Blockchain Ethics

Responses for class 2 readings

Hey there, this post loosely goes off the prompts. I apologize in advance if the prompts were meant to facilitate the discussion topics to a greater degree than I interpreted.

I found the readings interesting and appreciated their breadth!

After re-reading the bitcoin paper (haven’t read since 2014) there were a few things that stood out to me.

  • In recent years there has been attention to the prohibitively large size of the Bitcoin ledger, yet this wasn’t supposed to be a problem in the original theory posed in the paper. Satoshi explains how due to the Merkle tree’s construction and pruning, the size of the ledger should only grow by a 4.2MB per year. What went wrong? Have people not been spending Bitcoins in the way that Satoshi imagined, making sufficient pruning impossible?
  • Another part of the paper that stood out to me was in the section about incentives (6). In the explanation of why the protocol and system will remain a secure system, the paper says “If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.” While this might keep nodes honest, I wonder if this scenario still poses a terrible insecurity to the economic system of Bitcoin. Consider an entity that assembles enough wealth and then CPU power (51%) so that they can then continuously and increasingly have the highest probability of mining the next coin, therefore growing their wealth, which can be reinvested in even more CPU, further increasing their likelihood of winning the next block, and this cycle repeating itself? Even if this miner is “acting honestly” they have effectively overtaken the system and could operate as a dictator or monopoly within it at any time.

A tangential question that came up for me throughout the reading was: what is the difference between cryptology and cryptography? I hadn’t seen “cryptology” much before. The answer is that they are now commonly used interchangeably but that historically cryptology was an umbrella term for cryptanalysis and cryptography.

About the “Blockchain and Trust” blogpost:

I found this to be a very interesting critique that I have not heard enough of. Particularly that trust in bitcoin and its protocol (“in math we trust”) is insufficient without a distributed infrastructure and ecosystem to operate with it. There is a lot of economic theory that “works” when considered in a simplified vacuum, but is less applicable in the messy real world. Theory around Bitcoin and other cryptocurrencies suffer from similar problems.

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Hello! I really enjoyed the readings given that I was completely new to cryptocurrencies/blockchain (I apologize if I get anything wrong in this post) and I am now more excited than ever to take this class!

Firstly, I did not know that a fiat currency is a currency whose value is backed by a government entity. Secondly, stable coins are essentially stable cryptocurrencies by providing some sort of underlying asset (e.g. a reserve that offsets shortages or controls circulation to prevent volatility of price). For example, you can maintain a fiat currency reserve or a cryptocurrency reserve. However, the issue with the former is the government entity and the latter’s issue is that other cryptocurrencies are volatile as well, thus you need a lot of a particular volatile crypto coins to protect a few stablecoins. You could also use a non-collaterized system that relies on an algorithm that regulates supply/demand based on need by implementing smart contracts, which are simply contracts whose terms are written into the code.

Interestingly enough, this opens up a new door where you trust the code and technology rather than human entities as pointed out in the article “Blockchain and Trust”. However, they also mention that what seems to be purely autonomous in terms of enforcement is still subject to oversight in terms of exchanges that choose which cryptocurrencies to back, companies that sell specific hardware, and changing the size of the bitcoin block or the number of zeroes needed in a block’s hash.

Now the Sound Money camp would reply to the above statement in uproar since external pressures may influence the value of the bitcoin. Additionally, it is known that the bitcoin reward (or the prize at establishing a new validated block) decreases geometrically annually (“How Does Bitcoin Actually Work”, 3Blue1Brown), and the way miners get paid is to self-impose fees. Sound Money sounds more like idealized money to me. Nevertheless, I still think Bitcoin is incredibly powerful.

