$30 off During Our Annual Pro Sale. View Details »

Governance through Crowds, Consensus and P2P Networks

Governance through Crowds, Consensus and P2P Networks

This session will continue with our building blocks of crypto infrastructure. Here we will explore governance regimes (protocols) that leverage Crowds, Consensus and Peer to Peer Networks.

Daniel Martin Katz
PRO

February 18, 2019
Tweet

More Decks by Daniel Martin Katz

Other Decks in Technology

Transcript

  1. @ computational
    professor daniel martin katz danielmartinkatz.com
    BLOCKCHAIN,
    CRYPTOCURRENCY
    AND LAW
    professor nelson rosario
    GOVERNANCE THROUGH
    CROWDS, CONSENSUS AND
    P2P NETWORKS
    nelsonmrosario.com @ nelsonmrosario
    BLOCKCHAINLAWCLASS.COM

    View Slide

  2. DANIEL MARTIN KATZ
    E D U | I L L I N O I S T E C H + S TA N F O R D C O D E X
    B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M
    PAG E | DA N I E L M A R T I N K AT Z . C O M
    C O R P | L E X P R E D I C T. C O M
    NELSON ROSARIO
    B LO G | L AWO F C RY P TO C U R R E N C Y. C O M
    PAG E | N E L S O N M RO S A R I O . C O M
    F I R M | S M O L I N S K I RO S A R I O L AW P. C .
    BLOCKCHAINLAWCLASS.COM
    L A B | T H E L AW L A B . C O M
    E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW

    View Slide

  3. BLOCKCHAINLAWCLASS.COM
    GOVERNANCE IS A
    CHALLENGING IN
    ANY SOCIO,
    POLITICAL OR
    TECHNO SYSTEM

    View Slide

  4. BLOCKCHAINLAWCLASS.COM
    FOR
    CORPORATIONS,
    GOVERNMENTS,
    AND OTHER
    ORGANIZATIONS

    View Slide

  5. BLOCKCHAINLAWCLASS.COM
    QUESTIONS OF
    HOW TO OPTIMALLY
    DESIGN AND
    DEPLOY VARIOUS
    INSTITUTIONAL
    FORMS

    View Slide

  6. BLOCKCHAINLAWCLASS.COM
    HAS BEEN A
    SUBJECT OF
    INTEREST IN MANY
    FIELDS OF HUMAN
    ENDEAVOR …

    View Slide

  7. View Slide

  8. BLOCKCHAINLAWCLASS.COM
    CRYPTO
    INFRASTRUCTURE
    OFFERS A
    UNIQUE
    GOVERNANCE
    STRUCTURE

    View Slide

  9. BLOCKCHAINLAWCLASS.COM
    THAT NOVELLY
    CONFIGURES
    SOME KEY
    BUILDING
    BLOCKS

    View Slide

  10. View Slide

  11. BLOCKCHAINLAWCLASS.COM
    AS A REMINDER
    FROM OUR
    LAST SESSION …

    View Slide

  12. BLOCKCHAINLAWCLASS.COM
    WE REVIEWED
    THE FIRST THREE
    BUILDING BLOCKS
    OF CRYPTO
    INFRASTRUCTURE

    View Slide

  13. SO NOW …
    THE BUILDING
    BLOCKS OF
    BLOCKCHAIN
    TECHNOLOGY
    (PART 2)
    BLOCKCHAINLAWCLASS.COM

    View Slide

  14. LEDGERS
    CRYPTOGRAPHY
    NETWORKS
    +
    +
    CONSENSUS
    +
    }
    BLOCKCHAINLAWCLASS.COM
    BLOCKCHAIN
    APPLICATIONS
    =
    INCENTIVES
    +
    {

    View Slide

  15. LEDGERS
    CRYPTOGRAPHY
    NETWORKS
    +
    +
    BLOCKCHAINLAWCLASS.COM
    LAST SESSION

    View Slide

  16. THE BUILDING BLOCKS OF
    BLOCKCHAIN TECHNOLOGY
    BLOCKCHAINLAWCLASS.COM
    NETWORKS - ALLOWS US INTERACT / COMMUNICATE
    LEDGERS - LET US TRACK THINGS
    CRYPTOGRAPHY - HELPS US SECURE THINGS
    (*NOTE* NOTHING CAN EVER BE PERFECTLY SECURE)

    View Slide

  17. LEDGERS
    CRYPTOGRAPHY
    NETWORKS
    +
    +
    BLOCKCHAINLAWCLASS.COM
    LAST SESSION
    THIS SESSION
    CONSENSUS
    INCENTIVES
    +
    +

