to a tax refund and that tax refund percentage depends on the type of income and the classification of the particular shareholder. In most cases, in particular for ICOs they would be entitled to a 6/7 refund. So, one would have a tax payment of 35%, but then within a couple of weeks the Maltese tax authorities will give the shareholder 30% back and, in UBO’s r pockets, he ends up with 65 is the net dividend, plus the 30-tax refund, thereby ending with 95 after tax (out of an original income of 100). Effective tax leakage is 5%. This particular model could be complicated a bit and worked upon from a tax structure point of view by creating a dividend feeder company in Malta. The dividend feeder company is used in certain cases in order to avoid very aggressive anti-tax avoidance provisions in other jurisdictions. So, let me conclude by looking at a particular aspect of our taxation, which is typically not common in other jurisdictions. Disposals of cryptocurrencies are classified into two categories. Those, which are of a long-term nature, (in other words hodlers) and on the other hand day traders. Traders, pay taxes on trading profits at the normal rates. In the case of hodlers, those which buy crypto assets with the intention to hold and eventually make a capital gain, that capital gain is taxable only in the case of security tokens. If that particular token isn't a security token, it doesn't fall within the definition of taxable assets within our Income Tax Act and such a capital gain would be competent outside the scope of Maltese tax. So, again, Malta tends to be a very attractive jurisdiction for Bitcoin holders, cryptocurrency holders, which are considering disposing of the long-term holding, because we can provide an environment, where that significant capital gain can be received in your pockets without any tax leakage. ORS ORSZÁGH Chief Innovation Officer at Interticket, Deputy CEO at Blockchain Competence Center, Hungary Why did Hungary decide to create friendly environment and regulation of the blockchain technology and how it ended up in a nationwide blockchain strategy
Why did Hungary decide to create friendly environment and regulation of the blockchain technology and how it ended up in a nationwide blockchain strategy
do, because actually, there was no EU then, there was nothing to align to and I'm quite happy to say and see that actually this already happened and now we see that which way we can go and there is an EU regulation. The third one, which I already mentioned, that we wanted to put Hungary on the map as a hub or centre for blockchain. That is actually, I think, already something that we missed, but I think this region, the CEE region is a great place to be and I have a good expectation that the region can be a hub and the centre for blockchain technology.
Good afternoon! Thank you for being here and being able to be here and also for you to be here. I'm from Hungary and it was very interesting to hear so many great speakers and it was also great to hear, that there are already a lot of live services around the globe.
What we expect from the strategy? Actually, we are going to have government decrees, we are going to have regulation, we are going to have let's say capital friendly environment, because I believe, that blockchain and the ICOs and all related businesses are going to get capital to the country and also, which is not as obvious as the first three, we expect that there's going to be an emphasis on education. I'm quite sure that many of you already try to explain what blockchain is and why it is good maybe to in the private sector and in the public sector and this is a very, very difficult thing to do. If you can educate them, it is going to be much easier to start projects and businesses.
