Chapter by Lilian Edwards in L Edwards ed Law, Policy and the Internet (Hart , 2018): “In this chapter, I examine in detail how data subjects are tracked, profiled and targeted by their activities on line and, increasingly, in the “offline” world as well. Tracking is part of both commercial and state surveillance, but in this chapter I concentrate on the former. The European law relating to spam, cookies, online behavioural advertising (OBA), machine learning (ML) and the Internet of Things (IoT) is examined in detail, using both the GDPR and the forthcoming draft ePrivacy Regulation. The chapter concludes by examining both code and law solutions which might find a way forward to protect user privacy and still enable innovation, by looking to paradigms not based around consent, and less likely to rely on a “transparency fallacy”. Particular attention is drawn to the new work around Personal Data Containers (PDCs) and distributed ML analytics….(More)”.
On Preferring A to B, While Also Preferring B to A
Paper by Cass R. Sunstein: “In important contexts, people prefer option A to option B when they evaluate the two separately, but prefer option B to option A when they evaluate the two jointly. In consumer behavior, politics, and law, such preference reversals present serious puzzles about rationality and behavioral biases.
They are often a product of the pervasive problem of “evaluability.” Some important characteristics of options are difficult or impossible to assess in separate evaluation, and hence choosers disregard or downplay them; those characteristics are much easier to assess in joint evaluation, where they might be decisive. But in joint evaluation, certain characteristics of options may receive excessive weight, because they do not much affect people’s actual experience or because the particular contrast between joint options distorts people’s judgments. In joint as well as separate evaluation, people are subject to manipulation, though for different reasons.
It follows that neither mode of evaluation is reliable. The appropriate approach will vary depending on the goal of the task – increasing consumer welfare, preventing discrimination, achieving optimal deterrence, or something else. Under appropriate circumstances, global evaluation would be much better, but it is often not feasible. These conclusions bear on preference reversals in law and policy, where joint evaluation is often better, but where separate evaluation might ensure that certain characteristics or features of situations do not receive excessive weight…(More)”.
I want your (anonymized) social media data
The Conversation: “Social media sites’ responses to the Facebook-Cambridge Analytica scandal and new European privacy regulations have given users much more control over who can access their data, and for what purposes. To me, as a social media user, these are positive developments: It’s scary to think what these platforms could do with the troves of data available about me. But as a researcher, increased restrictions on data sharing worry me.
I am among the many scholars who depend on data from social media to gain insights into people’s actions. In a rush to protect individuals’ privacy, I worry that an unintended casualty could be knowledge about human nature. My most recent work, for example, analyzes feelings people express on Twitter to explain why the stock market fluctuates so much over the course of a single day. There are applications well beyond finance. Other scholars have studied mass transit rider satisfaction, emergency alert systems’ function during natural disasters and how online interactions influence people’s desire to lead healthy lifestyles.
This poses a dilemma – not just for me personally, but for society as a whole. Most people don’t want social media platforms to share or sell their personal information, unless specifically authorized by the individual user. But as members of a collective society, it’s useful to understand the social forces at work influencing everyday life and long-term trends. Before the recent crises, Facebook and other companies had already been making it hard for legitimate researchers to use their data, including by making it more difficult and more expensive to download and access data for analysis. The renewed public pressure for privacy means it’s likely to get even tougher….
It’s true – and concerning – that some presumably unethical people have tried to use social media data for their own benefit. But the data are not the actual problem, and cutting researchers’ access to data is not the solution. Doing so would also deprive society of the benefits of social media analysis.
Fortunately, there is a way to resolve this dilemma. Anonymization of data can keep people’s individual privacy intact, while giving researchers access to collective data that can yield important insights.
There’s even a strong model for how to strike that balance efficiently: the U.S. Census Bureau. For decades, that government agency has collected extremely personal data from households all across the country: ages, employment status, income levels, Social Security numbers and political affiliations. The results it publishes are very rich, but also not traceable to any individual.
It often is technically possible to reverse anonymity protections on data, using multiple pieces of anonymized information to identify the person they all relate to. The Census Bureau takes steps to prevent this.
