This is epicenter episode 253 with guest Angela Walsh. Hey work, or organizing a live event at the San Francisco blockchain week. It's called SF blockchain epicenter and will be October 8th and 9th at the Hilton Union Square. You can come see members of the epicenter team and a lot of familiar faces from the show. There are reduced rates for developers and you can learn
more at s.f. blockchain week.i oh This episode of epicenter is brought to you by top down top dowel is addressing the talent shortage in the blockchain space, connecting companies of all sizes with the world's best
blockchain. Here's, if you're looking to scale, your team, check out top taobao.com clock epicenter, and by Microsoft Azure configure and deploy a Consortium Network in just a few clicks with pre-built configurations, and enterprise-grade infrastructure, spend less time on watching, scaffolding and more time, building your application. Learn more at aka.ms/offweb Ascender. Hi, welcome to epicenter. So it's talks about the technology. Projects and startups, driving
decentralization. And the global blockchain Revolution. My name is Sebastian ink with you and my name is Brian Pub, and crane we're here today with Angela wall. She's a professor of law at st. Mary's University School of Law in San Antonio. She's also a research fellow at the blockchain center or Central Block Chain at University College London.
And she's a kind of prolific author of papers that are, you know, all critical of blockchain, or looking at the some of the downsides or some There, you know, maybe ways in which the common narratives around blockchains should be questions and so, yeah, I look forward to talking with, with you about that today. Thank you. I'm excited to be here and, yes, I do write a lot of stuff that's kind of critical or ask hard questions.
I like to thank very good. So when did you first learn about Bitcoin and blockchain and start? How did it start kind of rising you interest. Okay so I was transitioning. I'm from practice, I was a corporate lawyer for a while and I was transitioning to practice and had become very interested in money. How money Works? How law helps to constitute? What money is, how money can break?
All those types of questions? And I was very interested in researching that area for my, you know, research as a professor. So I was looking at, you know, thinking about how the dollar worked and stuff and heard of Bitcoin, I would Kind of like fall of 2011, early 2012 and didn't dig in at that point. But once I was in Academia, for real, I dug in, I would say early 2013 and the questions around the governance who my attention very early.
I was it was so interesting to me going to I went to a remember my first Bitcoin conference in the summer of 2013. 13 in New
York and it was an early crowd. Remember meeting like Marco Centauri there and some some other people who have continued to kind of be prominent people in the space and the conversation was about, oh, and we're talking about this new Bitcoin Foundation that were forming, and I was like the question in my head was wait a minute, how can you be a voice of a technology that is, you know, decentralised and who gets the right to be the voice and to, to say things that are
Either on behalf purported to me on behalf of this technology and decentralized community. So, those questions Drew my interest early on. And then since then, I've just kind of been along for the ride when I see things that don't make sense to me, where maybe the the the discussion around something doesn't match real-world events. I write about it or talk about it in hopes of drawing attention to it and flushing out inconsistencies, which I see as
potential risks in many cases. So what has the reaction been coming out of the blockchain community to your work? It varies there early on I would say it there was a lot of strong pushback that I shouldn't even be saying anything because I just don't understand anything. I clearly since I'm not a technologist, I can't possibly get it. And I am not a technologist and that is that's absolutely fair.
That I don't understand certain things that Technologies do but they also We don't understand certain things that I do. So I think that's one of the challenges in this space is for many, many disciplines to come together and try to communicate. So, I've been I've gotten a lot of bad feedback on Twitter, I would say and I've spoken at conferences and when I speak to tech people, they often hate what I'm saying.
And come up to me later and say, I don't, I don't remember what you said, but I know I hated it. So I, I guess I'm just keeping on I'm saying things despite that and there are plenty of tech people in this space. Actually I I've met and had good discussions with and I think, you know, I count the number of them as friends and critical thinkers as well.
So it's a mixed bag, I would say Is this sort of reactions something that you see in, maybe other areas of Technologies over the broader fintech space or just like purely something you see around with watching conferences. So this types of events. Well, okay so my argument about software developers is fiduciaries.
I think has you know it has resonance in the blockchain space and this is where you know I started thinking about that idea originally, but I do think it has A lot larger much larger
implications. And I think it actually needs to be looked at in you know, maybe in open-source important open source software projects generally and we can talk about that a little bit more but so I feel like when I'm at Tec, when I'm a tech conferences, blockchain has like probably the strongest reaction, but any software developer or anyone involved Volved in software development, is probably going to have a strong reaction to the coders of fiduciaries idea.
When I talk to lawyers, i-i've been kind of calling out height where I see it and the space and inconsistencies, and people kind of mindlessly, I would say evangelizing for things that they don't necessarily understand. And I point that out in a variety of settings, I've pointed it out at legal conferences. Has and the, the this the feeling that I get from talking to people, is that okay? It's very different from what we're used to hearing about blockchain and maybe some wool
being pulled off of their eyes. I don't know. That's my Hope anyway. So you mentioned these inconsistencies already it. So what are in your opinion? What in your eyes? The biggest inconsistencies that that people talk about when talking about blockchain in the broader context of the law. So, I mean, one of the big inconsistencies are things that I think of as problematic and we haven't gotten a good understanding of yet. Is really this. What what is decentralized
governance? Mean, and as I said early on I it was very interesting to me that the conversation around Bitcoin and then other blockchains was, you know, that it was just this software that miraculously was running on this network of computers and it just it just worked and it was the narrative was very much that there were not people involved with it, that it was Tech doing this, right? And again, not Technology is for questions like well what happens
is? There's a bug, surely someone's fixing it, who is doing this where you know, they're making changes to the software over time any updates and stuff. So I feel like there was and there still is resistance to this in some ways there was the it's been a long time coming.
