Long Finance
If you read the original Satoshi blockchain paper you can see that there is a political intent
Satoshi took a technique which I call mutual distributed ledgers and combined it to construct a currency
it has gone back and forth between coins and ledgers, and now coins are exciting people again
you want a solid technology for your ledger, now we have gone back to the ideas of Lisp where data can be code
Alderney runs a national timestamping system using one of Z/Yen's very boring ledgers
I like to divide between effiecient/inefficient and no trusted 3rd party vs single trusted 3rd party
the untrusted inefficient corner that bitcoin is in works for a while, but at some point you do need to trust
Ethereum replaced tyranny of the code with tyranny of the majority in response to the DAO problem
Everybody talks governance, but a lot of it is tosh for example, transparency is not a principle, but a tool
there are many issues where there can be too much transparency - for example fleeing a repressive regime
the challenge we have is the changing role of central third parties
mutual distributed ledgers are not that new, but we can apply them more widely
I have never seen a new technology take out an existing technology - even landlines are taking their time to go
the role of governance is to help us through these transitions of technology
there will be an explosion of ledgers with a central 3rd party attached - I think we'll find more use for them
we have a draft for comments, we're going to give it about a week before going to print
we looked at the challenge of governance for Mutual Distributed Ledgers, and how rules are enforced
what happens if there is a dispute? Who gets to change the software?
there are 2 main types of MDL - unpermissioned ones, and ones that have a registration need via a KYC process
Public MDLs fit well with a co-operative structure
a state sponsored MDL matches an appointed board, an oligarchy fits a private one
MDLs are often called trustless systems, but trust is essential - you need to trust the code, and transaction durability
trust in an MDL does depend on those who use it and the reputation of the kinds of transactions
the GDPR and the right to be forgotten do constrain how a ledger can be administered
for public MDLs the anonymity of users complicates dispute resolution and enforcement
Public MDLs will need terms of use and dispute resolution - a co-operative fits well with this model
for State Sponsored MDLs, integrating into existing government institutions is key
Estonia has set up the E-Estonia council in the prime ministers office to oversee these kind of MDLs
Private MDLs will have boards mapping onto the controlling institution. A consortium like SWIFT could work
I have not found any accountancy firms that have yet audited an MDL -
we may need a reality auditor to check that the assets on a blockchain do actually exist in the world
we need to bear in mind the disaster of the DAO - $150M in Ether raised, $50M taken by a hacker
a cabal within the Ethereum foundation decided to fork the code to remove the hackers spoils
this means there are now two Ethereums running in parallel, one with the hackers funds
The centre of excellence in MDLs is in London, not in the US
we find it difficult to engage people in public case studies of governance
many people are still very confused on governance and we can help them improve their thinking on it
@mrmainelli mentioned things like the Cadbury report that were layered on the top, but governance is fundamental
cryptocurrency offerings are a big problem for MDLs - these are bad money driving out good
large sums of money are being raised for no reason in ICOs
people are prepared to invest in a purely speculative item becasue of distrust in governments
when the explosion comes in these speculative issues, the fallout will damage MDLs reputation
I wonder how much capital will be burned in high risk engineering projects
can you enshrine a constitution in a formal language that a ledger can understand?
how can you define consent? Can we make liquid democracy more amenable to automation
you need both privacy and reputation, but they are in tension
Dash had a 'tax' on new coins that went to a foundation to fund new ideas - but most money went to 10 people
is it a rigged system, or just a founder effect that gave this kind of plutocracy?
