Smart Contracts and Distributed Ledger Technology: a Lawyer's Guide
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Securing the Chain
Securing the chain KPMG International kpmg.com/blockchain360 Foreword It’s no secret that blockchain1 is a potential game changer in financial services and other industries. This is evident by the US$1B investment2 in the technology last year alone. Or the fact that you don’t have to look very far for blockchain use cases, which are as diverse as a foreign exchange market in financial services to the pork supply chain in consumer retailing. Some even see blockchain as a “foundational” technology set to disrupt, enable and change business processing, as we know it across industries. To date, much of the blockchain frenzy has centered on its vast transformative potential across entire industries. So, organizations have focused squarely on “how” they can use blockchain for business. Yet, as more proof of concepts move toward practical implementations and cyber threats rapidly grow in number and sophistication, security and risk management can no longer take a backseat. In addition to “how”, the question then becomes, “Is blockchain secure for my business?” Simply put, it can be. But, not by just turning the key. Security will depend on a variety of factors, none the least of which requires a robust risk management framework. Consider, for example, that as many as half of vulnerability exploitations occur within 10 to 100 days after they are published according to one study3. Then add in the number of threats that are already known. Next, factor in the plethora of unknowns that accompany emerging technologies and you quickly see why a comprehensive view of your risk and threat landscape is necessary. -
Joseph Gao EAS 499: Senior Thesis Advisor: Brett Hemenway [DRAFT]
Joseph Gao EAS 499: Senior Thesis Advisor: Brett Hemenway [DRAFT] Introduction to Cryptocurrencies for Retail Investors 1. ABSTRACT In the year 1998, roughly seven years before the smartphone revolution, (2007 marked the release of the iPhone, which arguably kicked off the ‘always online’ era that we live in today), Wei Dai published a proposal for an “anonymous, distributed electronic cash system”.(http://www.weidai.com/bmoney.txt). In the paper, Dai introduced two protocols to achieve his proposal - the first using a proof of work function as a means of creating money, and the second defining a set of servers responsible for keeping accounts, which must be regularly published, and verify balances for the other participants in the decentralized system. While B-money never took off, in part due to the impractical requirement of the first protocol that asks for a broadcast channel that is synchronous and unjammable, Wei Dai’s proposal planted the seeds of an idea that would later inspire Satoshi Nakamoto to publish the Bitcoin: A Peer-to-Peer Electronic Cash System white paper. This publication sparked a renewed wave of interest in distributed payment systems and resulted in thousands and thousands of new proposals and protocols to be developed in the next ten years. 2. INTRODUCTION The year of 2017 showed immense mainstream adoption in a number of cryptocurrencies. However, while mainstream chatter of these various cryptocurrencies has become nearly impossible to avoid, many retail investors are unfamiliar with the underlying technology powering each coin, according to studies performed by CoinDesk, Blockchain Capital, and The 1 University of Cambridge . -
Read the Report Brief
A REVOLUTION IN TRUST Distributed Ledger Technology in Relief & Development MAY 2017 “The principal challenge associated with [DLT] is a lack of awareness of the technology, especially in sectors other than banking, and a lack of widespread understanding of how it works.” - Deloitte Executive Summary1 The Upside In 2016, the blockchain was recognized as one of the top 10 In a recent report, Accenture surveyed emerging technologies by the World Economic Forum.2 The cost data from eight of the world’s ten potential of the blockchain and distributed ledger technology largest investment banks, with the goal of putting a dollar figure against potential (hereinafter “DLT”) to deliver benefits is significant. Gartner cost savings that might be achieved with estimates that DLT will result in $176 billion in added business DLT. The report concluded that the value by 2025; that total reaches $3.1 trillion by 2030.3 banks analyzed could reduce infrastructure costs by an average $8 to Investment in the field reflects the widespread belief that the $12 billion a year. The survey mapped technology can deliver value. Numerous trials, and some more than 50 operational cost metrics deployments, can be found across multiple sectors. and found the savings would break down as follows: Over two dozen countries are investing in DLT 70% savings on central financial More than 2,500 patents have been filed in the last 3 reporting 4 30-50% savings on compliance years 50% savings on centralized operations As of Q4, 2016, 28 of the top 30 banks were engaged in 50% savings on business blockchain proofs-of-concept operations. -
What Is the Upper Limit of Value?