After much reading, I am still left with many questions. Can Bitcoin despite some of its flaws, be a champion for economic freedom in countries whose governments been deemed obsolete or distrustworthy by public opinion as in Venezuela and Zimbabwe? The Open Finance camp, in my humble opinion, would be elated to hear about bitcoin being available and adopted by all citizens by a particular country, yet they will be distraught by the entry level in terms of computation power needed by a proof of work blockchain. Therefore, I think the Payments camp would champion this change as it harmonizes the government and its people as it attempts to restore some financial independence to its people while creating stable coins backed by a fiat reserve. In The Architecture of Crypto Innovation Talk, it was mentioned that the Nakamoto proof of work design makes identities costly, thus curbing a Sybil attack. In Z cash, they boast anonymity, or rather making transaction histories of certain users private. However, I am not sure if it’s just me, but the “Peer to Peer Electronic Cash System” did state that public keys were kept anonymous, thus keeping track of a single ID’s balance, payments, and timestamps doesn’t seem like much if you don’t know the receiver nor sender. Furthermore, how would you check overspending? It seems to be more computationally intensive to decode each encrypted transaction separately as it is to have it publicly available, no? It seems like Z cash is asking to put more trust in the computer system than it is in the openness to the people. Maybe that’s just a hot take.

In my mind, Bitcoin consists of blocks. These blocks form a chain and blocks are added only if they are verified by the proof of work at the end of each block. In this case, the proof of work is a special number that in combination with the transactions found in a block hash to a specific digest containing a certain predetermined set of 0s. To maintain order, the header of each new block has the digest of the previous block. Transactions are verified by digital signatures or when Person A uses their private key on the digest of Person B’s public key to create a new signature for this transaction. This transaction can be publicly verified by Person A’s public key. As a result, changing a single transaction in a block changes the whole block’s digest and since every transaction is publicly broadcasted, the majority of members of the network will defeat any attacker in the long run by simply having more computational power since they are collectively searching for proofs of work for new blocks. And these members are incentivized to contribute to the network because they receive bitcoins for creating new blocks. Trust the longer chain because more computational power was put it into it.

I am tired now so I am going to sleep but I hoped you guys liked the digest that came from the hash that is my brain. The public key is English and my cryptic way of writing is my private key. The input is the reading I filtered into my brain/hash function. Thank you.

Really loved the videos that supplemented the readings this week! I was really drawn in by the two camps of crypto that I am still learning more about: Web 3.0 and Open Finance.

1. Web 3.0:

  1. However, Web 3.0 will be able to get the context from the user; and then be able to provide the user with the most useful information. Like an artificial intelligence assistant that understands its user and personalizes everything.
  2. A way to disintermediate centralized corporations by encouraging data ownership, and potentially redistributing profits.
  3. Pending Questions: How do you achieve true decentralization in the infrastructure of the internet? How do you control for how ethical the AI algorithms are / their recommendations?

2. Open Finance:

  1. Building a digital financial system with similar twin products (such as index funds, mortgages, security bundling, derivatives) in the crypto space— specifically Ethereum. They are mostly built on open-source protocols or modular frameworks for creating and issuing digital assets.
  2. Pending Questions: At some level for complex financial products there needs to be a holder of “risk” in layered security products. In the case of an open financial system, who would be liable for the risk? Also how are issuance platforms in DeFi different than open platforms such as MakerDAO or Dharma?

Finally, I think while the idea of distributive ledger technology can sometimes be over-hyped as a solution to everything (fad versus the best option), there are a lot of use cases that crop up outside of the finance realm that are very important to fundamentally transforming how industries operate and get rid of inefficiencies. For example, I would actually break the “Distributive Ledger” camp into sub-sections as follows:
34%20PM

These use cases can be mapped to industries such as agriculture, climate/energy grids, digital identity, governance and democracy, and healthcare. Happy to discuss these applications in depth at some point if interested :slight_smile:

I’m going to riff a bit here about Web 3.0 and the article on myth of the infrastructure phase article, which captured my attention most this week. There are a few defining features you can pull out from a Web 3.0 vision – technology stack, app libraries, economic models – but the apps used may ultimately, as the article argued, point to where the tech is going. I love the below diagram from Essentia.one founder Matte Gianpietro Zago to illustrate what this change looks like:


Here, centrally controlled apps and services are replaced with blockchain and decentralized ones. The core concept as I understand it – aided heavily by Consensys’ series with Ethereum co-founder Joseph Lubin – is that these apps can share a common space that is generally powered by a token, that enables broader coexistence and de-emphasizes a customer data collection model we see with many of the web 2.0 services listed above.