For instance, when members of the public access census data, the Census Bureau restricts information that is likely to identify specific individuals, such as reporting there is just one person in a community with a particularly high- or low-income level.
For researchers the process is somewhat different, but provides significant protections both in law and in practice. Scholars have to pass the Census Bureau’s vetting process to make sure they are legitimate, and must undergo training about what they can and cannot do with the data. The penalties for violating the rules include not only being barred from using census data in the future, but also civil fines and even criminal prosecution.
Even then, what researchers get comes without a name or Social Security number. Instead, the Census Bureau uses what it calls “protected identification keys,” a random number that replaces data that would allow researchers to identify individuals.
Each person’s data is labeled with his or her own identification key, allowing researchers to link information of different types. For instance, a researcher wanting to track how long it takes people to complete a college degree could follow individuals’ education levels over time, thanks to the identification keys.
Social media platforms could implement a similar anonymization process instead of increasing hurdles – and cost – to access their data…(More)” .
Data Detectives: More data and surveillance are transforming justice systems
Special issue by The Economist: “…the relationship between information and crime has changed in two ways, one absolute, one relative. In absolute terms, people generate more searchable information than they used to. Smartphones passively track and record where people go, who they talk to and for how long; their apps reveal subtler personal information, such as their political views, what they like to read and watch and how they spend their money. As more appliances and accoutrements become networked, so the amount of information people inadvertently create will continue to grow.
To track a suspect’s movements and conversations, police chiefs no longer need to allocate dozens of officers for round-the-clock stakeouts. They just need to seize the suspect’s phone and bypass its encryption. If he drives, police cars, streetlights and car parks equipped with automatic number-plate readers (ANPRs, known in America as automatic licence-plate readers or ALPRs) can track all his movements.
In relative terms, the gap between information technology and policy gapes ever wider. Most privacy laws were written for the age of postal services and fixed-line telephones. Courts give citizens protection from governments entering their homes or rifling through their personal papers. The law on people’s digital presence is less clear. In most liberal countries, police still must convince a judge to let them eavesdrop on phone calls.
But mobile-phone “metadata”—not the actual conversations, but data about who was called and when—enjoy less stringent protections. In 2006 the European Union issued a directive requiring telecom firms to retain customer metadata for up to two years for use in potential crime investigations. The European Court of Justice invalidated that law in 2014, after numerous countries challenged it in court, saying that it interfered with “the fundamental rights to respect for private life”. Today data-retention laws vary widely in Europe. Laws, and their interpretation, are changing in America, too. A case before the Supreme Court will determine whether police need a warrant to obtain metadata.
Less shoe leather
If you drive in a city anywhere in the developed world, ANPRs are almost certainly tracking you. This is not illegal. Police do not generally need a warrant to follow someone in public. However, people not suspected of committing a crime do not usually expect authorities to amass terabytes of data on every person they have met and every business visited. ANPRs offer a lot of that.
To some people, this may not matter. Toplines, an Israeli ANPR firm, wants to add voice- and facial-recognition to its Bluetooth-enabled cameras, and install them on private vehicles, turning every car on the road into a “mobile broadcast system” that collects and transmits data to a control centre that security forces can access. Its founder posits that insurance-rate discounts could incentivise drivers to become, in effect, freelance roving crime-detection units for the police, subjecting unwitting citizens to constant surveillance. In answer to a question about the implications of such data for privacy, a Toplines employee shrugs: Facebook and WhatsApp are spying on us anyway, he says. If the stream of information keeps people safer, who could object? “Privacy is dead.”
It is not. But this dangerously complacent attitude brings its demise ever closer….(More)”.