The realization that governance is actually happening in blockchains through the development of software and this this conversation hasn't is is Also still in progress, but I think there there are similar arguments that significant
validators and miners. In the space Also function as fiduciaries, the paper that I've written here, the in-depth paper is looking at software developers in this light, but I need to write and I have half-written, you know, want about Miners and other validators as as fiduciaries. So inconsistencies in thinking that Because we have this, you know, a lot of computers somehow the running of the system is
necessarily decentralized. I think they're starting to be more clarity in descriptions of these systems that governance happens in different levels, right? And decentralization is relevant in different places. Decentralization can refer to the number of nodes in a network and can refer to concentration of the validators in a network. It can refer to how the software process software development process happens. Right? Is that centralized is a decentralized?
What is decentralized even mean? So governance decentralization is a term that I think is that's what I'm working on right now. So it's top of mind trying to figure out what that actually means. And then I see just like a lot of words used as basic. Descriptors of the technology
immutable secure reflects truth. Trustless, I think all of those are Widely repeated, including an academic Works in reports by governments and nonprofits etcetera as being characteristics of blockchain technology and their their stated as characteristics of blockchain. Whether we're talking about public blockchains or permission blockchains whatever as if they are Universal regardless of the flavor of technology that you're using and that's just not right.
And yet the discussion continues and I think it can have significant consequences when we expect the technology to do things for us, that it just doesn't do great. Now, I think that was a great kind of overview.
Now you've mentioned a few times to term fiduciaries, and I think this idea of developers as producers is probably the most, you know, controversial idea you have and also an idea that, you know, if kind of people went along with it and regulate the spend along with it had would have a Women's consequences. We can you talk a little bit about you know, what are fiduciaries? And why is that relevant in the
blockchain context? Sure. Okay so the the paper that I have out right now and I've been thinking about this for a long time, I guess I'm just slow on this point to actually get that analysis out, but fiduciaries are they're an important part of our Lives generally. And people that we think of as fulfilling the Re-roll commonly
are people like lawyers. Lawyers are fiduciaries of their clients, doctors are fiduciaries of their patients, some people view like pastors and stuff as fiduciaries of the, you know, the the members of their, their, their church or whatever. Souls of that you sure. Yes, yeah.
Yeah. That there's, we could have a very interesting discussion about that totally unrelated to blockchain stuff but fiduciaries basically are people that you put trust in You essentially trust them to give you their expertise in different ways, they may hold money on your your behalf. They, they do things that are of great importance for other people.
And in my paper, I use a framework that Tamar Frankel, who is a very prominent very well respected, law, professor, who has developed really a Theory of fiduciary law, I use her description of what if a general description of what a fiduciary is, and compare that to what I see software developers doing in these walk chains.
And a crucial part of a fiduciary is because you're trusting in them, you are enabling them to make decisions for you that affect you and that is putting power into their hands. Okay? So I think that people in the Software development part of public blockchains people who are thinking and doing research in what kind of policies, the software should reflect people who are figuring out how the software would reflect those policies and actually doing the coding, perhaps of reflecting
that and then reviewing, right? There's a lot of my understanding not being a software developer, there's a lot of different steps that go into it. It's not someone sits down and spits out code right there, especially in systems that purport to transfer value and you significant things for people. The software development process is extremely important and
fiduciary. I think these people are acting as fiduciaries in that users of these systems, the ones who, you know, own the cryptocurrencies, or crypto assets that trade on these things. People that potentially people that are building businesses. On top of that using these public blockchains, as infrastructure for various things, they are relying very strongly on the software developers to do two things. One to be good at what they're doing to be competent, but that's not all.
Okay, they're also relying on these software developers to be trustworthy and to not do things for their own benefit, over the benefit of the public, who's essentially We using these systems meaning you wouldn't want a software developer for a theory and more for Bitcoin to be taking bribes from a particular minor or government to push a certain change to the network right to talk it up. I think people would in the blockchain space would be horrified to hear of that
happening, but no one owes you that Duty, unless there's something like a fiduciary. In your paper. You you make reference to Tamar Frankel's scholarly fiduciary law, and and there's, there's there's four attributes. And so you, you sort of mention them during your description of if you just sort of like go through them one by one. Because it is interesting to me this, this how these attributes, it sort of reminds me of the Howey test in a sense where one
looks at an entity. In poses these questions. And if they, if they answer yes to these questions, then one could assume that they are fiduciary. So if we could just go through this again, so we have them popped out of mine and then sort of, yeah, let's go through them one by one. Okay, so Frankel says that all fiduciary share a certain set of attributes, okay? And the first attribute, she says, they have is that they
generally offer services. Instead of products, the services are usually socially desirable Durable and often require expertise. Okay, so she gives examples of things like Legal Services teaching Asset Management, corporate management Etc. Okay, so people offering Services based on their expertise and the way that I see that applying to software developers is that well, clearly they are providing Services, right?
The services of creating the code, if they are The Originators of a blockchain system but also Meaning and continuing to review the code, right? And figuring out what changes are necessary and there is no doubt that the services that the Developers for systems, like Bitcoin and etherium Z cash, and, and others, that all those requiring, very significant expertise, right? That it takes a long time for someone to develop the next necessary, expertise, to to credibly do the development.
And actually, Ali, right? We've seen that, even those who have created these systems still don't have full understanding of them, right? With the parity, parity bug and the different ones that have shown up in ethereum. It's been the ones who created the systems that, you know, they're not foolproof yet, right? So it requires a lot of expertise, and actually there's there was a computer science paper that I cite in my paper that talks about software developer.
Blockchain software developers actually having a higher standard of like, developing a blockchain software engineering standard or something like that, because it is such a demanding role to play. So services that require expertise. Okay? The second factor is that in order to perform the services, effectively, the fiduciaries have to be entrusted with
property or power, okay? So you could see that in the context of, you know, run-of-the-mill, Series like lawyers that, you know, the client is entrusting the lawyer with power over their most private information. Or one that you're turning over, you're telling your lawyer, the full truth, you may entrust an escrow agent with your property, right? And trust that they're that they're not going to abscond with it. So, that's how we see it in the general fiduciary world.
