It Might be an Apple . . . But is it? World with Blockchain — and Blockchain Governance — Kenji Saito Keio Research Institute at SFC, Keio University / beyond-blockchain.org [email protected] World with Blockchain — and Blockchain Governance — 2018-07-10 – p.1/21 

Who Am I? Kenji Saito, Ph.D. Senior Researcher, Keio Research Institute at SFC, Keio University Lecturer, Faculty of Environment and Information Studies, Keio University Representative Director, Beyond Blockchain / Chief Science Officer, BlockchainHub Inc. Representative Director, Academy Camp Bio 1993 : M.Eng in Computer Science from Cornell University 2006 : Ph.D. in Media and Governance from Keio University (on digital currency research) Making research on P2P (peer-to-peer) and digital currencies for over 17 years Holding Academy Camp series for children in Fukushima since the summer of 2011, the year of the Great East Japan Earthquake, tsunami and the nuclear disaster → In my mind, they are all connected (how do we design our society hereafter?) World with Blockchain — and Blockchain Governance — 2018-07-10 – p.2/21 

Blockchains and Supply Chains Walmart, JD.com, IBM and Tsinghua University Launch a Blockchain Food Safety Alliance in China The four companies will work together to create a standards-based method of collecting data about the origin, safety and authenticity of food, using blockchain technology to provide real-time traceability throughout the supply chain This will encourage accountability and give suppliers, regulators and consumers greater insight and transparency into how food is handled, from the farm to consumers This has traditionally been challenging due to complex and fragmented data sharing systems that are often paper-based and can be error-prone — IBM News Release, 14 Dec 2017 https://www-03.ibm.com/press/us/en/pressrelease/53487.wss ⇒ Really? World with Blockchain — and Blockchain Governance — 2018-07-10 – p.3/21 

What Does A Blockchain (Try to) Provide? 1) Save and maintain records whose content and existence nobody can deny 2) Everyone can confirm that 1) is working correctly 3) Nobody can stop 1) or 2) For a specific application, “nobody” and “everyone” means among defined stakeholders ⇒ Virtually can fix records in the air ⇒ Twofold problems : Is it really realized? (technological problems) Problems in timeliness, scalability, dependability, adaptability and sustainability If it is really realized, can it be applied to real problems? How do we link firmly between the physical entity and its digital counterpart? · Can we trace materials after being processed in supply chains? → Always with socio-technical or techno-political issues World with Blockchain — and Blockchain Governance — 2018-07-10 – p.4/21 

What is a Blockchain? “The problem” Bitcoin tries to answer “How do I let nobody stop me from spending my own money?” Distrust against (central) bank money “The answer” Bitcoin provides Exchange digital coins in a P2P (peer-to-peer) manner without fixed servers Using digital signatures (to guarantee validity and non-repudiation of content) Need to prevent “double spending” (to guarantee non-repudiation of existence) ⇒ Print an evidence on “newspaper” the crowd (users) collectively issues Blockchains can virtually “fix promises in the air” Can fix records in the form of “promises” (with agreed rights) → money is both a “promise” and public goods Expected applicability to other public goods World with Blockchain — and Blockchain Governance — 2018-07-10 – p.5/21 

Beaker / Newspaper Model (1) Bitcoin and its blockchain in a physical model 21M cm3 (cc) liquid in a tank Anyone can have as many beakers as they want, each can measure down to 10−8 cm3 These beakers are placed in a public space Each beaker is locked by a mechanical lid, opened only with the participant’s private key Today, a selected party can take 12.5cm3 from the tank Selection happens every 10 minutes on average Selected by a special lottery Each party has a box with a winning ticket, and draws with full force ⇒ Faster, the more advantageous ⇒ Can satisfy liveness (system does not stop) World with Blockchain — and Blockchain Governance — 2018-07-10 – p.6/21 