    View Slide

  18. LEDGERS
    CRYPTOGRAPHY
    NETWORKS
    +
    +
    CONSENSUS
    +
    }
    BLOCKCHAINLAWCLASS.COM
    BLOCKCHAIN
    APPLICATIONS
    =
    INCENTIVES
    +
    {

    View Slide

  19. View Slide

  20. BLOCKCHAINLAWCLASS.COM
    LETS TAKE A
    BIT OF A
    DEEPER DIVE

    View Slide

  21. BLOCKCHAINLAWCLASS.COM
    CONSENSUS
    JUST MEANS
    AGREEMENT

    View Slide

  22. BLOCKCHAINLAWCLASS.COM
    BUT IN THIS
    CONTEXT IT
    TAKES ON A
    SLIGHTLY
    DIFFERENT
    MEANING …

    View Slide

  23. BLOCKCHAINLAWCLASS.COM
    ALSO WE
    WILL USE A
    RETROFITTED
    DEFINITION OF
    ‘INCENTIVE’
    AS WELL

    View Slide

  24. THE BUILDING BLOCKS OF
    BLOCKCHAIN TECHNOLOGY
    BLOCKCHAINLAWCLASS.COM
    CONSENSUS - METHODOLOGY FOR REACHING A
    COORDINATED DECISION IN A GROUP DECISION
    MAKING PROCESS
    INCENTIVES - MECHANISM(S) FOR ENCOURAGING
    PARTICULAR FORMS OF PARTICIPATION IN SOCIO-
    TECHNICAL SYSTEMS

    View Slide

  25. View Slide

  26. BLOCKCHAINLAWCLASS.COM
    CONSENSUS

    View Slide

  27. BLOCKCHAINLAWCLASS.COM
    INSTITUTIONS
    (POLITICAL OR
    OTHERWISE) EXIST
    IN PART TO REACH
    CONSENSUS ON ONE
    OR MORE TOPICS

    View Slide

  28. BLOCKCHAINLAWCLASS.COM
    NOTE:
    CONSENSUS
    NEED NOT IMPLY
    UNANIMITY AMONG
    THE PARTICIPANTS

    View Slide

  29. BLOCKCHAINLAWCLASS.COM
    CONSENSUS COULD
    BE REACH BY RULE OF
    A DICTATOR OR
    SINGLE DECISION
    MAKING AUTHORITY

    View Slide

  30. BLOCKCHAINLAWCLASS.COM
    WITHIN THE LAW
    WE USE CONSENSUS
    MECHANISMS TO
    MAKE DECISIONS

    View Slide

  31. BLOCKCHAINLAWCLASS.COM
    WITHIN THE LAW
    WE USE VARIOUS
    CONSENSUS
    MECHANISMS TO
    MAKE DECISIONS

    View Slide

  32. BLOCKCHAINLAWCLASS.COM
    THESE INCLUDE
    DIFFERENT FORMS OF
    INSTITUTIONAL
    DECISION MAKING
    PROTOCOLS SURROUND
    DIFFERENT FORMS OF
    DECISION MAKERS

    View Slide

  33. View Slide

  34. BLOCKCHAINLAWCLASS.COM
    JUDGES
    JURIES
    ADMINISTRATORS
    LEGISLATORS
    EXECUTIVES
    ETC.

    View Slide

  35. BLOCKCHAINLAWCLASS.COM
    BOTH DIRECT
    DEMOCRACY AND
    JURIES ATTEMPT TO
    LEVERAGE THE
    COLLECTIVE
    WISDOM OF THE
    GENERAL PUBLIC

    View Slide

  36. BLOCKCHAINLAWCLASS.COM
    IN OTHER REALMS,
    THIS IS CALLED
    ‘CROWDSOURCING’

    View Slide

  37. C R O W D S O U R C I N G
    I D E A I S T H AT T H E R E I S A L AT E N T
    ‘ W I S D O M O F C R O W D S ’
    AVA I L A B L E T H AT M I G H T M ATC H
    O R E XC E E D T H E ‘ P E R F O R M A N C E ’
    ( H O W E V E R D E F I N E D ) O F
    I N D I V I D UA L D E C I S I O N M A K E R

    View Slide

  38. C R O W D S O U R C I N G
    C R O W D S O U R C I N G D O E S
    * N OT * R E F E R TO A S P E C I F I C
    T E C H N I Q U E O R A LG O R I T H M