And in the blockchain, I see software developers and trusted with with, with power certainly. And I think there's actually an argument that they're interested with property potentially as well. The power is that well not everybody can read the software code, that people are that people write for these blockchains. I understand that they're all generally open source. So the code is available, but people are not reviewing that on
a day-to-day basis. I EU, like, 90% of the users of Bitcoin, or ethereum or not referring reviewing, the, the actual underlying software code. So they are trusting that software developers are doing it, doing it, right? And doing it in, doing it in accordance with, you know, the ethos of the community. There's an argument that these people are actually even entrusted with property. T in the sense that we're now viewing these cryptocurrencies
as assets right? There's been discussion the legal World okay, are they Commodities? What are they? They're these things that have value. So I get a lot of pushback on this argument but I think that These digital assets are completely reliant on the ongoing skill and you know, good works of the software developers write. If they screw up, if they put a bug in, if they fail to come to agreement as a group and don't repair a critical emergency, then the property is kind of gone, right?
Or loses all its value. The digital assets value is very much tied to What the software developers do and we can go into more examples of that, I cite a few in my paper but I could have cited. I feel like many many more but crisis moments to me in general are the ones that reveal the power that people are exercising. Okay. So the third factor that Frankel identifies as being one of fiduciaries is that trusting these fiduciaries poses risks to she calls them in Trust.
There's okay, so the people who are relying on the fiduciaries, it poses a risk to them that the fiduciaries are not going to be trustworthy, okay? They may run off with the property that you give them. They may not perform the services they promised to adequately, they might misuse the the property that you give them.
And I've talked about this a little bit already, I think, but if the software developers are not trustworthy, basically the people who are using the the system are using it under false pretenses, right? If metallic or Vlad are, you know, taking bribes from the Russian government or something like that, which I'm not accusing them of doing it anyway, but it would be relevant for the users of the etherium
community to know this, right? If there are secret backdoor deals and one is getting paid by my someone, People should know that and right now, there is, there's nothing that obligates them to do that. Unless we consider them to have some sort of Duty to the people using these systems, okay? Number four, there is a likelihood that the in truster will fail to protect itself from the risks involved in fiduciary
relationships. The markets may also fail to protect them from these risks and the costs for the fiduciaries of establishing. Their trustworthiness might be higher than their benefits from the Oops. This one has a lot of stuff embedded in it, so I'm going to kind of simplify it for purposes of this conversation. Basically, I think that users of these systems to me, the Ico Market demonstrates, this beautifully that they will fail to protect themselves from the risks involved in this to do
Sherry relationship, okay? People have been investing in, you know so-called public blockchains like crazy over the Steer in a lot of initial coin offerings and a recent study that came out from the University of Pennsylvania talked about how the code in these and many, many ico's actually Bears, no relation to the promises made in white papers, or in ads for the ico's, right?
Things like, they will have a vesting provision for the founders or they will take All founder control within the code. Well, when they reviewed the software code and the white paper or whatever else making any promises generally, they found that there were big gaps, many cases, the code again, as I said bore, no resemblance, the market certainly didn't protect these people. They weren't they, they didn't protect themselves. Right?
So nothing. No protection was happening for people who were buying into these icos. And I I feel it's easy to Tar. There's clearly a lot of fraud in the Ico space over the past year. And I don't want to get distracted by that because I feel like these issues are not just relevant to what are clearly fraudulent. Fly-by-night ico's. I think they're actually relevant to even the more legitimate projects. Like the client like ethereum like Z cash. What which have very serious
technologists involved. So I think and as I explore in my paper, I think there are very strong arguments actually that software developers in the broad sense that I'm talking about, actually fulfill all of these characteristics.
And there's one thing that I do, I want to be sure to mention while I'm thinking about it. And one of the pushbacks that I get about, About this idea is that people don't see them as fiduciaries because they feel like the fiduciary has to have a personal relationship with with like there has to be a personal relationship between the person serving is the fiduciary in the person relying on them. And I'm I'm viewing this more as a kind of fiduciary almost of the public.
There's ideas about fiduciaries such as you know, some people argue that politicians are fiduciaries or judges or fiduciaries of the public and kind of have a the public places, a trust in them. So I don't think it necessarily has to be a one-on-one relationship between a user and a developer for there to be a fiduciary relationship. I think it can be a broader relationship one, too many
actually. Have you ever considered that one of the biggest factors holding back growth in the blockchain industry, is the lack of talented available. Developers by some estimates, there are up to 14 job, openings, for every single Block Chain developer in the world. That's where Top Guns in top towels, a Global Network of talent and business technology and design. And they pick their members by selecting only the top, three
percent of applicants. When you work with top tell you're getting the candid XM. We've got a blockchain specialization that's an on-demand service. That connects your business to an elite network of developers and Engineers specializing in areas. Like solidity smart contracts, hyper Ledger fabric are 3, quart, a decentralized applications and more.
What's best about top towel? What I like the most about this service is they take the stress and pain out of hiring, who has time to publish job, openings and sift through resumes and schedule interviews and all that stuff. It's a white glove service so they take care of everything and
a top tile. Director of engineering will deliver the best candidates for your position on a silver platter and as fast as 24 hours, and from there, your company can work with your new hire or no risk trial period and you pay only if you're Five. So simplify your hiring process and access the world's best blockchain talent for a limited time. Epicenter listeners are eligible for a one thousand dollar credit after the first two thousand dollars paid towards their first higher.
To learn more, go to top.com, epicenter, and we'd like to thank top dollar for their support. Now if you Sheree, right this is I think many people would agree that of course as a user were blockchain II rely to varying extents on different parties including developers but let's say we actually went ahead with your suggestions as okay, we do treat the mass-produced shoes. What would that practical mean? Because that is illegal term right? With all kinds of implications. Yes, you're right.