Data and activity based models (If you’re not paying for the product, you are the product) on a social net might be replaced with models emphasizing a quality or willingness to pay transaction fees in the form of a token (e.g. Bitcoin tip to miners to accept the transaction) or upkeep of the blockchain itself (proof of work / stake / something else entirely). This has the potential to be extremely healthy for our digital wellness, with things like ad-blocking a cornerstone of the Brave browser.[1] Pointing backwards to Larry Lessig’s read/write culture[2] epitomized by web 2.0 and sharing/action/reaction web, a web 3.0 world is read/write/own[3] – the data on the web belongs to those who produced it.

But there are some major questions that remain – how much are these transaction fees?[4] What do these systems mean for global communities with harsher data or speed limitations? What does a blockchain-fueled web 3.0 mean for the right to be forgotten? Will dApps be obviously better enough to convince people to leave Facebook? What does Moore’s law and processing power have to saw about decentralization from increasingly pocket-able PCs?

The question of infrastructure is an interesting one, too. I started peeking at Status, which is a coinwallet, messaging app, and dApp OS all in one. It is in many ways an infrastructure in an app, or vice versa. But the promises web 3.0 keep address some of the fundamental anxieties of web 2.0 standards: the zuck is l i s t e n i n g and that 5G modem from our Easterly friends may be doing more. Chrome is just mining advertising targets, and the margins on upwork and youtube are brutal for creators.

So far so good, let’s keep on building.

Cheers, d

1: A fun side note, DUSP's IT department is installing Brave on the session images for lab computers.
2: A small note here on [Lessig's reaction](https://medium.com/@lessig/on-joi-and-mit-3cb422fe5ae7) to recent events.
3: Or read/write/execute as one[IBM blogger has it](https://www.ibm.com/blogs/blockchain/2019/03/exploring-blockchain-as-the-foundation-for-next-gen-apps-on-web-3-0/)
4: In the case of Storj and Filecoin, a decentralized storage platform, node operators are paid in dollar-pegged amounts of coin -- who's paying the fees?

The most informative readings for me this week was the detailed information on how to build the ethical framework that I can use to evaluate potential blockchain use cases. Although the information on Cypherpunks and Crypto Anarchist was certainly entertaining, I had previously seen this material so it was not new to me. However, I had not previously been exposed to the building an ethical framework, so this guidance was critical to building the foundation that I will need for the rest of the class.

To bolster my understanding of this area, I reviewed the optional readings related to ethics, in addition to the required readings on this subject. I particularly appreciated the ACM Code of Ethics and Risk Mitigation Checklist for the detailed analysis of the key concepts that should be considered before engaging in an analysis of an electronic or digital product. The focus on being proactive was important, as it is always better to try to actively prevent harm rather than proceeding ahead blindly without considering the consequences; the tech companies claim to have risk teams but it is often hard to see that from the way that they roll out new products. The Pathetic Dot Theory was very appropriate for me as a regulator, and I could see why it is so popular as a way to synthesize the competing forces that affect our behavior.

The discussion of the Twelve Leverage Points from Donella Meadows provides an additional set of parameters that can be used to control an environment. This format shows that your meta paradigm about the system affects everything else that follows, which is why it is so important to clarify your values and goals before you begin your analysis. If you can shift your paradigm, it changes the entire scope of the thesis that you are building.

Hi,

I just finished doing all required reading/watching for class 2. Thanks for compiling such an amazing reading list. It covered a lot of ground. I am writing about a couple of things that I found interesting.

I liked the idea that applications and the infrastructure needed to support those applications evolve in responsive cycles, not in distinct separate phases. The arguments presented in support of this hypothesis were convincing.

Further, I see there has been a lot of discussions around public Vs permissioned Blockchains and camps of people believing in one over another. This has been touched upon in multiple reading materials and was also discussed in our previous class. I believe the idea of a public Blockchain, open to anybody, is an illusion and so, I don’t see a defining distinction between a public and permissioned systems. What I see is a spectrum of permission. The claim that anybody can join a public Blockchain is not true. One needs to have certain access to be able to join even a public one. For example, access to internet. More specifically, an uncensored internet. One needs to have a computer. And then, the knowledge to be able to operate it and join a public Blockchain. How many humans living on the planet are we left with then? When we move from public to permissioned, we just add one more layer of filter and as we keep adding filters the system becomes more and more permissioned. So, in a way, all Blockchains are permissioned and they each have their own community and applications.