In Hungary, two years ago, when we actually founded our company, we wanted to be pioneers in the blockchain world and actually this is something that we already missed. This is something that I'm not going to say that we could be pioneers, but at least we would like to be the first followers and we would like to learn from all the experience you have already made. I really like to start with this Google Trends chart at many conferences, this blockchain conference may not be the best place, but I'm quite sure that if you have ever been to another conference and mainly FinTech, they always try to think that Blockchain is part of FinTech, or any other buzzwords that we are talking about 5G, IOT, Big Data is actually bigger than blockchain. Google Trends shows clearly that the interest towards blockchain is way bigger than towards all the other buzzwords we are talking about and all the other buzzwords and all the other technologies actually will benefit from the blockchain implementation, even if we talk about the hype. You can see January, when let's say the crypto hype was on the top, even if we deduct this one, actually blockchain is the leading technology interest. I'm talking about hype, blockchain created a great hype, actually you can find TED talks about how blockchain is going to revolutionize the world, change the world, actually is going to solve all the problems we have. Actually, that's not the case, but I think, if I say that have you ever heard a TED talk about my SQL, I don't think that you have ever done this. And actually, it shows that blockchain is something much bigger than any other technologies we had in the last 20 or 30 years. Also, the hype, maybe you are familiar with the Gartner Hype Cycle, this is quite new, this was published in August, but actually, it's the same cycle that we have we have seen last year so blockchain didn't really move, we are still in the disillusionment phase, but that is actually great. What does it mean, that we are over the hype? For me, this is the first conference where none of the speakers wanted to define what blockchain is, it means, that actually we are already speaking the same language. The other thing, that no one talked about, the price of Bitcoin, which is also great, which for me also, this is the first conference when no one was trying to find out what is going to be in the next few years. Our company was based on the same principles we've heard in the morning session, where it was thought that maybe 10% of savings could be realized if you implement blockchain based services, if you use blockchain as a technology in all your processes. We are not this optimistic, we were saying two or three percent, which is still a great number, but I would like to be very happy to believe to the presenter Mr. Asher Idan, that 10% is actually viable. In Hungary, we were appointed by the government, that we should write a nationwide blockchain strategy. I also have to say, that I'm not part of the government, we worked for the government and actually we wrote a strategy on blockchain and this is what I'm going to show you today. What were our goals? We had three goals, I think let's start with the middle, which is I think a nobrainer. We all do believe, that actually blockchain is going to add to our, not just a society, but to all the business we are doing and actually this is a no-brainer that we should have blockchain friendly, blockchain, crypto and token friendly environment. The next one is that we should be aligned with the EU regulations. I think, until the end of last year, that was not an easy thing to
What we did? So, we talked to everybody, by everybody, I mean we also consider ourselves as experts and we have a vision, we have a view, but of course this is not enough. There's going to be a lot of people and a lot of companies who are going to comment this strategy, so we tried to talk to them as well, we talked to academic players, university guys, market players, by market players I mean maybe the blockchain service providers, the big ones, IBM, Microsoft and all the big guys who are already dealing with Blockchain technology. and we talked with the public sector, with many companies, with many start-ups and we talked to, let's say, the Hungarian blockchain society, by Hungarian blockchain Society I mean those guys, who don't want to go to prison in the next three years, because they started something and they didn't know what they can expect. So, this is the eighth suggestion for our enactment and I'm going to give you a few minutes to read it, ok so this is in Hungarian, this is the first thing that maybe most of you will not be able to do, but I also wanted to do to show you the font type, so this is an official document, you can realize it. So, we have eight things and what I think that regulating just the crypto world is not enough. If you want at least, and we are the followers as I said, we are not pioneering, but as a follower we would like to make a comprehensive regulation and actually, it involves not just the regulation of the crypto. But this is also important, we should regulate the crypto and the taxation and also, we had to understand, that in in the view of the state, in the view of the government, something that cannot be taxed actually doesn't exist or should not exist. So, they would like to have something that they can put tax on it. Mr. Wang, I think, mentioned instead of ICOs the STOs, security token offerings, which is the current word for ICOs, because ICO is a bit outdated at the moment, but I think the ICO friendly regulation is also required, because it can bring you capital, it can help you to make the start-up stay in your country and not going to, for example, Malta or Liechtenstein. All the players we met and they were working in Hungary, they wanted to stay in Hungary, they knew, that the regulation currently does not let them to start their companies, to start the ICOs, but actually, they were working from Hungary and they would be very happy if a regulator was actually leading them to stay. We proposed to create a coalition for blockchain in Hungary, just like we have for 5g, and it works great. Actually, it involves all the related players and really helped and it's going to help for 5g to start and to launch. I think, for blockchain, this is also necessary. We also proposed and this is something that I think the EU has the same view on it, that a nationwide blockchain platform is needed, meaning that anyone, who would like to interact with the government, it could be an information it could be any interaction, there should be a nationwide platform and maybe in the long term we will be able to have not just a nationwide, then an EU-wide or a v4-wide and then a global blockchain platform, because the cross-border interaction is becoming much more important.