It is and there are there are many Patient, implications like practical ones. There's a lot of practical questions about it, and in the paper I explore some of the costs and benefits of this because I don't think it's by any means like an easy conclusion to decide that. Okay, well, they are look doing things that make them look an awful lot like fiduciaries. Do we actually go ahead and treat them like that in in a legal sense. So some of the big questions around this.
Are, you know, how do you identify which software
Developers? Which people in this process are actually functioning as fiduciaries, is it just the, you know, the the people who are supervising, the research is that just the people who are doing the review of the code, do some of the pushback I get is that describing you know, software developers are I've used the term coders as fiduciaries, I get a lot of pushback because people think of the term coders just sounds like the Scribe, write and not the
the brain power that's going into creating the code. So you No, that's, that's those are big questions? Which one's actually would be treated as fiduciaries figuring out. Who is actually going to benefit from this legal category categorization, right? Is it anyone who owns or has ever owned potentially the cryptocurrency of the system is it can can we extend it to people who have built businesses on the system like exchanges or
wallet companies? Absolutely are similarly relying on the developers to do a good job and not cheat. So identifying those parties is important and I mean of course there would be challenges to figuring out what to blame people for, right? Which bit of code is the one that caused all the problems. That could be also an area of controversy. But there are and I think you're getting out, there are a larger potential social. Consequences to this categorization, right?
Software has a huge role and how Society runs today. It runs a lot of our most important infrastructures, right nuclear weapons systems the internet itself. Like, all of these things, run on software and blockchains want to run important things. I mean, that's one of the things that people are excited about them for, right? They want them to be used for important social systems.
If you are, if you decide to treat software developers of these systems, which are kind of bubbling up, there's this, you know, great activity and Entrepreneurship in the area. If you're treating those software developers as fiduciaries that are you going to stifle everything and no one's going to do any development at all, right? Because they are worried about the liability that they may
face, right? If someone can sue you for screwing up, you're probably not going to want to do anything. And I think this Is this really gets at some of these larger questions that were wrestling with in Tech now? Right, what should accountability be for people who create really important systems and mess up Tech has had a lot
of protection. I would almost call it a subsidy in the sense that people who create have created software have been very much insulated from liability and the If you look at any agreement software licensing agreement, you will see tons of disclaimers and if you look at any of the open source software license agreements, that these blockchains are that the software for the blockchains is is tied to you will see full disclaimers of all sorts of
liability, right? And that the developers are basically responsible for nothing. So I don't think the the discussion stops just looking at what the license agreements say. I think that this is actually a policy question. Right? Fine. So that the contracts have said that. No one Bears any liability it was that is that okay in a in a situation where so much trust is being placed on these people to know take care of Large amounts of value. Should we impose more things?
That can't be disclaimed potentially? So yeah, basically, I would be described as an innovation Killer By Any Tech person. If you want to boil it down. Yeah, I mean, one of the things that stand out to me is that your proposals? Don't seem very practical, right? So, we've, what we've seen in the Block Chain spaces that it's a global thing, right?
And of course, you can start and run and and these It's from anywhere and you know even if you look at something like a token sales which I think the case there that there's some regulation applied teams you know fairly straightforward in comparison but you know the very mobile can move around and so it seems like here if let's say the US said okay developers are fiduciaries. This would just push, you know, Innovation abroad or people would find ways to Route Around.
Let's say you said, okay, but only those who have MIT access they are fiduciaries. Then people probably figure out some way to like so nobody else commit access but still things could committed or like I'm sure people would immediately route around it. So do you think there's actually like, what do you think is Paul realistically possible? Yeah, those are all very good points. I mean, people definitely respond to laws that are passed by trying to get around them. Absolutely.
And we're seeing some of that play out in the laws that are being developed in the blockchain space already, right? There's kind of there's some regulatory competition happening. I would say, some jurisdictions have decided they really want to incentivize people to do this type of software development. Creation of these businesses and their jurisdiction like in Malta or and Bermuda or Gibraltar and crypto crypto Valley right in Switzerland.
So the multi-jurisdictional, the global aspect of it is certainly an important consideration? I don't know. I don't think it's impossible that we could come to consensus on the fact that software developers, fulfill an important role. And I don't, okay.
So I feel like we're early in the conversation on this as well and it's sort of I see it being part of my job as an academic to ask hard questions to describe things in ways that I'm seeing them and for the world, then to figure out, well yeah, do we need a change in this area? It would be a really important change, but it's not necessarily out of line with what we're seeing in the larger Tech conversation.
For the longest time, the conversation around social media platforms and all these big Tech platforms, like, Google and Amazon, and Facebook, and stuff has been, you know, let him go, let him go. They are doing so much good for the world, all the real excitement at the, you know, as the internet and social media were developing that these is good, good, good, good, good. We're seeing a real change, I
think. In tone in the conversation and things that would have been impossible to imagine that maybe Facebook could be broken up or maybe it will be regulated in different ways. Those are impossible to imagine just a few years ago but I don't think they're impossible to imagine now and I think that the the tide can shift very rapidly and I see the the blockchain conversation kind of intersecting with that in that one of those. The immense that blockchain supporters often make, is that
okay? Well we can use blockchains to essentially fix all the bad things about tech that have emerged, right? The extreme centralization that we've seen in these platforms. The the concentrations of power and doing things that a decentralized way is is going to be what solves the problem and that may well be true.
But I think we need to ask hard questions about what do we mean by decentralized is just Slapping this label on something decentralized, is that absolve people and are we comfortable that we understand how power works in those systems such that we're not just handing power to a different set of people, rather than, you know, dispersing it or making a meaningful change. So I'd like to bring up who regulates fiduciaries in the u.s.