Data Pollution
Paper by Omri Ben-Shahar: “Digital information is the fuel of the new economy. But like the old economy’s carbon fuel, it also pollutes. Harmful “data emissions” are leaked into the digital ecosystem, disrupting social institutions and public interests. This article develops a novel framework- data pollution-to rethink the harms the data economy creates and the way they have to be regulated. It argues that social intervention should focus on the external harms from collection and misuse of personal data. The article challenges the hegemony of the prevailing view-that the harm from digital data enterprise is to the privacy of the people whose information is used. It claims that a central problem has been largely ignored: how the information individuals give affects others, and how it undermines and degrade public goods and interests. The data pollution metaphor offers a novel perspective why existing regulatory tools-torts, contracts, and disclosure law-are ineffective, mirroring their historical futility in curbing the external social harms from environmental pollution. The data pollution framework also opens up a rich roadmap for new regulatory devices-an environmental law for dataprotection-that focus on controlling these external effects. The article examines whether the general tools society has long used to control industrial pollution-production restrictions, carbon tax, and emissions liability-could be adapted to govern data pollution….(More)”.
A Rule of Persons, Not Machines: The Limits of Legal Automation
Paper by Frank A. Pasquale: “For many legal futurists, attorneys’ work is a prime target for automation. They view the legal practice of most businesses as algorithmic: data (such as facts) are transformed into outputs (agreements or litigation stances) via application of set rules. These technophiles promote substituting computer code for contracts and descriptions of facts now written by humans. They point to early successes in legal automation as proof of concept. TurboTax has helped millions of Americans file taxes, and algorithms have taken over certain aspects of stock trading. Corporate efforts to “formalize legal code” may bring new efficiencies in areas of practice characterized by both legal and factual clarity.
However, legal automation can also elide or exclude important human values, necessary improvisations, and irreducibly deliberative governance. Due process, appeals, and narratively intelligible explanation from persons, for persons, depend on forms of communication that are not reducible to software. Language is constitutive of these aspects of law. To preserve accountability and a humane legal order, these reasons must be expressed in language by a responsible person. This basic requirement for legitimacy limits legal automation in several contexts, including corporate compliance, property recordation, and contracting. A robust and ethical legal profession respects the flexibility and subtlety of legal language as a prerequisite for a just and accountable social order. It ensures a rule of persons, not machines…(More)”
The Unlinkable Data Challenge: Advancing Methods in Differential Privacy
National Institute of Standards and Technology: “Databases across the country include information with potentially important research implications and uses, e.g. contingency planning in disaster scenarios, identifying safety risks in aviation, assist in tracking contagious diseases, identifying patterns of violence in local communities. However, included in these datasets are personally identifiable information (PII) and it is not enough to simply remove PII from these datasets. It is well known that using auxiliary and possibly completely unrelated datasets, in combination with records in the dataset, can correspond to uniquely identifiable individuals (known as a linkage attack). Today’s efforts to remove PII do not provide adequate protection against linkage attacks. With the advent of “big data” and technological advances in linking data, there are far too many other possible data sources related to each of us that can lead to our identity being uncovered.
Get Involved – How to Participate
The Unlinkable Data Challenge is a multi-stage Challenge. This first stage of the Challenge is intended to source detailed concepts for new approaches, inform the final design in the two subsequent stages, and provide recommendations for matching stage 1 competitors into teams for subsequent stages. Teams will predict and justify where their algorithm fails with respect to the utility-privacy frontier curve.
In this stage, competitors are asked to propose how to de-identify a dataset using less than the available privacy budget, while also maintaining the dataset’s utility for analysis. For example, the de-identified data, when put through the same analysis pipeline as the original dataset, produces comparable results (i.e. similar coefficients in a linear regression model, or a classifier that produces similar predictions on sub-samples of the data).
This stage of the Challenge seeks Conceptual Solutions that describe how to use and/or combine methods in differential privacy to mitigate privacy loss when publicly releasing datasets in a variety of industries such as public safety, law enforcement, healthcare/biomedical research, education, and finance. We are limiting the scope to addressing research questions and methodologies that require regression, classification, and clustering analysis on datasets that contain numerical, geo-spatial, and categorical data.
To compete in this stage, we are asking that you propose a new algorithm utilizing existing or new randomized mechanisms with a justification of how this will optimize privacy and utility across different analysis types. We are also asking you to propose a dataset that you believe would make a good use case for your proposed algorithm, and provide a means of comparing your algorithm and other algorithms.