Beaker / Newspaper Model (2) Liquid can be moved among beakers in certain ways (Guarantee of Validity) Only the corresponding private key can open a lid Once opened, the beaker must be emptied The “selected party” validates the trades, and creates a new page of newspaper where records are printed (Proof of Existence) Can also take spill (fee) If the same page number is used, longer sequence is valid (Consensus on Uniqueness) Often, people lose their private keys Let’s consider this as currency → Bitcoin (there’s no “real money”; every currency is considered as currency) World with Blockchain — and Blockchain Governance — 2018-07-10 – p.7/21 

Hash-chain with Proof-of-Work page number : n page number : n+1 page number : n+2 Cryptographic digest of the previous page (must be less than or equal to the target value) some extra number (Nonce : Number used Once) (random value to make the digest less than or equal to the target) Cryptographic digest of a page must be less than or equal to the given target value for the page Can’t guess what digest is returned when the data is how modified → must be repetitively tried for many, many times With this “lottery”, no record can be altered unless the same amount of cost is cast World with Blockchain — and Blockchain Governance — 2018-07-10 – p.8/21 

Uniqueness ∼ Nakamoto Consensus page number : n page number : n+1 page number : n+2 page number : n+3 page number : n+1 page number : n+2 page number : n+3 page number : n+4 This history is valid Occasionally, the sequence of pages gets separated as more than one miner win the lottery about the same time This is inevitable as autonomy is required not to let anyone stop the system The sequence with the highest accumulated cost of proof of work is the most difficult to alter Everyone agrees that the sequence is the correct history (this does not realize exact consensus) World with Blockchain — and Blockchain Governance — 2018-07-10 – p.9/21 

Blockchains and Distributed Ledgers Now Blockchains (“the air” is typically a global space) Bitcoin (The blockchain) Open Assets Protocol (OAP) (can define arbitrary quantities over Bitcoin blockchain to transfer) Ethereum (platform for so-called Distributed Apps) (experimental) Enterprise Ethereum Alliance (↓ evolve this way?) Other distributed ledgers (“the air” is typically a local space) Hyperledger (Linux Foundation) Fabric (IBM/DAH), Sawtooth (Intel), Iroha (Soramitsu), . . . many development projects are ongoing Corda (R3), Tangle (IOTA), . . . , BBc-1 (beyond-blockchain.org) Can nobody really deny the content or existence of a record? Can everyone really confirm the correctness of the above? World with Blockchain — and Blockchain Governance — 2018-07-10 – p.10/21 

Problems of Blockchains and Other Ledgers Lack of Timeliness (probabilistic behavior) Lack of Confidentiality (verifiability open to everyone) Oneness (distributed vs. replicated) Lack of Scalability (won’t scale if replicated to all participants) Governance Problem (can’t change if all needs to work together the exact same way) Incentive Mismatch (supported by the price of native currency) All applications may stop upon sudden drop of the price because miners would have to leave ⇒ Solvable if re-designed from scratch Ongoing (example : BBc-1) Many distributed ledgers are not designed from scratch Ex : Hash-chain without proof of work is not tamper-resistant Ex : In newspaper model, printing on a house magazine gives no proof World with Blockchain — and Blockchain Governance — 2018-07-10 – p.11/21 

Blockchains vs. Private Ledgers Private ledger Blockchain Verifiability Fault- tolerance Tamper- resistance Consistency Latency Throughput Resource- saving Ease of development Sustainability Private ledgers often lack important properties such as tamper-resistance and verifiability World with Blockchain — and Blockchain Governance — 2018-07-10 – p.12/21 

Beyond Blockchain One (BBc-1) Proof of existence is made possible even in a situation like “our customers can read our house magazine” Open source since 31 Oct. 2017 (v1.0 on 22 May 2018) (https://github.com/beyond-blockchain), managed by an NPO Beyond Blockchain, the NPO, welcomes corporate members World with Blockchain — and Blockchain Governance — 2018-07-10 – p.13/21 