Is there a sort of a governing body like the SEC decides, what is, or isn't a security? Is there a regulator that decides what is and what is not as fiduciary know? So a fiduciary characterization or categorization could come in different ways. Okay, it could come from just common law. So, in the u.s., a lot of our law is, is made just by courts deciding actual disputes between people. They decide cases and over time the law, very gradually might shift.
And that's generally what happens with the development of fiduciary law. Now, it also can happen through a legislature, making a decision that a certain party is a fiduciary, okay? So in some of our statutes certain parties are treated as fiduciaries, like in there's a Rissa is a statute in the u.s. that governs like Employee Retirement. Plans and certain parties acting within that are de facto fiduciaries, right?
There's just been a big, big tussle in the u.s. about whether certain investment advisors are fiduciaries, okay? And it was passed into law, that they would be. And now I think it's been taken back so it can also come from a legislature but just because a court hasn't found it to be the case doesn't mean They couldn't view. You couldn't be persuaded by arguments like those that I'm making that. Well, this sure looks like fiduciaries that we see in other contexts.
Maybe we're going to treat one like that. In this case, it's certainly not impossible for the law to move gradually over time or to persuade, right? Lawmakers that they are fiduciaries and to your question like how am I? I think it's getting at, you know, like how might this Manifest. We know to look to the SEC for what is a security, right? And we've seen a ton of discussion about that over the past year or two and this this very much relates.
I see the SEC having made in that the speech that got a lot of attention by Hinman earlier this summer where he said that you know, based on his read now, aetherium met. You know, leaving aside how it was initially issued and it's, you know, it's its initial Ico, right? I guess that's initial initial but its initial fundraising, it may have been a security then he didn't say for sure. But it doesn't look like one now because it's sufficiently
decentralized. Okay, I see that being exactly the same conversation that we're having here because making a conclusion about whether something is sufficiently, decentralized is talking about how power Works in that system. So the conclusion there seems to be that people are no longer needed to make important decisions to keep the system running. And at least a central group of people are not, and we're going to say, it's sufficiently decentralized. Well, that means to me that.
Oh, well, maybe we don't see any fiduciaries operating there. Okay, people who have positions of trust and power. So as you might guess, I completely disagree with that analysis, but it's absolutely interconnected these conversations. Is about power in these systems. Yeah. I mean to me it seems that, you know, the one hand, you always lie, correct that, you know, just calling something blockchain or even something.
Having this blockchain data structure that is sort of absolves you from all responsibility like that, that obviously doesn't make any sense and I think there are plenty of you have example. Remember a while ago, there was this article about liske. I don't know if you read that but in liske they have this sort of this proof of stake blockchain but there's two cartels that control the entire network and they figured out basically some way to like
punish and push out. Anybody who doesn't agree with them. So essentially I would like to sort of organizations, you know, governing that blockchain. And so, you know, it seems obvious to me that like to some things, you know, you should probably should really treat as okay. You know, these people are responsible for what happens there, but then at the same time when you look at something like Bitcoin and I guess that is also
where red is SEC comments. Go at like then there's there's other things where it's sufficiently decentralized, whatever that means, so that you don't really like that. So but you disagree with this one too. So you don't think there's this kind of line. Yeah. Well so I do think it's important to recognize that decentralization is something on
a spectrum, right? Things are more, some things are more decentralized, some things are more centralized I guess, less decentralized and we kind of have to figure out what we're we're measuring in that sense for me. A lot of it comes down to looking at how the software is developed and who actually plays a role in that and who makes a decision. You mentioned commit access earlier. I think that's actually a hugely important thing, right? Someone is making a decision.
They're about. What actually ends up in the code that is going to be released. Someone is without their password. It's not going to get in. I mean, of course, what about you think? They're, I people mad at me for that. So what am I right? I think what you're missing that. You know most blockchain people will point out.
Is that okay? Like I said, say, somebody changes that that Bitcoin repo or the code there but it's still afterwards, you know, active decision of like, you know, a minor whether they actually use that code to operate at code but you know, of course, Influence is a blurry line and it certainly happens. That's true. Yeah, yeah. So I'm still messing with this idea, but I feel like the conversation has been sort of like if son, less than one has absolute control and
dictatorship. We're going to say that they have no power, right? So because there are checks and balances in these systems, right? You could argue that the, the miners are validators, are kind of a check in some ways on the Le purrs. And then vice versa, right? So in our system of government,
right? Just because Congress has to have a signature by the president to put in the US to put something into law, doesn't mean that Congress doesn't have any power right there are checks and balances but people are still exercising power and we still want people and we still expect those people to be accountable and oh duties despite the fact that they don't have absolute control.
Of course, this is all, you know, potentially out the window How I love everything is in chaos with the government's anyway, but but I think that is something that's important that's often left out of the discussion. So there's one thing that we sort of alluded to in the conversation but not directly and that, is that. This this idea that software developers should be fiduciaries, doesn't only apply to blockchains but it that it might also apply to all open source software.
So if we go back to the four, the four characteristics of a fiduciary, you know, you could potentially apply those questions to something like, Linux and argue that the benevolent dictator is or Linus. Torvalds or whoever are also fiduciaries in that sense. Now, if if that were to be the case, Asif jurisprudence in the US or anywhere else where to establish its software developers, in any case in any type of Open Source software regardless of the licensing,
where have you are? In fact, fiduciaries, what do you think this would do to the software industry? Is this something that's desirable in today's world offer because or something everything that we do and everything?
It's everywhere. And I think it's something that we would need to think very carefully about Don't think for one, I don't think it's every open source, software project, I think there, maybe we, you know, there needs to be some Nuance to it in the sense of how critical it is, like, how many people are relying on it potentially, right? We saw that it was a problem, right? In the case of just Heartbleed 41, right? It really important piece of Open Source.
Software infrastructure, fund function is infrastructure. Right? There's a critical bug in it and it turned out well. It happened because no one was really looking at it and only had like one or two people wrote, you know, responsible for it. And whoa, this is critical infrastructure and nobody's doing anything for it. So I feel like we need to take this stuff seriously, and in the past accountability, for important stuff. That makes you take it more.
