Tuesday, May 29, 2018

Hard-forks and governance on the Bitcoin blockchain

By Jeffery Atik
The recent experience of forks and potential forks in response to the various Segregated Witness and blocksize increase proposals highlights the nature of governance on the Bitcoin blockchain. The result of the SegWit / blocksize controversies has been a so-called hard fork on the Bitcoin blockchain, producing two varieties of Bitcoin with a common history but now distinct technical characteristics: Bitcoin and Bitcoin Cash.

The Bitcoin blockchain marks a novel form of social organization. There is no central node in the network, no center of authority directing or coordinating internal or external action. Rather, the constituent autonomous nodes operate the Bitcoin blockchain following a downloaded open-source protocol that Bitcoin’s mysterious founders initially developed and which is quite resistant to change. When change does come to the Bitcoin blockchain, it emerges from loose and informal constellations of various stakeholders. Bitcoin users and the sponsors of the Bitcoin network nodes (known as ‘miners’) are formal stakeholders. Indirect stakeholders include Bitcoin developers and businesses that service the Bitcoin ecosystem (systems operators and equipment manufacturers, as well as Bitcoin exchanges). Still we can draw a black box around the Bitcoin blockchain and examine it as a finite social space, an organization set apart from surrounding players and institutions.

The Bitcoin blockchain resorts to “Nakamoto consensus” as its ultimate form of governance. Nakamoto consensus is an emergent and diffuse consensus arising among the active Bitcoin miners, each pursuing its own advantage while collectively engaged in maintaining, verifying and expanding the blockchain. Nakamoto consensus is the ultimate source, and hence authority, as to the canonical state of the Bitcoin blockchain; this consensus is the Truth as far as the Bitcoin blockchain is concerned, and once reached, it cannot readily be disturbed. More considered consensus engages on those occasions when the Bitcoin blockchain community makes a constitutional decision as to changes to its basic rules.

Wednesday, June 14, 2017

Innovation and keeping old ways on the blockchain: ChromaWay's Swedish Land Registry project - Part 2

By Jeffery Atik

In the development of blockchain applications, we now find ourselves in an exhilarating rush of proofs of concept, of mock-ups and test-beds. Real implementation of major applications on the blockchain (beyond the bitcoin) remain some distance away. And so it is with the Swedish Land Registry project, which is spearheaded by Stockholm's blockchain house ChromaWay.

The Swedish Land Registry project takes the basic 'small house' purchase transaction and proposes placing it on the blockchain. The various parties - the buyer, the seller, the real estate agent, the respective banks and the Land Registry - continue to play the same roles they held in the conventional transactional pattern. No new party is introduced, nor are any parties eliminated. The obvious candidate for elimination in an eventual blockchain-based land conveyancing system would have been the Land Registry itself - which is the chief sponsor of this project. For an agency to contemplate its own demise reflects admirable public spirit. But worry not: the Land Registry will continue to authenticate Swedish land titles. The blockchain merely records (albeit in a permanent and tamper-proof way) the title determinations of the Land Registry. The Land Registry project is a thoughtful inquiry into the blockchain’s potential; it is also a case study of incrementalist innovation, where the general outlines of the familiar are retained.

Monday, June 5, 2017

Trust on the Blockchain: ChromaWay's Swedish Land Registry project - Part 1

ChromaWay is a major innovator in blockchain technology, headquartered in Stockholm. ChromaWay is developing - together with other collaborators - a blockchain-based solution for the Swedish Land Registry. ChromaWay recently completed the second phase of this project (which it calls a "testbed") and has now published a report. Last week I spoke with ChromaWay’s Henrik Hjelte and Ludvig Öberg about the Land Registry project.

The blockchain has been called the "trust machine." In the blockchain’s original application, supporting bitcoin transactions and accounts, there is (it is asserted) no need for counterparties to trust each other. Indeed, counterparties know nothing of each other’s identities beyond their encrypted keys. Nor need they trust the accuracy of the records located on the blockchain; the distributed nature of the blockchain as well as the incentives provided the various nodes assure that tamper-proof records are identically preserved at each node. The blockchain itself is the ultimate reality of bitcoin; bitcoins exist no place else, and one securely owns the quantity of bitcoins the blockchain records. Where there is no need for trust, parties can deal directly and need not rely on intermediaries. The role of trust in more complex applications is more nuanced. While the character of required trust may be altered on the blockchain, the need to trust may not be entirely eliminated.

Wednesday, October 28, 2015

New directions in Technology Transfer

by Jeffery Atik

There continues to be a flow of academic writing and field studies concerning technology transfer, but there are no great breakthroughs to report. That said, there is an observable tiring with neoliberal approaches (which have failed to unlock the puzzle of incentivizing technology transfer). Moving the discussion to more public (if not statist) approaches to technology transfer might restore promise to what has been a disappointing field.