we can't solve this analytically - we need to run experiments to see what actually happens
you need metadata and attribution for recourse when fraud occurs - in the bitcoin world we have none of this
this makes bitcoin incompatible with the existing financial world -
I bridge both worlds - I have a blockchain company and an FCA vehicle too
we are deploying blockchain in IoT devices
we want to blockify existing processes - enshrining the bits that need to be recorded in MDLs
these are permissioned systems, and can map to existing processes more clearly
we still could not find an auditor able to audit a blockchain model
I think legacy is going to eat blockchain in the developed world, but the developing world doesn't have legacy ssytems
what you can do now is federate in a specific and precise way, which wasn't there before
A lot of people come and ask us for a blockchain without actually knowing what they might need it for
the idea that you have to measure and control everything is in the financial services psyche
we have to think about the kinds of decentralised control that we see in open source software
It's good to see a difference between governance and regulation - we're going to see this as ICOs blow up
we're about to see this in Bitcoin with segregated witness coming in
we're seeing screams as people ask how ICOs are governed and who is in charge of them
some of the ICO offer documents that I have seen are shocking in their blatant disclaiming of all responsibility
doing an ICO out of London should match existing practices, and be as clean as other kinds of money here
we have the possibility of fraud and the possibility of accountability built on a system designed around anonymity
when we began this in April, there was no public visibility of ICOs - now they are being reported in the FT
the whole thing is going nuts, and there will be an ICO crash within 2 years
is there anyone here who trusts a government to manage a currency correctly?
every day we trust government currency to transact
my whoel life is buitl about not trusting governments
in 1971 the dollar was delinked from the gold standard and governments could issue anything they wanted
and any proper bank can front run a government system - you can buy something with money you issue and make money
you expect to realise this in a national currency, not in an asset
I expect the assets to appreciate against all currencies
what happens when a crypto currency starts to use physoical assets to back a currency?
bitcoin denominated excahnges are being designed to buy property
a lot of ICOs aren't worth the paper they're printed on, but 10% or so are interesting
does anyone keep their accounts in bitcoin or other crypto currency? [2 or 3 people say yes]
what stops anyone from issuing new coins? Bitcoin has an exchange rate listed in the paper
ethereum has different monetary policy form bitcoin - it is more inflationary so will eventually devalue
we could disaggregate monetary policy from exchange of value
presumably governments will interfere if the little people get hurt
the people investing in ICOs are the people who hold bitcoin and spending their bitcoin profits in ICOs
it's like fine art - they are a very rarefied market
the value of Van Goghs is based on an actual scarcity - there is no scarcity in bitcoin or ICOs except artificially
the reason Ethereum has value is that they spent time building a great community - that is what is being valued
the merchant and the consumer care less about what the local unit of account is - you can have a portfolio of currencies
what is the natural demand for bitcoin? - it's not settlement it's speculation
my decorator was bemoaning that ethereum had dropped in value - we are in a bubble world now
it's going to be five times faster and twice as bad as the dotcom crash
Galbraith's shoeshine boy is Simon's decorator
the issue of liquidity matters - how much can be realised? is liqudiity part of the governance process
there are over 100,000 companies that take bitcoin for purchase
you can now get a debit card backed by bitcoin that translates into local currency
the very volatility of these currencies tells you that there is a liquidity problem
liquidity is s slippery concept to tie down
an MDLs utility depends on the number of users - if no-one is using it it is worthless
the more people that use it, the more liquid it is, but if that goes down you get mini crashes
as you get more and more currencies you have to get businesses to take them
in the future the term cryptocurrency will be like 'horseless carriage' - they're not like currencies
they stopped being currencies when they became programmable
Governance reminds me of when digitising central exchanges in 2000s - we thought eBay would never work
as small people get burnt it will get more progressively regulated
our two authors have highlighted the return to a good constitution
accountability is transparency plus predictability in decision making
business doesn't want certainty, but certainty in how the rules will be changed
the process by which tax rules are changed in the UK is capricious - the chancellor pops up surprises
what we need is predictability in how rules can be changed
your ethical obligation is to the market as a whole - you can't say 'my ICO is ok' when most aren't
periods of great innovation are wars or bubbles. If the ICO bubble consumes the whole space we will miss the rest
I'm hoping that ledgers can survive even as ICOs blow up
if we have gold or property backed ICOs, they will need to be audited and protected against theft
at the point we are doing this we have left the distributed ledger a long way behind
the inherent advantages of a distributed ledger are lost if you build too much on top of it
we have other long finance publications at http://www.zyen.com/ on pensions as well as blockchain risk
the volatility of these coins plays against your ability to use them in transactions, even mentally