TRANSCRIPTS OF SPEAKERâ&#x20AC;&#x2122;S SPEECHES We also think, that the pension system is something that is a place where blockchain will be used and can be used, and we think, that in the 8 suggestion, this is something that we should deal with. It's a huge topic and I really hope, that we will be able to use this. If you think about that in the current or for the next 10 or 20 years, where our employers are not in one country, but will be EU wide and when you want to retire and actually you will need all the information to have a pension right, then it is going to be very difficult to get this information together. So, the pension system it's a nationwide system as well, but also EU wide or globally interesting system. We have already started in Hungary to give the customers e-identity cards and I think blockchain ID should be connected to all these cards, then online identification and KYC is going to be much easier and hopefully and I think luckily the regulator is very open to start the negotiations on how to put a blockchain ID to these e-identity cards. We also believe, that not only the government would use blockchain, but actually everyone in the country. We should find places where blockchain based solutions can be used, and we really think that smart city is one of the focuses, there is a lot of use cases in smart cities, local cryptos, there are a lot of big data providers in the ecosystem. The originality and the immutability of all the information that you will get from a smart city is going to be very important. Currently what we do is, we are gathering data and we think, that big data is a great stuff, because we have a lot of data and we can process it and have a good outcome. But very soon, not just the number, not just the size of this big data is going to be interesting, but actually the originality and the immutability of these data is going to be very important.
Afterwards, I focused on security research and I scanned the entire internet for security vulnerabilities and published my results in 1998, you can still look it up, the internet auditing project, and that got the interest of the local defence establishment and I started working with them as a consultant, which was very surreal, because I was still a pretty young kid and I looked younger than my age. One thing led to another and I got offered an offer I couldn't refuse, to come and start a new military cyber warfare unit and that really appealed to my young sense of ego, so I went for that. So, 20 years later, despite this troublesome background, I'm not a supervillain, even though that was my childhood dream, well I hear it's never too late to follow your dreams, I focus on solving problems, that I think I have the most leverage on, given my background.
And last, but not least, but I also mentioned, that the education support, this is also something that we highlighted among these suggestions, is very important, because we have to educate all the sectors, not just the public sector, the private sector even. We need universities and colleges dealing with blockchain and educate people to blockchain and I do believe that actual blockchain is much more than a technology very likely a philosophy and it is going to have an effect on our society as well. Actually, these are the eight suggestions we made and we really expect that upon these in the next year Hungary will finally have a regulation. Because this is the missing link, the missing chain to be able to create great services and maybe one last thing I would like to mention, I told you that the blockchain created a great hype, but Blockchain also created great communities. I think, that if you turn to your partner at the table and greet each other you will feel that actually we are talking the same language, we have the same opinion and we have the same view and maybe, you are the people who really want to actually change the world.
In the last year, I co-founded three crypto companies and we raised over 25 million dollars in equity, not ICOs, we care about our investors a lot. My focus today is, as a CEO of TabooKey, which is a stealth stage start-up tracing decentralized marketplaces, hoping to fix a broken incentive structure. I'm also a decentralization evangelist, I believe decentralization has the potential not only to dramatically improve the security of our systems, but also improve the way we structure our societies and by encouraging competition between variations that we have in society, what we have in biological systems, which is evolution.
Thank you so much! LIRAZ SIRI CEO of TabooKey, Israel I'm going to be talking about how we can build on blockchain, to protect critical infrastructures from the risk of cyber warfare and the weaponization of the Internet. This is going to require a bit of a miracle because I want to cover a lot. First, a little bit about my background and why you should listen to me. The other part is the big problem with the cyber security industry and why most of it is deeply corrupted by perverted incentives that reward fake solutions. What the consequences of not fixing that are going to be and how blockchain can play a part.
Cyber war and critical infrastructures: building on blockchain to kill security theatre before it kills us So, I'm going to start by talking about an earlier period in my life that I'm not really that proud of. Yes, everybody has those, as a teenager I was obsessed with penetration and perversion of computer systems. Just the challenge of trying to hack into systems, exploit vulnerabilities, it consumed me, I found it absolutely fascinating, it was a giant game. It was all fun and games, until I got busted by the police at 15, which was a very traumatic for my parents and I realized, this is not a game, I could actually go to jail for this, so I cut it out and I've never gotten in trouble since.