I think this is an interesting thought and I would like to hear what others think about this.

Hey, I enjoyed the readings and supplementary videos a lot from a noob’s perspective! Even though it took me a while to digest the concept but still, inspiring. Here are some insights and feedback is always welcome!

  • “ Shift some of the trust in people and institutions to trust in technology”
    • By switching people’s trust on certain human legal system to technology, such as cryptography, protocols, software and computer network, blockchain technology is somehow deemphasize the traditional form of trust that is charged by humans. I agreed there were questions remained unclear and unsolved in regards to this new form of technological trust: what if user forget the login credentials? What if there were bugs in the system while it took long to reach agreement and fix it? What if your bitcoin wallet gets hacked? I can’t tell how possible or often those cases would happen( need more data supported) but as long as it leads to the same irreversible disaster, it makes harder and harder for new user or institution to build trust with it. It also talks about blockchain is a way to transfer trust, rather eliminate it. There is a call for new economy and trust system that can resist the flaws of traditional banking system that causes the crisis in 2008.
    • However, I think technological trust is more close to the future of the trust. The blockchain itself does not create trust itself but how bitcoin works explains its fundamental roles as a support for trust.
      • Unique proof of work - containing a history of each previous node
      • Transactions being broadcast to each node
      • The blockchain itself, containing a list of all past transactions and newly minted tokens. It serves as the distributed state of the network.
      • Nodes, which only accept verifiable blocks from other nodes.
      • Follow the chain with most computational work

Hello,

The article that most resonated with me was It’s about the development cycle of blockchain related technologies and the push and pull between development of blockchain applications and blockchain infrastructure.

for me the Key Takeaways were: in general with technology the applications don’t wait for the infrastructure to be in place before being developed. Key applications are developed and then the infrastructure comes in to allow for that application to scale. A good example being the invention of the lightbulb preceding the invention of the electric grid by three years. So while many people believe we are in the infrastructure building phase of the blockchain industry, this notion may really be a myth. Appended is a diagram showing the development cycle of blockchain tech.

they go on to say that with blockchain technologies especially, since so many of them are open source, the distinction between app and infrastructure is blurred.

My question is If bitcoin was the first application and also the first piece of infrastructure that spurred growth in the space what is the next one going to be? In my mind the biggest challenge I see (exemplified by the Dapps in 2018 video and the blockchain and trust article) is ease of use/ security. My impression is that certain fields in the space, like mining, are almost overdeveloped for the amount of people that actually use crypto (The Bitcoin network now produces 80 exahashes per second, these hashes cost about $19.8 million dollars a day), while applications and infrastructure that would make it convenient to use crypto are really lagging behind. this leads me to the question is this blurred line of application and infrastructure makes things move faster or slower in the crypto-verse?

Sure open source things reduce the barrier to building on top of things that exist, but does that ability to build anywhere cause a lack of focus on building what is really important. I am not experienced in the tech space so it could be I am thinking about this in completely the wrong way.

Excellent reading material! The five perspectives is very helpful scaffolding. I found Michael Nielsen’s explanation of Bitcoin excellent. But to me it’s not any one of the readings, but the collection of them together that provided value. Good to see the topic from so many perspectives!

I would like to use the key words/phrases mentioned in the syllabus that are associated with blockchain and cryptocurrencies to try to describe the affordances of the technology.

PRIVACY – The key theme here is that bitcoin is considered pseudo-anonymous, but it is not private. This feature gives rise to different platforms like Zcash, that use zero knowledge proofs, to facilitate the use of “shielded” addresses that inhibit the ability of others to determine the identity of the user. Privacy coins make regulators like me nervous, so preventing or limiting the use of privacy coins is a key goal of regulation. However, I’m not sure what regulators can do to prevent the use of privacy coins, if anything. Potential strategies for addressing this risk are still being investigated, and it remains an open question at this time.

TRANSPARENCY – The bitcoin blockchain is generally considered to be transparent, since all transactions on the blockchain are public. This feature is used as a way to foster trust in the blockchain, and is a work-around for the lack of a trusted intermediary. However, this feature, is the opposite end of the spectrum from true privacy, which is why some users, at least on some occasions, use privacy coins like Zcash. Regulators like this feature of bitcoin but many users do not.