Seriously, if I may interject there, I think so that that examples, interesting, right? So hardly SSL bug like many people actually in the Block Chain space of use that, as an example of like, exactly why blockchain and token sales and it's so important because they're the problem wasn't that? Nobody was responsible problem was there was no not funny, no money, no money, tacitly. So if you know, now, treated the developers as fiduciary. The I actually do think there
must be love. Less likely to go in there and and may something with it. So it seems like your proposal would almost certainly be counterproductive in terms of reducing funding interest and work on all of this infrastructure and I don't think in general, right?
It's not like there was some malicious person in Hartley that you know, they didn't, you know, if you had given them some legal obligation, they would have done a better job but it's just that there wasn't enough Ian. And I think that we need to rethink that whole governance structure potentially generally that, whether it's okay weather for society, right?
Whether it's a good idea for society, kind of from a risk management perspective to use this governance model where people do it kind of, you know, just on their own and their free time for things that are critical to the ongoing operation of the world and our economies, right? It's so and this has that the Heartbleed issue.
As you probably know led to this creation of this, like the thing is called the core infrastructure initiative or something like that, where a bunch of tech companies have now contributed funding and are trying to provide funding for will to identify open source software projects that function as infrastructure and to provide some more funding. But it's a work in progress and I agree with you that the token sales and stuff are groping or trying to get to a solution to
this problem the funding issue. that, that is relevant here, but the funding of The core Protocols of Bitcoin in aetherium remains an issue. Despite all this idea about you know, ico's fixing this problem, right? I see it talked about as a continuing issue, who should pay the Bitcoin core developers. Should it be companies within the ecosystem? Should they be sponsored? I don't know. But they're, they're very
important. People from the perspective of every single person who relies on this system who should pay him. Nobody knows right now. If you've listened to previous episodes with Marlon gray and Matt koerner, you know, that Microsoft is committed to providing enterprise-grade tools and infrastructure for blockchain developers. Well, the Azure blockchain workbench is perfect for organizations building.
Consortium networks. Take the etherium proof of authority template, for example, it's ideal for permission. Networks were consensus, participants are known in reputable. A theorem on Azure has on chain Network governance, that leverages parodies extensible, proof of authority, client, each Consortium member has the power to govern the network or delegate their consensus. Participants to a trusted operator and parodies.
Webassembly support allows developers to write smart contracts and familiar languages like C C++ and rust as your blockchain workbench was created on the same principles that drive all Production Services in Azure, so, you know, you're relying on secure redundant infrastructure, that can scale and we built in services. Like authenticating apis off chain databases and secure Key Management Services.
You can scaffold your infrastructure in just a few hours to learn more about Azure blockchain workbench and how Microsoft is Blockchain usability and Enterprise, check out aka.ms/offweb the center and start building today. We'd like to thank Microsoft Azure for their support of epicenter. So you wrote another paper title, the path of the blockchain, Lexicon and the law.
And this paper explores the ever-changing and evolving and sometimes confusing lexicon used in the Block Chain space and Block Chain space botanique industry watching ecosystem. There, there's wise at least 11 sort of terminology that we can't even agree on and specifically how all this changing lexicon poses. The confusion and potentially is threatening for Regulators. Could you give us a high level overview and of this paper, we can sort of dive into the sure.
So you've done a pretty good description but basically the paper Is trying to draw attention to the fact that the lingo in blockchain world is all over the place. Nobody knows what a blockchain is versus a distributed Ledger. Nobody knows what a smart contract. Is nobody knows what any of these terms like that have already come up in our conversation today. What is decentralized mean? What is immutable mean what is secure mean? What is trustless mean?
What do any of these mean? And people are using them as if they do and I think that leads to Mass confusion about the capabilities of the technology and it makes it really hard for people to get down to the facts. Okay, what can this type of Technology? This flavor of Technology actually do, can I rely on it to actually create a record that is going to be permanent and impossible to change?
Well, I would argue no. Li but certainly some blockchains or things that go by the name blockchain, they vary in their ability to make this claim, right? It's all spectrums. But the the terminology in the space, often speaks in terms of absolutes, okay? Right. Unchangeable unhackable permanent secure, right? Those are all like absolutes. It's decentralized instead of the spectrum idea and I think that that that all of this has significant consequences.
I framed the paper in terms of the trouble that it can cause for Regulators in that you have to be able to understand the facts about what you're regulating order to make good decisions about it, but it's certainly much broader than just Regulators, right? It's every policy maker. Evaluating how to treat the technology and also whether to
adopt it at, all right? So anyone making decisions about the technology is affected by the problematic language in the space and Unfortunately language is this kind of weird thing right? You can't get rid of terms just because they seem to be used badly. We kind of get stuck with them and maybe we figure it out in the end and come up with a better lingo. But right now it's a mess and we're seeing a lot of different initiatives to try to pin down the terminology more.
But that's of course a challenge because the technology is moving Moving at such a pace, right? The experimentation is happening so rapidly. So it's really hard to know when you can actually pin down pin something down like into a standard into a technical defined terminology and just the pace of it. Like I feel like I'm running as fast as I can and just you know, grasping it to try to understand anything it's impossible to stay on top of things in the space
because of the pace. And I think that all creates potential for A lot of bad decisions and the reason I kind of try to draw attention to this is because these systems are talked about as being useful for lots of critical critical functions, critical to social like our societies like voting, right? Or finance and when you, you better know what you're putting in, and not have a mistaken impression of it. When you're dealing with big social systems, Yeah. So of course you totally right,
right. The, the terminology is very hard and decentralized is a great example of that. Like, what's the Practical takeaway from this observation? Like, what can we do about this? I guess the Practical takeaway is the extremely skeptical in that. Anyone who is considering adopting this any regulator who is considering how to treat this anyone and everyone should be extremely skeptical and critical of everything they hear. Or read about the technology. So basically join my team.