Collaborations do appear to be a promising institutional response; they have been reportedly successfully deployed in achieving advances in approaches to neglected diseases (such as Ebola) and climate change technologies. Collaborations are inherently public-private and can be structured to include (as full research partners) LDC institutions. These collaborations may feature government entities from the developed world, specialized development agencies, NGOs (who often coordinate), and university and state laboratories. They include private firms that carry out much of the focused technological development. As such, the success of a collaboration (as measured by innovation outcomes) depends on an effective design of incentives. Market-based financial rewards (licensing, sale of firms, IPOs) are replaced by funded contract research (similar to what occurs in defense fields) and/or prizes. Disengaging from the market permits research targeting - the ability to focus the collaboration on LDC needs and circumstances. For technology transfer to result, there must be meaningful inclusion of LDC institutions and personnel in the collaboration. LDC collaborators should not be mere observers; they make important contributions, particularly with regard to molding innovation to match the LDC environment where the technology will be deployed.

Wednesday, September 9, 2015

Apple loses appeal in e-book antitrust case - Part 3

This is the third and final comment in a series on the Second Circuit’s June 30 decision in the Apple e-books antitrust case.

The Second Circuit's decision in the Apple e-book case contains a rather acrimonious exchange between Judge Debra Livingston (author of the majority opinion) and Judge Dennis Jacobs (the dissenting judge) - which is a bit unfortunate, as there is much to harvest from their debate. The judges directly address each other - and are unsparing in their disdain for the other's theory of the case. Livingston may have the better of the argument (and she in part writes for the majority), but there is much to value in Jacobs's dissent as well. This is the final comment in a series examining the Apple e-book case (Part I and Part 2 of the series examine the background and the majority theory of liability, respectively). This comment examines Judge Jacobs's dissent and the ideas behind it.

Let's first look at the rather broad zone of agreement between Jacobs and the majority of the panel. Jacobs has no illusions about Apple's bruising conduct - he accepts Apple's forceful role in moving e-book distribution towards commissioned agency pricing. But he doesn't view Apple's conduct (when considered together with the e-book publishers) as constituting per se price fixing. Rather, he believes that any agreement among Apple and the e-book publishers should be evaluated according to the Rule of Reason - and he would further find that application of the Rule, given the Amazon-imposed market structure for e-books prior to Apple's iPad introduction, compels discharging Apple of antitrust liability (recall the e-book publishers had settled with the government prior to the litigation, accepting that they at least engaged in questionable pricing behavior).

Thursday, August 27, 2015

Apple loses appeal in e-books antitrust case - Part 2

This is the second in a series of comments on the Second Circuit’s June 30 decision in the Apple e-books antitrust case.

The Second Circuit has upheld a federal trial court finding that Apple, together with five of the so-called "Big Six" publishing companies, fixed prices for e-book editions of new issues and New York Times best sellers. The e-book reader market had been (and continues to be) dominated by Amazon's Kindle platform, first introduced in 2007; Kindle is an e-bookstore, an e-book format (including a digital rights management system), a cloud-based storage system, and a suite of e-readers. When Apple introduced its more general purpose iPad in 2010, it commenced competing with Amazon's Kindle across all these dimensions. Importantly, Apple sought to distribute e-books and so required access to the major publishers' catalog.

Amazon had been selling most new release and New York Times bestseller e-books below cost, attracting legions of readers to the Kindle ecosystem with its $9.99 pricing. Apple cleverly upset Amazon's $9.99 pricing policy by positioning itself as a sales agent (and not a retailer) of e-books, taking a 30% commission on sales. Apple thus generally restored retail pricing authority to the publishers. Apple's agency contracts, however. required e-book retail prices on iPad to match those offered on Amazon. This 'most favored nation' obligation drove the publishers to renegotiate their distribution deals with Amazon. Collectively (and with Apple playing an active coordinating role), the book publishers placed Amazon on an agency basis as well. The publishers then immediately raised e-book retail prices across both platforms - a surprising result in a market that appeared to be growing more competitive through the introduction of the iPad.

Thursday, August 13, 2015

Apple loses appeal in e-books antitrust case

This is the first of a series of comments on the Second Circuit’s June 30, 2015 decision in the Apple e-books antitrust case.

Through a series of spectacular commercial moves, Apple succeeded in disrupting the e-book space upon its 2009 release of the iPad, sweeping away Amazon Kindle’s popular $9.99 pricing for new releases and for New York Times best-sellers. The iPad brought meaningful competition to Amazon’s wildly successful Kindle as an e-book platform; the emergence of this new distribution channel raised e-book prices, whether purchased on iPads or Kindles, seemingly defying an economic law of gravity. It was a coup that only a Steve Jobs could pull off. The e-book price shift attracted the attention of federal and state antitrust authorities. In 2012, the government brought a civil antitrust action against Apple and five major publishers. The book publishers settled, and the government proceeded in a price fixing claim against Apple. On June 30, a panel of the Second Circuit Court of Appeals upheld a federal trial court’s finding that Apple violated Section 1 of the Sherman Act.