I've come to the realization, that the highest level of achievement is not breaking things but building them and identifying, what the most challenging problems are, which ones you have the possibility of making an impact on and then figuring out, how to recruit the best people to help you build that. So, I got very early into crypto, I run blockexplorer.com, which was the first Bitcoin web interface for four years, until last year, when it became way too hard to keep it up, because crypto exploded. So, that is no longer my responsibility, I sold it off, but it was run by the community for the community no as it was there was a lot of craziness going on in the early stages and they wanted to give sort of an antithesis to that.
So, here's the hardest problem I've come across in my security career. The hardest problem is, that bad security is actually really good for business. So, we keep hearing about major catastrophes, they seem to be happening regularly, data breaches doesn't seem to be any end in sight and you know, a lot of people that come from the background, they don't realize that security is a very special challenge, it's unlike any other challenge with a product, where you have to get it to do something, with security you're trying to get a solution to prevent something from happening. So, if I tell you a car gets to 60 miles per hour, you can verify my claim pretty easily, but if I tell you the car can't be hacked but it's online, that's very hard for you to verify, that's challenging, making things not happen is hard, especially when you have very determined adversaries on the other end. So, because security solutions are so hard to evaluate, this creates a huge incentive for what we call the security industry, to create fake solutions. This results in a massive security theatre industry where perception is prioritized over performance. If we have two companies and one company invests 90% in marketing and 10% in R&D and it's competing in the security industry with another company that's investing 90% in R&D and 10% in marketing, the first company that invests in marketing will win every single time. That makes it very difficult to be an honest CEO of a security company. Now, one of the best examples of this, and I remember we already gave World War two example, so it will fit right in, the Nazis, they trusted the Enigma, they did not know the Enigma was broken, they encrypted all their communications with it, they did not lack resources, but what Nazis lacked was an Alan Turing, the Laxus ingenuity, turns out that genius developed new crypto analytical techniques and he gave the Allied insights into everything the Nazis were doing. The history of cryptography has shown us, that proving the security of a system is very, very difficult. You actually can't do that, you can just approach it empirically by trying really hard to break the system and not being successful.
So what do we do? The best solutions are not perfect, the best solutions are designed to fail well. They realize, that the security properties of our complicated systems are very hard to prove and that it's almost impossible to implement anything perfectly, only unicorns are perfect, in the real world, there are bugs in everything and we're rushing products to market and we're operating within budgets. There are bugs, there are lots of bugs and some of those bugs are going to create gaps between what the system is supposed to do and what it actually does. In that gap, you have security issues, you also have functional problems, feature bugs, but the security issues are hard, because they're hard to catch. An attacker only needs to find that one chink in your defence, well, as a defender you have to cover all of your bases. So, failing well, designing systems that have the right architectures and are structured in a way, where failure of some of the components is expected and yet the security property of the system is still maintained, that's the only way I know how to do it. So, what are the consequences of not solving this? We have escalating attacks on critical infrastructures, reports are that the Russians have compromised 20 electrical power facilities in the US, they've shut down two facilities in the Ukraine, supposedly some country took over Iranian nuclear facility and physically damaged it, and as the head of the NSA said, security right now is all offense and no defence and it's very hard to attribute attacks, like, we don't know where attacks came from, it's very hard to prove, it's hard to respond to cyber-attacks the way we respond to physical attacks, Borderless power has irresistible payoffs and by this I mean, that we're in a very strange situation, where we're creating a world, where you can kill people from anywhere and you're not going to be held accountable for that. So, the situation today is that unfortunately even life-critical devices that we depend on, like cars and airplanes can already be hacked. And you know, there was an example of a couple years ago, where they took over a Cherokee jeep remotely through the entertainment system. Security research have been claiming for years that you can take over airplanes remotely and last year the department of homeland defence in the US, they proved that you could, they actually did that. Last year, there were 8.4 billion devices online. The internet of insecure things is exploding and 10 years from now, we are headed into a future, where we're dramatically more dependent on the security of all of these things, that are really computers in various disguises. So autonomous fleets of vehicles, they are really computers on wheels, a modern car has 40 computers in it, it's a giant network, there's a lot of complexity involved and complexity is the enemy of security, because the more complex system is, the harder the system is to fully understand and the harder it is to fully understand, given that it's very hard to validate security, the easier it is for there to be gaps that attackers can then exploit. So, we're headed into a future where, if we don't dramatically change our approach, the consequences are going to be severe. The consequences are, that rogue nations, and one example that happened a couple of years ago is, North Korea did not like a movie that's only produced about criticizing its dictator in a satirical way and they actually hacked into Sony's computer systems and afterwards Sony decided to cancel the