    View Slide

  39. C R O W D S O U R C I N G
    G E N E R A L LY R E F E R S TO A
    P R O C E S S O F AG G R E G AT I O N
    A N D / O R S E G M E N TAT I O N O F
    I N F O R M AT I O N S I G N A L S

    View Slide

  40. S O H O W D O I
    CO N ST R U C T A
    C R O W D ?

    View Slide

  41. I N T H E C L A S S I C
    CO N D O R C E T J U R Y
    S E T T I N G , M O D E L S
    TY P I CA L LY U S E
    P R E D I C T I O N S F R O M
    A L L PA RT I C I PA N T S

    View Slide

  42. H O W E V E R , M O D E L S CA N
    A L S O TA K E I N TO ACCO U N T
    I N F O R M AT I O N ( S I G N A L S )
    F R O M S O M E S U B S E T O F
    PA RT I C I PA N T S
    ( D E F I N E D U S I N G E I T H E R I N C LU S I O N
    R U L E S O R E XC LU S I O N R U L E S )

    View Slide

  43. VA R I O U S S I G N A L TY P E S
    T H E I N P U T S I G N A L S CA N A S S U M E
    M A N Y D I F F E R E N T F O R M S
    I N C LU D I N G F R O M M O D E L S O R
    I N D I V I D UA L S O R S E N S O R S
    ( O R S O M E CA S E S E V E N OT H E R C R O W D S )

    View Slide

  44. View Slide

  45. S O M E E X A M P L E S

    View Slide

  46. CROWD OF INDIVIDUALS
    The most well know approach involves
    extracting ‘wisdom’ from crowds where crowds
    are built from individual people

    View Slide

  47. CROWD OF SENSORS
    Note crowds need not be composed of humans
    but could be networked IT systems
    Decentralized Distributed Ledgers -or- Oracles
    -or- IOT sensors with Crowdsourcing Validation
    #Blockchain
    #InternetofThings
    #Crypto

    View Slide

  48. #CRYPTO CROWD
    Thanks to Team Augur for the Shoutout

    View Slide

  49. CRYPTO CROWDS?
    For most applications,
    crowdsourcing could
    produce *better*
    performance but the
    biggest challenge is
    the coordination costs

    View Slide

  50. CRYPTO CROWDS?
    Sometimes getting even a
    second opinion in medicine
    (or any professional service)
    is very challenging —
    obtaining a 100th opinion is
    practically impossible

    View Slide

  51. CRYPTO CROWDS?
    Among other things Crypto
    Infrastructure (Blockchain)
    might provide the
    mechanism necessary to
    lower the coordination costs
    in crowd construction

    View Slide

  52. Random Forest Model
    Breiman, L.(2001). Random forests.
    Machine learning, 45(1), 5-32.
    Grow a set of differentiated trees
    through bagging and random
    substrates (predict using a consensus
    mechanism)
    C R O W D O F M O D E L S

    View Slide

  53. CROWD PREDICTIONS
    Thanks to Team Augur for the Shoutout

    View Slide

  54. C R O W D O F
    M O D E L S
    Each Poll has a slightly different
    methodology and historic performance
    (can be aggregated in various ways )

    View Slide

  55. crowd of signals does not always yield success
    aggregation of similarly biased signals does not work

    View Slide

  56. Poll Aggregation
    (note not always successful)
    C R O W D O F
    M O D E L S
    Each Poll has a slightly different
    methodology and historic performance
    (can be aggregated in various ways )

    View Slide

  57. View Slide

  58. S O H O W D O I
    CO N ST R U C T A
    C R O W D ?

    View Slide

  59. C R O W D S O U R C I N G
    T H E R E A R E VA R I O U S
    R U L E S T H AT M I G H T B E
    CO M B I N E D I N O R D E R TO
    ‘ CO N ST R U C T ’ A C R O W D

    View Slide

  60. BLOCKCHAINLAWCLASS.COM
    THROUGH SOME
    PROCESS (PROTOCOL)
    WE WILL SEEK TO
    OBTAIN CONSENSUS
    REGARDING SOME
    EXTERNAL ‘TRUTH’

    View Slide

  61. BLOCKCHAINLAWCLASS.COM
    IN CRYPTO (AND IN
    OTHER APPLICATIONS)
    CROWD CONSENSUS
    IS DERIVED FROM
    PEER TO PEER
    NETWORKS