Introducing BBc-1 — Features Guarantee of Validity UTXO data structure + separation between identifiers and public keys + validation within a domain Asset as a proof of debt + common consensus algorithms such as Byzantine Paxos No native currency + governance within a domain inter-crossing references + initially, anchoring to existing blockchains Proof of Existence Consensus on Uniqueness Distribution of Governance https://beyond-blockchain.org World with Blockchain — and Blockchain Governance — 2018-07-10 – p.14/21 

Design with Potentials Private ledger BBc-1 Blockchain Verifiability potential potential potential Fault- tolerance Tamper- resistance Consistency Latency Throughput Resource- saving Ease of development Sustainability Initial design and reference software of BBc-1 can be improved in many ways World with Blockchain — and Blockchain Governance — 2018-07-10 – p.15/21 

References Web Page https://beyond-blockchain.org/ GitHub https://github.com/beyond-blockchain BBc Trust (requirement specifications) https://beyond-blockchain.org/public/bbc-trust.pdf Design Paper (white paper) (currently revision 0.1) https://beyond-blockchain.org/public/bbc1-design-paper.pdf World with Blockchain — and Blockchain Governance — 2018-07-10 – p.16/21 

On Tamper-Resistance (1) Software system is never “tamper-resistant” to begin with → Is tampering detected? When? Access control has been used for existing databases Tampering is detected only with journals (logs) In distributed ledgers, relation among data is enforced ⇒ Simple tampering would cause contradictions Can detect tampering if a contradiction remains Cannot detect tampering if no contradiction remains World with Blockchain — and Blockchain Governance — 2018-07-10 – p.17/21 

On Tamper-Resistance (2) Platform Tampering Cost C Value V Condition C ≥ V Proactive Bitcoin (Basic) Mining Cost bitcoin Satisfied No Bitcoin (Applied) Depends Possibly Not Satisfied Ethereum Mining Cost Depends Possibly Not Satisfied No Private Ledgers N.D. but Small Depends Not Satisfied No? BBc-1 N.D. but Maximal Depends Satisfied Yes If condition C ≥ V is not satisfied, tampering can be noncontradictory and nondetectable Whether partial tampering (w/ contradiction) is proactively detected (with introspection) or not In any system, if a node is partially tampered, users may be malinformed Although contradictory transactions cannot be entered into a blockchain In general ledgers, if possibility of intrusion to (majority of) validators cannot be ignored, designers should consider proactive detection World with Blockchain — and Blockchain Governance — 2018-07-10 – p.18/21 

An Interesting Governance Issue “The problem” Bitcoin tries to answer and other blockchains to follow “How do I let nobody stop me from spending my own money?” (Freedom) Suppose some technology solves it, then “I” must be authenticated by my own (zero-knowledge proof of possession of private key) Everyone must be able to trace transfers (public record) Nobody may get the transferred money back (such policy) Have you heard of Mt.Gox, Coincheck or other cases of stolen coins? Once private key is illegally used, everyone knows where the stolen money is in the system, but nobody can get it back But the platform may choose to deny the incident by splitting a new history But then, does the platform take some juridical role? World with Blockchain — and Blockchain Governance — 2018-07-10 – p.19/21 

Cyber-Physical Society and Cybernetics Cybernetics began as understanding of animals in terms of communication and control, and is born to be physical anyways Society is acquiring new eyes, ears, arms and legs Ex. Wherever you are, they let you know that rain cloud is approaching to your town Ex. And a robotic system will bring in your laundry and fold them ⇒ Is the knowledge brought through the new eyes and ears correct? Is the control and its decision correct? Is the mission correct? Any bias? AI’s may be Byzantine nodes in the society as a network Byzantine = with arbitrary failures It may be meaningful to save and maintain records that even AI’s cannot alter World with Blockchain — and Blockchain Governance — 2018-07-10 – p.20/21 

Conclusions Any technology is an “answer” to a specific “question” in society We will need to question “what to question” first What do we expect for upcoming Cybernetically Organized (Cyborg) Society? It will inevitably be required to be dependable Issues are always socio-technical or techno-political World with Blockchain — and Blockchain Governance — 2018-07-10 – p.21/21