WHAT IS THE UPPER LIMIT OF VALUE? Anders Sandberg∗ David Manheim∗ Future of Humanity Institute 1DaySooner University of Oxford Delaware, United States, Suite 1, Littlegate House [email protected] 16/17 St. Ebbe’s Street, Oxford OX1 1PT [email protected] January 27, 2021 ABSTRACT How much value can our decisions create? We argue that unless our current understanding of physics is wrong in fairly fundamental ways, there exists an upper limit of value relevant to our decisions. First, due to the speed of light and the definition and conception of economic growth, the limit to economic growth is a restrictive one. Additionally, a related far larger but still finite limit exists for value in a much broader sense due to the physics of information and the ability of physical beings to place value on outcomes. We discuss how this argument can handle lexicographic preferences, probabilities, and the implications for infinite ethics and ethical uncertainty. Keywords Value · Physics of Information · Ethics Acknowledgements: We are grateful to the Global Priorities Institute for highlighting these issues and hosting the conference where this paper was conceived, and to Will MacAskill for the presentation that prompted the paper. Thanks to Hilary Greaves, Toby Ord, and Anthony DiGiovanni, as well as to Adam Brown, Evan Ryan Gunter, and Scott Aaronson, for feedback on the philosophy and the physics, respectively. David Manheim also thanks the late George Koleszarik for initially pointing out Wei Dai’s related work in 2015, and an early discussion of related issues with Scott Garrabrant and others on asymptotic logical uncertainty, both of which informed much of his thinking in conceiving the paper. -
A R E S E a R C H Agenda
Cooperation, Conflict, and Transformative Artificial Intelligence — A RESEARCH AGENDA Jesse Clifton — LONGTERMRISK.ORG March 2020 First draft: December 2019 Contents 1 Introduction 2 1.1 Cooperation failure: models and examples . .3 1.2 Outline of the agenda . .5 2 AI strategy and governance 8 2.1 Polarity and transition scenarios . .8 2.2 Commitment and transparency . .8 2.3 AI misalignment scenarios . 10 2.4 Other directions . 10 2.5 Potential downsides of research on cooperation failures . 11 3 Credibility 12 3.1 Commitment capabilities . 13 3.2 Open-source game theory . 13 4 Peaceful bargaining mechanisms 16 4.1 Rational crisis bargaining . 16 4.2 Surrogate goals . 18 5 Contemporary AI architectures 21 5.1 Learning to solve social dilemmas . 21 5.2 Multi-agent training . 24 5.3 Decision theory . 25 6 Humans in the loop 27 6.1 Behavioral game theory . 27 6.2 AI delegates . 28 7 Foundations of rational agency 30 7.1 Bounded decision theory . 30 7.2 Acausal reasoning . 31 8 Acknowledgements 35 1 1 Introduction Transformative artificial intelligence (TAI) may be a key factor in the long-run trajec- tory of civilization. A growing interdisciplinary community has begun to study how the development of TAI can be made safe and beneficial to sentient life (Bostrom, 2014; Russell et al., 2015; OpenAI, 2018; Ortega and Maini, 2018; Dafoe, 2018). We present a research agenda for advancing a critical component of this effort: preventing catastrophic failures of cooperation among TAI systems. By cooperation failures we refer to a broad class of potentially-catastrophic inefficiencies in interactions among TAI-enabled actors. -
Security Analysis Methods on Ethereum Smart Contract Vulnerabilities — a Survey
1 Security Analysis Methods on Ethereum Smart Contract Vulnerabilities — A Survey Purathani Praitheeshan?, Lei Pan?, Jiangshan Yuy, Joseph Liuy, and Robin Doss? Abstract—Smart contracts are software programs featuring user [4]. In consequence of these issues of the traditional both traditional applications and distributed data storage on financial systems, the technology advances in peer to peer blockchains. Ethereum is a prominent blockchain platform with network and decentralized data management were headed up the support of smart contracts. The smart contracts act as autonomous agents in critical decentralized applications and as the way of mitigation. In recent years, the blockchain hold a significant amount of cryptocurrency to perform trusted technology is being the prominent mechanism which uses transactions and agreements. Millions of dollars as part of the distributed ledger technology (DLT) to implement digitalized assets held by the smart contracts were stolen or frozen through and decentralized public ledger to keep all cryptocurrency the notorious attacks just between 2016 and 2018, such as the transactions [1], [5], [6], [7], [8]. Blockchain is a public DAO attack, Parity Multi-Sig Wallet attack, and the integer underflow/overflow attacks. These attacks were caused by a electronic ledger equivalent to a distributed database. It can combination of technical flaws in designing and implementing be openly shared among the disparate users to create an software codes. However, many more vulnerabilities of less sever- immutable record of their transactions [7], [9], [10], [11], ity are to be discovered because of the scripting natures of the [12], [13]. Since all the committed records and transactions Solidity language and the non-updateable feature of blockchains. -