    View Slide

  62. BLOCKCHAINLAWCLASS.COM
    MOST
    CRYPTOCURRENCY
    BLOCKCHAINS ARE
    PEER TO PEER
    NETWORKS

    View Slide

  63. BLOCKCHAINLAWCLASS.COM
    PEER-TO-PEER
    NETWORK

    View Slide

  64. BLOCKCHAINLAWCLASS.COM
    PEER-TO-PEER
    NETWORKS EXAMPLES
    THE FIRST WAVE OF PEER-TO-PEER APPLICATIONS
    WERE FOCUSED ON FILE-SHARING
    NAPSTER BITTORRENT
    GROKSTER

    View Slide

  65. BLOCKCHAINLAWCLASS.COM
    PEER-TO-PEER
    NETWORKS EXAMPLES
    THE SECOND WAVE OF PEER-TO-PEER APPLICATIONS
    ARE FOCUSED ON ALL SORTS OF TOPICS
    FINANCE COMPUTING
    FILE STORAGE

    View Slide

  66. BLOCKCHAINLAWCLASS.COM
    NODES ON
    PEER TO PEER
    NETWORKS SERVE
    AS THE CROWD
    SOURCED
    VALIDATORS OF
    ‘TRUTH’ / ‘TRUST’

    View Slide

  67. BLOCKCHAINLAWCLASS.COM
    HOW DOES THE
    BEHAVIOR OF INDIVIDUAL
    FACELESS, NAMELESS
    NODES IN A NETWORK
    YIELD ‘TRUST’ ?

    View Slide

  68. BLOCKCHAINLAWCLASS.COM
    IN OTHER WORDS,
    HOW DOES TRUST
    EMERGE FROM
    THIS CROWD?

    View Slide

  69. BLOCKCHAINLAWCLASS.COM
    AGAIN REMEMBER VARIOUS
    FORMS OF CRYPTO
    INFRASTRUCTURE OFFER
    NOVEL COMBINATIONS OF
    DIFFERENT INGREDIENTS

    View Slide

  70. BLOCKCHAINLAWCLASS.COM
    THE FINAL INGREDIENT
    IS THE CLEVER
    IMPLEMENTATION OF
    ECONOMIC INCENTIVES

    View Slide

  71. View Slide

  72. BLOCKCHAINLAWCLASS.COM
    MICRO INCENTIVES
    AND MACRO TRUST

    View Slide

  73. BLOCKCHAINLAWCLASS.COM
    IN THE CASE OF
    CRYPTO CURRENCY
    THIS IS WHERE
    POW VS. POS
    ENTER THE
    PICTURE …

    View Slide

  74. BLOCKCHAINLAWCLASS.COM
    PROOF
    OF WORK
    VS
    PROOF
    OF STAKE
    https://blockgeeks.com/guides/
    proof-of-work-vs-proof-of-stake/

    View Slide

  75. BLOCKCHAINLAWCLASS.COM
    WE WILL TALK
    MORE ABOUT
    ‘MINING’ IN THE
    NEXT MODULE …

    View Slide

  76. BLOCKCHAINLAWCLASS.COM
    BUT THE *KEY*
    IDEA HERE IS THAT
    WE USE MICRO
    LEVEL ECONOMIC
    INCENTIVES

    View Slide

  77. BLOCKCHAINLAWCLASS.COM
    IN ORDER TO
    BUILD MACRO
    LEVEL TRUST …

    View Slide

  78. BLOCKCHAINLAWCLASS.COM
    FOR MORE MODULES VISIT

    View Slide

  79. View Slide

  80. DANIEL MARTIN KATZ
    E D U | I L L I N O I S T E C H + S TA N F O R D C O D E X
    B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M
    PAG E | DA N I E L M A R T I N K AT Z . C O M
    C O R P | L E X P R E D I C T. C O M
    NELSON ROSARIO
    B LO G | L AWO F C RY P TO C U R R E N C Y. C O M
    PAG E | N E L S O N M RO S A R I O . C O M
    F I R M | S M O L I N S K I RO S A R I O L AW P. C .
    BLOCKCHAINLAWCLASS.COM
    L A B | T H E L AW L A B . C O M
    E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW

    View Slide

  81. @ computational
    professor daniel martin katz danielmartinkatz.com
    BLOCKCHAIN,
    CRYPTOCURRENCY
    AND LAW
    professor nelson rosario nelsonmrosario.com @ nelsonmrosario
    BLOCKCHAINLAWCLASS.COM
    GOVERNANCE THROUGH
    CROWDS, CONSENSUS AND
    P2P NETWORKS

    View Slide