So Recognize that words don't mean what you think, they mean, right? And you need to dig further, you can't take anything at face value, unfortunately, and that includes academic work from the most prominent of forms, right? Stuff, that it just, you would think that you could rely on. But from my perspective, you can it uses all the language that is misleading. So be skeptical. So can you speak about the example of the ERM immutability. Like how do you think of that term?
Sure. Okay. I think it's completely wrong because I think it's again, one of those absolute terms. So delay meeting of immutable would be unchangeable, right? It can never be changed and the term is omnipresent in the discussion around blockchain
technology. I feel like it's starting to shift a little bit and I don't know if I've had anything to do with that, but I'm happy that I feel like it's Going to shift but I think it's I think it's inaccurate for a few reasons and one of those is that we have definitely seen even in public blockchains which to me have the certainly much more than any permission. Blockchain would have a stronger
claim of being harder to change. I feel like permission blockchains, I see them as just joint-venture databases and it's hard for them to claim that they have actually any of the actu. Attributes that public blockchains have. I see them as just totally different beast and it's bizarre to me that they go by the same name at all. But okay. So but just focusing on public blockchains, we've seen instances.
Where the record that was created was not immutable, it was not unchangeable, in fact, it was, it was altered. I mean, people, I always go back to one instance, being the 2013 4 in Bitcoin, which Which was caused by different software being run by different portions of the validating Network different nodes, wearing different versions and some miners you know had to essentially abandon a chain that they'd already earned money on when the core developers decided. Nope, that's wrong.
We're going to go to this change. This we're going to choose which of the the split Ledger's is authoritative which one is actually Bitcoin. And a small group of people decided which one it was and went there. So a let Ledger that appeared legitimate, that should have been immutable and used forever, right, was rejected as no good. I see. I see the the post Dow Fork telling us a similar story,
right? The fact that the decision was made to treat, the hack is a theft Theft was an active decision made and it affected the record that appears in what is now called Theory. Mm. I mean just technically speaking, right? So I mean I guess in the Bitcoin case, it is true, right? That you have two different chains and then one of them sort of you know never made it into history but in the theorem case I mean the record wasn't you know retroactively change.
It's just that I guess the reversibility in a way of transaction was sort of it was changed in a way that was not in accordance. With the rules that people thought there was for the changeability for the record right there were certainly not in accordance with the you know the sort of ethereum vision or description of code is Law and being above the, you know, reproach or sort of the control of ordinary people and developers.
That's exactly. Yeah. So I see those as kind of disproving the idea of immutable. So it's always very interesting to me that people continue to use the term and then my other other critique of it is that a lot of these features that we use to describe the technology the record of that created by the technology, right? This immutable or skewer or whatever are ones that they're like, emergent properties, okay?
Of these complex systems. So somehow when we put together this particular consensus mechanism and certain cryptography, and whatever All else these ingredients are we get that all this magical record that's immutable and secure and reflects the truth and all that. Okay so I now adjust it in my paper to baking a cake. Okay. You put this group of ingredients together. You treated a particular way, you run it a particular way and
you get these great properties. Okay, what we're seeing with the development in the blockchain space is tons of experimentation. Right. Everything every possible thing is being varied from the consensus mechanism to yeah. Who are validators, who are, who are developers. What cryptography is being used, everything is is up for grabs, right?
But people still persist in talking about every system that might be considered a blockchain as giving rise to the same miraculous set of immutable records, these magical emergent properties so it's as if you change the ingredients of the cake, Make you change the temperature, you bake it at you change. How long you bake it at and you're still expecting to get the same cake in the end. I think that is doesn't make sense.
I think you're expecting to get a cake just the whether or not it'll be a cake that you particularly want to eat or not, is what's put in my question. I want to come back on this idea of immutability because I sort of see immutability is something that you can apply that property and think of it in different ways given the context. So what I would tend to agree with Brian was saying earlier that, you know, the data itself
continues to exist. However, as from the point of view of the user, you know was the transaction where those Transactions immutable whereas like the money in your wallet is still there and I sort of see blockchains analysis and analogize them in the following ways that we used to think that the Earth was flat. There was a consensus around that and the majority of people were to think that the Earth was flat. And at some point there was a
change in consensus. And so, you know, one can consider that to be sort of a fork and the majority of people now think, although there's still a small, Majority of people that think the Earth is flat, but the majority of people now think the Earth is round, so you could consider that as the
chain with the most validators. Now, when we still, we still all agree that at some point, we thought the Earth was flat, we just don't think that's, that's true anymore, but the information and the data is still there. So to me that sort of resembles what happened with the etherium heart Fork, the data still exists, it continues to exist, just the consensus and the majority of people Yeah. Yeah, no. I absolutely see that argument.
I think it intertwines in an interesting way with the governance conversation because kind of like what we were talking about earlier, right? It changed in ways that we're not in line with how people expected it to be able to change, right? So the change happened that the change taking away the money from the right, the the hacker or whatever, the thief that change was not in line with the rules. So I there's some interesting conflation here that maybe I'm making with immutability and
governance. I think they're intimately related though. I'm not sure quite how to articulate that but I think immutable is the wrong term, because humans, Remain in charge of the the system. And I think I think that term is, is part of the way that people talk about these systems as not involving humans, right? Tech is going to fix these problems. We don't have to trust in humans. It's it's Tech, it's running away from Human flaws, it we've
escaped the human flaws. So the tech is going to just do these things for us and Immutable acts as if the humans who are running the system. Can't continue to make decisions about it and they do and we'll and I I think I may be slightly more appropriate term might be auditable because regardless of regardless of the changes that that occur of the shifts and consensus, the data were you went, you can see where you went and where you've been, and you can always audit that
information. I think that, you know, that may be more helpful. Yeah. I have a suggestion for a guest, for you actually. An archivist. Yeah. Victoria Lemieux is an archivist at a digital archivist at the University of British Columbia and these are record-keeping systems, right? But there's not enough archivist in the conversation who actually know what record keeping is all about. So she is an expert on blockchains and records and I think Enjoy.