Law and the Blockchain
Law and the Blockchain Usha 1K Rodrigues* ABSTRACT: All contracts are necessarily incomplete. The inefficiencies of bargainingover every contingency, coupled with humans' innate bounded rationality, mean that contracts cannot anticipate and address every potential eventuality. One role of law is to fill gaps in incomplete contracts with default rules. Emerging technologies have created new, yet equally incomplete, types of contracts that exist outside of this traditionalgapfilling legal role. The blockchain is a distributed ledger that allows the cryptographic recording of transactions and permits "smart" contracts that self-execute automatically if their conditions are met. Because humans code the contracts of the blockchain, gaps in these contracts will arise. Yet in the world of "smart contracting"on the blockchain, there is no placefor the law to step in to supply default rules-no "legal intervention point." The lack of a legal intervention point means that law on the blockchain works in a fundamentally different way from law in the corporealworld. Business organizationallaw provides a prime example of how the law uses default rules to fill gaps in an incomplete contract and how the law works differently in the blockchain context. I. INTRODU CTION ............................................................................. 68o II. ORGANIZATIONAL LAW AS A GAP FILLER ...................................... 686 A. THE FIRM AS AN INCOMPLETEFCONTRACT................................ 686 B. THEORIES OF, TimE CORPORATE FoRM ...................................... -
Deconstructing the Dao: the Need for Legal Recognition and the Application of Securities Laws to Decentralized Organizations
DECONSTRUCTING THE DAO: THE NEED FOR LEGAL RECOGNITION AND THE APPLICATION OF SECURITIES LAWS TO DECENTRALIZED ORGANIZATIONS Laila Metjahic† TABLE OF CONTENTS INTRODUCTION .............................................................................................................. 1534 I. BACKGROUND ......................................................................................................... 1537 A. The Basics of the Blockchain and Its Role in Decentralized Organizations ............................................................................................. 1537 B. Smart Contracts and Their Role in Decentralized Organizations ........ 1538 C. What Are Decentralized Organizations? ................................................ 1541 D. Why It Is Necessary to Clarify the Legal Status of the DAO and Other Decentralized Organizations ......................................................... 1546 II. ANALYSIS ................................................................................................................. 1549 A. How U.S. Courts Define a General Partnership ..................................... 1549 B. How U.S. Courts Define a Security .......................................................... 1551 III. PROPOSAL ................................................................................................................ 1553 A. The DAO Is a General Partnership .......................................................... 1553 B. Even If the DAO Is Not a General Partnership, It Is Nevertheless a Joint Venture -
The DAO Chronology of a Daring Heist and Its Resolution the DAO | Chronology of a Daring Heist and Its Resolution
The DAO Chronology of a daring heist and its resolution The DAO | Chronology of a daring heist and its resolution “[the] Digital currency Ethereum is cratering because of a US$50 million hack” Business Insider on 17.06.2016 2 The DAO | Chronology of a daring heist and its resolution It has been the saga of the summer for anyone interested in digital currency and beyond. Within hours the value of the ETH plunged as a result of a hack which relieved the DAO, a massive blockchain-based crowdfunding project, of ETH worth US$50 million. The heist was covered by a number of mainstream journals which published the Decentralized Autonomous news with a varying amount of technical Organizations detail, mostly highlighting the risks A commonly accepted definition involved in dealing in digital currencies. of DAOs some times also referred to as DACs (Decentralized What happened was – of course – a Autonomous Companies) has not severe setback for one of the best-known yet evolved. Usually the terms blockchain-based business applications. refer to a more or less complex It is therefore important to understand interacting set of smart contracts exactly what happened and draw the being able to resemble the necessary consequences in order to fundamentals of organizations, improve the technology. interacting with individuals and dealing with some sort of In order to grasp the whole story about property. the hack of the DAO, it is important to understand what a DAO is and on what Smart contracts can be platform it was deployed: the blockchain seen as the simplest form of platform Ethereum. -
The DAO Attack Or, How to Steal $60 Million with Smart Contracts
