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.

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Daniel Martin Katz

February 18, 2019
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  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
  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
  3. BLOCKCHAINLAWCLASS.COM GOVERNANCE IS A CHALLENGING IN ANY SOCIO, POLITICAL OR

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

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

    INSTITUTIONAL FORMS
  6. BLOCKCHAINLAWCLASS.COM HAS BEEN A SUBJECT OF INTEREST IN MANY FIELDS

    OF HUMAN ENDEAVOR …
  7. None
  8. BLOCKCHAINLAWCLASS.COM CRYPTO INFRASTRUCTURE OFFERS A UNIQUE GOVERNANCE STRUCTURE

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

  10. None
  11. BLOCKCHAINLAWCLASS.COM AS A REMINDER FROM OUR LAST SESSION …

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

    INFRASTRUCTURE
  13. SO NOW … THE BUILDING BLOCKS OF BLOCKCHAIN TECHNOLOGY (PART

    2) BLOCKCHAINLAWCLASS.COM
  14. LEDGERS CRYPTOGRAPHY NETWORKS + + CONSENSUS + } BLOCKCHAINLAWCLASS.COM BLOCKCHAIN

    APPLICATIONS = INCENTIVES + {
  15. LEDGERS CRYPTOGRAPHY NETWORKS + + BLOCKCHAINLAWCLASS.COM LAST SESSION

  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)
  17. LEDGERS CRYPTOGRAPHY NETWORKS + + BLOCKCHAINLAWCLASS.COM LAST SESSION THIS SESSION

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

    APPLICATIONS = INCENTIVES + {
  19. None
  20. BLOCKCHAINLAWCLASS.COM LETS TAKE A BIT OF A DEEPER DIVE

  21. BLOCKCHAINLAWCLASS.COM CONSENSUS JUST MEANS AGREEMENT

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

    DIFFERENT MEANING …
  23. BLOCKCHAINLAWCLASS.COM ALSO WE WILL USE A RETROFITTED DEFINITION OF ‘INCENTIVE’

    AS WELL
  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
  25. None
  26. BLOCKCHAINLAWCLASS.COM CONSENSUS

  27. BLOCKCHAINLAWCLASS.COM INSTITUTIONS (POLITICAL OR OTHERWISE) EXIST IN PART TO REACH

    CONSENSUS ON ONE OR MORE TOPICS
  28. BLOCKCHAINLAWCLASS.COM NOTE: CONSENSUS NEED NOT IMPLY UNANIMITY AMONG THE PARTICIPANTS

  29. BLOCKCHAINLAWCLASS.COM CONSENSUS COULD BE REACH BY RULE OF A DICTATOR

    OR SINGLE DECISION MAKING AUTHORITY
  30. BLOCKCHAINLAWCLASS.COM WITHIN THE LAW WE USE CONSENSUS MECHANISMS TO MAKE

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

    MAKE DECISIONS
  32. BLOCKCHAINLAWCLASS.COM THESE INCLUDE DIFFERENT FORMS OF INSTITUTIONAL DECISION MAKING PROTOCOLS

    SURROUND DIFFERENT FORMS OF DECISION MAKERS
  33. None
  34. BLOCKCHAINLAWCLASS.COM JUDGES JURIES ADMINISTRATORS LEGISLATORS EXECUTIVES ETC.

  35. BLOCKCHAINLAWCLASS.COM BOTH DIRECT DEMOCRACY AND JURIES ATTEMPT TO LEVERAGE THE

    COLLECTIVE WISDOM OF THE GENERAL PUBLIC
  36. BLOCKCHAINLAWCLASS.COM IN OTHER REALMS, THIS IS CALLED ‘CROWDSOURCING’

  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
  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
  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
  40. S O H O W D O I CO N

    ST R U C T A C R O W D ?
  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
  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 )
  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 )
  44. None
  45. S O M E E X A M P L

    E S
  46. CROWD OF INDIVIDUALS The most well know approach involves extracting

    ‘wisdom’ from crowds where crowds are built from individual people
  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
  48. #CRYPTO CROWD Thanks to Team Augur for the Shoutout

  49. CRYPTO CROWDS? For most applications, crowdsourcing could produce *better* performance

    but the biggest challenge is the coordination costs
  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
  51. CRYPTO CROWDS? Among other things Crypto Infrastructure (Blockchain) might provide

    the mechanism necessary to lower the coordination costs in crowd construction
  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
  53. CROWD PREDICTIONS Thanks to Team Augur for the Shoutout

  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 )
  55. crowd of signals does not always yield success aggregation of

    similarly biased signals does not work
  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 )
  57. None
  58. S O H O W D O I CO N

    ST R U C T A C R O W D ?
  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
  60. BLOCKCHAINLAWCLASS.COM THROUGH SOME PROCESS (PROTOCOL) WE WILL SEEK TO OBTAIN

    CONSENSUS REGARDING SOME EXTERNAL ‘TRUTH’
  61. BLOCKCHAINLAWCLASS.COM IN CRYPTO (AND IN OTHER APPLICATIONS) CROWD CONSENSUS IS

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

  63. BLOCKCHAINLAWCLASS.COM PEER-TO-PEER NETWORK

  64. BLOCKCHAINLAWCLASS.COM PEER-TO-PEER NETWORKS EXAMPLES THE FIRST WAVE OF PEER-TO-PEER APPLICATIONS

    WERE FOCUSED ON FILE-SHARING NAPSTER BITTORRENT GROKSTER
  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
  66. BLOCKCHAINLAWCLASS.COM NODES ON PEER TO PEER NETWORKS SERVE AS THE

    CROWD SOURCED VALIDATORS OF ‘TRUTH’ / ‘TRUST’
  67. BLOCKCHAINLAWCLASS.COM HOW DOES THE BEHAVIOR OF INDIVIDUAL FACELESS, NAMELESS NODES

    IN A NETWORK YIELD ‘TRUST’ ?
  68. BLOCKCHAINLAWCLASS.COM IN OTHER WORDS, HOW DOES TRUST EMERGE FROM THIS

    CROWD?
  69. BLOCKCHAINLAWCLASS.COM AGAIN REMEMBER VARIOUS FORMS OF CRYPTO INFRASTRUCTURE OFFER NOVEL

    COMBINATIONS OF DIFFERENT INGREDIENTS
  70. BLOCKCHAINLAWCLASS.COM THE FINAL INGREDIENT IS THE CLEVER IMPLEMENTATION OF ECONOMIC

    INCENTIVES
  71. None
  72. BLOCKCHAINLAWCLASS.COM MICRO INCENTIVES AND MACRO TRUST

  73. BLOCKCHAINLAWCLASS.COM IN THE CASE OF CRYPTO CURRENCY THIS IS WHERE

    POW VS. POS ENTER THE PICTURE …
  74. BLOCKCHAINLAWCLASS.COM PROOF OF WORK VS PROOF OF STAKE https://blockgeeks.com/guides/ proof-of-work-vs-proof-of-stake/

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

    MODULE …
  76. BLOCKCHAINLAWCLASS.COM BUT THE *KEY* IDEA HERE IS THAT WE USE

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

  78. BLOCKCHAINLAWCLASS.COM FOR MORE MODULES VISIT

  79. None
  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
  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