movie, and you know, the consequences of hacking computer systems in a world we are not depending on them for life-and-death purposes are relatively benign, but that is quickly changing and ten years from now we'll be putting our children into the autonomous vehicles, that we'll be driving in the off to kindergarten. We will have buzzing drones over our heads, delivering everything and you can't opt out of the system, you could try, but even if you decide you don't trust an autonomous vehicle, if the roads are filled with them, then one of them could still kill you. It could be, you know an accident. If you decide, you're really paranoid, you want to stay at home, then an autonomous truck could drive into your home so there's really no way for us to run away from this and we're not going to be abandoning technology, we're only going to be becoming more dependent on it, this is an unstoppable trend. So, we need to rethink how do we do cyber security? What does blockchain have to offer? So, blockchain is really not a very good technology and what I mean by that, it has terrible performance, it's not immediate, it's very, very slow bitcoin is limited to maybe twelve transactions per second, the theory of not much more than that and it introduces a lot of complexity, the tools are immature, why would you want to use a blockchain? Well, blockchain is really, really good at one thing and only one thing and that's decentralization. So, the problem with centralization is, when you have a
single point of failure and you rely on it, with the power of life and death over people, that becomes irresistible for attackers. Analogy I like to give is, imagine we had all the gold in the world in one giant vault and compare that to a scenario, where we are distributing the gold in thousands of vaults all around the world. In which scenario is it more likely for gold to be miss-accounted for, like in an Enron pipe scandal, or stolen by an ocean 11 type physical penetration scenario, or just confiscated by the government like FDR did in in the days of the Great Depression. So that's pretty obvious, that the more we centralize, the more resistant and our keynote speaker, Nick Szabo mentioned, security does not scale very well. What do we do? Well, it turns out what we need to change in our approach, it's not great systems we can trust more, but actually create systems, where we don't have to trust as much. We're minimizing the trust and there are significant challenges and trade-offs, when you use blockchain technology. You have to give up a lot and it's at a relative early stage of maturity. So, what is the value proposition? Why go to all the trouble? Well, the most important thing the Blockchain has to offer is changing incentive structures and this means, security solution providers can participate in a new type of game, where they are bearing the cost of failure, as opposed to what we have right now, where the customers bear the cost of failure. This requires security vendors to put their money where their mouth is and that aligns incentives. Through great new games like this, then we're dramatically increasing the incentive of security solution providers to actually get it right, even though empirically verifying security is still not going to be easy and we can do this by creating smart contracts and transferring risk, using insurance like vehicles, actually they function more like performance bonds. The ultimate outcome that we're aiming for is, instead of relying on these fragile centralized entities, we have a decentralized marketplace of competing companies, that are rewarded to the extent, not that they market their solutions, but that they actually solve the problem. In this marketplace, they do not sell solutions. What they do is, they buy up risk, you pay them for buying up risk, just like you pay an insurance company, but they are paying, they are buying up the risk for their own nonperformance. It's hard to create solutions like this, but if we're not aligning incentive structures, then there's no possibility for a company that actually fixes these problems, to win in the marketplace. So what does winning look like? Well, perfect security is impossible. We have a long tradition of trying and we've never managed to make anything perfect, especially not hyper complicated systems that we have today and even more complicated systems, that we'll have tomorrow. But we don't have to secure our systems perfectly, what we need to do is raise the cost of attack by decentralizing all of the different components, all the different assumptions that we're making, that can break and result in catastrophic failure. The key to that, beyond incentive structures is architecture. If you have a house of cards, you only need to pull out one card and the entire thing collapses, and you cannot make a house of cards, it's very robust, that's impossible. But, if you look at the architecture around the military base, that is not a house of cards, the cost of attack is getting through all of the levels of defence. It's level one, plus level two, plus level three and you have to penetrate all of them. If we manage to raise the cost of attack, for the systems that we rely on, with our critical infrastructures, where the consequences of failure are life and death, when if we raise the cost of attack so dramatically, that attackers realize it will be impossible for them to cross all of the levels of defence, that we've created and actually achieve their objectives, then we've won. That's what winning looks like. In security, you don't need perfection, perfection is impossible. You just need enough failure tolerance, you need to be very, very sceptical. I've been in the industry for 20 years now and I've learned to be very sceptical of my own ideas, the ability of the best people to create perfect solutions, it's not going to happen, we have to assume anything can fail. It's really about probabilities, but if you have a set, you have any component, even very carefully manufactured and you layer them, so the risk of failure is maybe 1% and you layer that with another level and another level, another layer so you have this multi-layered security solution, where the attacker has to get through all of them, then the cost of attack can be high enough to deter even nation-states, which are included in the threat model for the systems, that we are relying on today and certainly tomorrow. Thank you.