The DAO Attack or, How To Steal $60 Million With Smart Contracts By Charles Lin for CS 261 Tuesday, September 12, 2018 Today, we are covering... ● Decentralized Autonomous Organizations (DAOs) ● The DAO Attack: story and technical details ● Aftermath and implications What is a Decentralized Autonomous Organization? What is a Company? What is a Company? ● A legal entity that people can purchase shares of ● People can use shares to vote on how to spend company assets ● Behaviour enforced by people ● Reneging punished by law ● People don’t always agree on the rules ● People don’t always follow the rules ● Legal punishment is a deterrent, not absolute enforcement, and does not repair damage What is a Company? ● A legal entity that people can purchase shares of ● People can use shares to vote on how to spend company assets ● Behaviour enforced by people ● Reneging punished by law What is a Company? ● A legal entity that people can purchase shares of ● People can use shares to vote on how to spend company assets ● Behaviour enforced by people ● Reneging punished by law What is a Decentralized Autonomous Organization? ● A contract that people can purchase shares of ● People can use shares to vote on how to spend contract’s ether balance ● Behaviour enforced by code ● Reneging impossible! “The” DAO slock.it and “The DAO” ● April 2016 ● German startup called slock.it - smart locks connected to blockchain ● Started a venture capital DAO to get the community to fund their startup and other startups of their choice ● Called it “The DAO” The DAO Code (simplified) from Atezi et al. -
Crush Crypto Educational Series
The History of Digital Currency Educational Series November 26, 2018 Digital Currency Before Bitcoin • The creation of Bitcoin in 2009 marked the birth of the first digital currency to achieve widespread adoption across the globe. However, the concept of a secure digital currency has been around since the 1980s. • Previous attempts that inspired Satoshi Nakamoto’s creation of Bitcoin include: • DigiCash • Bit Gold • Hashcash • B-money For additional resources, please visit www.CrushCrypto.com. 2 Copyright © Crush Crypto. All Rights Reserved. DigiCash • Computer scientist David Chaum released the paper Blind Signatures for Untraceable Payments (1982) in which he outlined an alternative to the electronic transactions hitting retail stores at the time. His paper is considered one of the first proposals of digital currency in history. • He continued working on his proposal and eventually launched a company called DigiCash in 1990 to commercialize the ideas in his research. In 1994 the company put forth their first electronic cash transaction over the internet. For additional resources, please visit www.CrushCrypto.com. 3 Copyright © Crush Crypto. All Rights Reserved. DigiCash (continued) • DigiCash transactions were unique for the time considering their use of protocols like blind signatures and public key cryptography to enable anonymity. As a result, third parties were prevented from accessing personal information through the online transactions. • Despite the novel technology, DigiCash was not profitable as a company and filed a chapter 11 bankruptcy in 1998 before being sold for assets in 2002. • Chaum thought that DigiCash entered the market before e-commerce was fully integrated with the internet and that lead to a chicken-and-egg problem. -
Science and Technology Briefings– No
Briefing ___ Understanding Blockchain s ___ April 4 2 0 1 8 How A Blockchain Works Summary The protocol that powers Bitcoin appeared 10 years ago as a combination of existing technologies. The blockchain enables decentralized and secure transactions without the need for a trusted third party. The potential applications are much broader than just cryptocurrencies and while they are extremely promising, today the technology is generally not yet mature enough for large scale solutions. Further research and innovation are needed to solve blockchain’s scalability limitations as well as its high energy consumption. Source : OPECST from Blockchain France Mrs Valéria Faure-Muntian and Mr Claude de Ganay, Members of the National Assembly, Mr Ronan Le Gleut, Senator Context This memo answers a request from the common fact- The invention of hashcash by Adam Back in 1997 was a finding mission on “Use cases of the blockchain and significant achievement in the idea of validating other data certification technologies” created by the transactions using cryptographic hashes, called “proof National Assembly. It will be followed by a more of work”(4). The goal of these technologies is to remove advanced memo. What we refer to as the blockchain the need for “trusted third parties”, by relying instead are the technologies for storing and transmitting on a distributed network of trust based on an data allowing the creation of distributed, immutable “digital ledger”. duplicated ledgers, without a centralized authority, The obstacle to overcome lies in the problem of secured through cryptography, and organized into double spending (the risk that the same asset could be linked blocks of information at regular intervals of spent twice) and, more generally, around network fault time.