CENSORSHIP-RESISTENCE – This feature is central to the sound-money and web 3 camps, and to some extent the open finance camp. The feature of bitcoin that makes it censorship-resistant is its decentralized structure.

IMMUTABILITY – The immutability feature is the most attractive aspect for the decentralized ledger technology camp. It is made possible by the mining process and the use of cryptography to make it virtually impossible to make changes to the blockchain once too much time has passed, which is usually considered to be once six blocks have been confirmed since the initial confirmation of the transaction.

PERMISSIONLESSNESS – This feature is what determines the difference between a private blockchain and a public blockchain. There are use cases for both types of blockchains, but a permissionlessness blockchain is needed for bitcoin in order to make it accessible by anyone who wants to exit the fiat system. This aspect makes it an important attribute for the sound money and open finance camps.

AUTONOMOUS COMPUTATION – This feature is a component of the distributed ledger aspect of blockchains, and refers to the method by which the overall system adapts to changes in the environment. Since I am not a computer specialist, this aspect is not something that I am very familiar with, but it is an important feature to understand if you want to trust the blockchain.

MONEY – Schneier says that currency is a necessary element of a blockchain to align the incentives of everyone involved. Most governments do not consider bitcoin to be money, since it is not fiat, but instead consider it to be an asset or commodity. However, the sound money camp disagrees. Money is supposed to be fungible, a store of value, and unit of account. At this time, bitcoin functions primarily as a store of value, although even that is highly debated by many people since the value is so volatile. This is a complex topic where I can only scratch the surface right now, but I believe that bitcoin is too new to truly be “money” right now. However, that may change once it is more accepted by average people.

TRUST – The blog post from Schneier talks about how the blockchain changes the nature of trust. I am in the process of reading the book from Kevin Werbach mentioned in the blog post, and it is a key resource for me as a regulator because my goal is to have a trustworthy financial system. Understanding the trust aspect of blockchain is one step towards me knowing what regulatory protocols should be in place to ensure a fair system going forward, and I hope to gain a deeper understanding of that through this class.

INTERNET PROTOCOL STACK – We learned in the first class that bitcoin just adds the digital currency layer to the internet stack; this feature is the final step in the new world desired by the Cypherpunks.

I just found this series on Medium.com from Dan Held that provides a detailed look at Bitcoin’s affordances (the series is “Planting Bitcoin”) so I am posting a link here to the first article for reference.
https://medium.com/@danhedl/planting-bitcoin-sound-money-72e80e40ff62

re: Merkle trees and the capacity of a Bitcoin block - this was the lightbulb answer.

re: incentives - good question. Mining pools with beaucoup of CPU and hash power is definitely a thing, so theoretically speaking, 51% attacks should be more common. Andreas explains why “experts” aren’t sweating that stuff here
Andreas is also just a lovely and funny human that explains things well in this space. This is a good overview answer on this.

This thing says “Cryptography is a broad, sticky, and mathematically complex, but interesting subject and an integral part of the evolution of warfare. So let’s get some definitions out of the way first. Cryptology is the study of codes, both creating and solving them. Cryptography is the art of creating codes. Cryptanalysis is the art of surreptitiously revealing the contents of coded messages, breaking codes, that were not intended for you as a recipient.” (another good question!)

Welcome to the forum! @The-Ripp3r (don’t forget to introduce yourself in the #introduction thread)

re: “Can Bitcoin despite some of its flaws, be a champion for economic freedom in countries whose governments been deemed obsolete or distrustworthy by public opinion as in Venezuela and Zimbabwe?”
good question! we’ll cover conversations like this in a class themed around “Banking the Unbanked” very soon.

re: “…how would you check overspending?” …essentially - who becomes the intermediary? Is that a responsibility of a company? Does this mean we’re just building another high-tech bank? (All good questions)

re: “It seems like Z cash is asking to put more trust in the computer system than it is in the openness to the people. Maybe that’s just a hot take.” Yea! That’s a pretty solid assessment.

…and how does one assess who/what is creating the datasets that train these AI alogs that make decisions?

Good question! I often wonder which the transnational technology we see in layer 2, who/what law exists to keep said “holders of risk” accountable?