Yeah, she's awesome great. Now I would love to dive in a little bit on your so, you know, you written a lot of these academic papers looking at some of the you know, maybe flaws or questionable aspects of the blockchain discussion. Like, what's your personal stance on this? You feel like this is, you know, some sort of insane hype and it needs to be deflated or you think they really is great promise in blockchain and we'll have a lot of great effects. Like how do you think about this?
I'm unconvinced I think at the moment of the the great potential for the tech, I'm still I'm still needing convincing the reason. I think that I'm I'm so interested and have wanted to contribute to the conversation here is as I've said, because people want to use it for
socially significant things. And I feel that if you're going to use something for big things, you need to make sure that you're having a That you're putting in the right amount of thinking to it that your scrutinizing every conclusion, every assumption, everything, and I don't otherwise see that happening to to the extent. I think it should. So that's kind of what the role that I've been trying to fill in
the space. I think bottom line, I'm feeling like private blockchains, these are these permission blockchains whatever you want to call them. From technologists who I trust and believe are credible in the space. These are nothing revolutionary. Their stuff that we've been able to do for a long time but the marketing around blockchain and stuff has made people more interested in doing it potentially. But I'm skeptical that they have the capabilities that people ascribe to them.
And that they, I'm hoping that we don't end up in a situation because we're because policymakers believe that they have certain capabilities. Abilities and adopt them for important, very important systems. I mean, there are, there are, is a, you know, strong push to do blockchain based voting, which I again, another topic for a show for you. But the again, the cryptographers and the people who are respecting the space or like, no, that's crazy for many, many reasons.
So I'm skeptical of private blockchains on the public blockchain side. I think it's very interesting. I think the The gun, the governance and the idea of humans doing something in this way, is very interesting, but right now, I feel like they can't actually be useful for things of social importance, unless they get governance.
Worked out because governance I think is a core flaw and no matter whether you talking about the on chain stuff, or, or off chain governance, it's all experimental at this point. So unless you figure out the governance there too unstable I think for anything. That more than a small group of people can rely on. That's where I am right now. Okay. But then I guess you are looking positively on you know many blockchain projects today. You know explicitly think about governance and talk about
governance mechanisms. So you do think that well I think that's I think that's a step forward to acknowledge that governance is inevitable and has to happen but we'll see what happens. The deal is So you can look at governance over time in a number of ways, right? I guess dip. Every every governance method we have is a work in progress, right?
We like to think that democracy is perfect but now, we're finding out about, you know, how much of in the u.s. right, how much of democracy is you know stuff that's actually written into a constitution versus just Norms that have put limits on the behaviors that we think are acceptable.
So maybe I'm romanticizing, you know, our Or overstating what we know about governance, generally in other contexts, but I think that it's really important for people designing governance systems in blockchain systems, to learn from what humans have done before, and to bring multiple, disciplines to it, to bring history to it. Because I think that just throwing it out as and We Know Better, We Know Better is It's it waste time and it's potentially harmful.
Yeah, so you've written a bunch of paper is what's coming up for you. Are there still some, you know, some big really important areas that you feel you want to look at in the next year's. So I'm thinking a lot about
decentralization right now. I'm working on a paper kind of trying to deconstruct the term and think about its potential legal implications, whether we're thinking about decentral, something that's decentralized as a way of You know, a code word for, we don't have to worry about power, that's being exercised and something that can claim to be decentralized. So I'm working on a paper on that.
I've been, I'm teaching a course, totally devoted to cryptocurrencies blockchain and the law this semester. So trying to stay on top of that is fun and there's just so much going on in the space that it's hard to figure out what to prioritize and spend your time on. There's just, there's And I have probably 50 papers that I have ideas for and want to write, but, you know, time time time.
So before we wrap up, I just want to ask you about this initiative that you're a part of which is the Journal of financial technology which else that also includes the some some other guests that we've had on the show before. Could just briefly tell us, tell us about that. And what's going on with that? Sure.
So in past year, a group of Of academics, kind of, from a bunch of different places, around the world have gotten together to, to try to. To create the field of fintech financial technology as a real academic discipline. And I'm on it for the long kind of in regulation side, there are mathematicians computer, scientists, economists, people
in finance. And it's it, recognizes that this field is interdisciplinary by nature and that the different disciplines need to be talking to one another so that we can understand what's going on, right? We can each inform the conversation in different ways so it I mean it is intended to bring pieces from, you know, the perspective of their discipline. So you would expect to see articles written like law review articles, you expect to see
ones. Economics ones written like economics papers, Etc. So I don't know that we all speak the same We can fully understand what each other is saying, but I think it's important to at least get us all in the same room so that's what that's what the goal is. So if people have papers look up journal for financial technology, I think it's the JF t.com and send us something. We'll have links for that in the show notes, of course.
And also the you were mentioning a paper earlier by the my researchers at the University of Penn State University of I think it's good that it's the coin operated capitalism one, right? Yeah. So we'll also link to that in the show notes. Great cool. Well, thanks so much for joining us today on July was, it was great speaking with you. I think, you know, certainly doing important work, that's, you know, needed.
Then there's sort of a balance in the blockchain space and that I look forward to more paper by you. Thank you was a real pleasure to talk with you guys. Thank you cool. And of course we're going to have your links to to a whole bunch of her papers in the show notes if you want to check that out. And also, Rep side. You just check out the show notes and thanks so much for listener for once again, tuning in, if you want to support the show, you can leave us an iTunes
review. That helps new people find show. You can, of course, watch YouTube videos on youtube.com slash Epson Bitcoin. And yeah, we look forward to being back next week.