BLOCKCHAIN AND CRYPTOCURRENCY DICTIONARY
Blockchain is a type of distributed ledger. consisting of unchangeable, digitally recorded data in blocks each block is chained with the following block using a cryptographic signature. This allows block chains to be used like a ledger. which can be shared and available to anyone with the appropriate permissions.
Cryptocurrency is a form of digital currency. which operates independently of a central bank In cryptocurrencies, encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrency represents both. coins and tokens. 2.1. Coin – is digital money, created using encryption techniques, that store value over time. 2.2. Token - is a digital asset issued by the projects. Valid within project’s ecosystem.
Distributed ledgers are a type of database that are spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger. Distributed ledger data can be either “permissioned” or “permissionless” to control who can view it.
Address – cryptocurrency address is used to receive and send transactions via blockchain. An address consists of alphanumeric characters and is often represented as a QR code.
4.1. Private key – it is a “password” which can never be revealed to anyone. Private key allows you to spend cryptocurrency from your wallet through a cryptographic signature. Private key allows you to sign documents which can be verified by public key only. 4.2. Public key – it is a key by which, anyone can verify documents signed using your private key.
Initial Coin Offering (ICO) is an event in which a new cryptocurrency is issued on top of the root blockchain, in exchange for upfront capital. ICOs are frequently used for developers of a new cryptocurrency to raise capital.
Security Token Offering (STO) is an increasing trend in the world of blockchain when legacy type securities as well as new
kinds of securities are tokenized, stored and traded in a regulatory compliant manner on the blockchain.
07. 08. 09. 10.
Bitcoin is a well-known cryptocurrency using blockchain, based on the proof-of-work consensus. A digital commodity is a scarce, electronically transferrable, intangible, with a market value. Fiat currency is any money declared by a government to be valid for meeting a financial obligation, such as EUR or USD.
Mining is the process by which transactions are verified and added to a blockchain. This process of solving cryptographic problems using computing hardware also triggers the release of cryptocurrencies. Successful solving of cryptographic problem is rewarded with Block reward, which fulfils the factor of motivation for nodes.
Node is representation of an entity and a unit in a decentralized P2P network.
Transaction fees are fees imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.
Peer-to-peer (P2P) refers to the decentralized interactions that happen between at least two parties in a highly interconnected network. P2P participants deal directly with each other through a single mediation point.
Smart contracts are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.
15. 16. 17.
A wallet is a software application or hardware device that contains a collection of private keys Consensus mechanism is a set of protocol rules upon which nodes in a decentralized network agree on the state of the ledger.
Double spend refers to a scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recip-
ients at the same time. However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.
Hash - A hash function is any function that can be used to map data of arbitrary size to data of a fixed size. The values returned by a hash function are called hash values. hash codes, digests. or simply hashes. Hash functions are often used in combination with a hash table. a common data structure used in computer software for rapid data lookup. Hash functions accelerate table or database lookup by detecting duplicated records in a large file.
Merkle tree - A Merkle tree is a structure that allows for efficient and secure verification of content in a large body of data. This structure helps verify the consistency and content of the data. Merkle trees are a generalization of hash lists and hash chains. Merkle trees are used by both Bitcoin and Ethereum.
Timestamp - Each block of the blockchain contains a Unix time timestamp. In addition to serving as a source of variation for the block hash. they also make it more difficult for an adversary to manipulate the blockchain. [1536135095 09/05/2018 @ 8 llam UTCl
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