All submissions must be made using the submission form provided on HeroX website….(More)“.
Data Governance in the Digital Age
Centre for International Governance Innovation: “Data is being hailed as “the new oil.” The analogy seems appropriate given the growing amount of data being collected, and the advances made in its gathering, storage, manipulation and use for commercial, social and political purposes.
Big data and its application in artificial intelligence, for example, promises to transform the way we live and work — and will generate considerable wealth in the process. But data’s transformative nature also raises important questions around how the benefits are shared, privacy, public security, openness and democracy, and the institutions that will govern the data revolution.
The delicate interplay between these considerations means that they have to be treated jointly, and at every level of the governance process, from local communities to the international arena. This series of essays by leading scholars and practitioners, which is also published as a special report, will explore topics including the rationale for a data strategy, the role of a data strategy for Canadian industries, and policy considerations for domestic and international data governance…
RATIONALE OF A DATA STRATEGY
- Considerations for Canada’s National Data Strategy
- The Economics of Data: Implications for the Data-driven Economy
- The Government’s Role in Constructing the Data-driven Economy
- Canadian Network Sovereignty: A Strategy for Twenty-First-Century National Infrastructure Building
- VIDEO: Considerations for Canada’s National Data Strategy
- VIDEO: Canada Needs a National Data Strategy
- VIDEO: The Economics of Data: Implications for the Data-driven Economy
THE ROLE OF A DATA STRATEGY FOR CANADIAN INDUSTRIES
- Treasure of the Commons: Global Leadership through Health Data
- Monetizing Smart Cities: Framing the Debate
- Big Data: The Canadian Opportunity
- VIDEO: Treasure of the Commons: Global Leadership Through Health Data
- VIDEO: Big Data: The Canadian Opportunity
BALANCING PRIVACY AND COMMERCIAL VALUES
- Preventing Big Data Discrimination in Canada: Addressing Design, Consent and Sovereignty Challenges
- Data and the Future of Growth: The Need for Strategic Data Policy
- Crypto Agility Is a Must-Have for Data Encryption Standards
DOMESTIC POLICY FOR DATA GOVERNANCE
- Ungoverned Space: How Surveillance Capitalism and AI Undermine Democracy
- Governance Vacuums and How Code Is Becoming Law
- Measuring the Economy in an Increasingly Digitalized World: Are Statistics Up to the Task?
- VIDEO: Governance Vacuums and How Code Is Becoming Law
- VIDEO: How Surveillance Capitalism Undermines Democracy
INTERNATIONAL POLICY CONSIDERATIONS
- Data Libera? Canada’s Data Strategy and the Law of the Sea
- Data Rules in Modern Trade Agreements: Toward Reconciling an Open Internet with Privacy and Security Safeguards
- Data Minefield? How AI Is Prodding Governments to Rethink Trade in Data
- VIDEO: Data Rules in Modern Trade Agreements
- Screen Time, the Brain, Privacy and Mental Health
EPILOGUE
The GovLab Selected Readings on Blockchain Technologies and the Governance of Extractives
Curation by Andrew Young, Anders Pedersen, and Stefaan G. Verhulst
Readings developed together with NRGI, within the context of our joint project on Blockchain technologies and the Governance of Extractives. Thanks to Joyce Zhang and Michelle Winowatan for research support.
We need your help! Please share any additional readings on the use of Blockchain Technologies in the Extractives Sector with blockchange@thegovlab.org.
Introduction
By providing new ways to securely identify individuals and organizations, and record transactions of various types in a distributed manner, blockchain technologies have been heralded as a new tool to address information asymmetries, establish trust and improve governance – particularly around the extraction of oil, gas and other natural resources. At the same time, blockchain technologies are been experimented with to optimize certain parts of the extractives value chain – potentially decreasing transparency and accountability while making governance harder to implement.
Across the expansive and complex extractives sector, blockchain technologies are believed to have particular potential for improving governance in three key areas:
- Beneficial ownership and illicit flows screening: The identity of those who benefit, through ownership, from companies that extract natural resources is often hidden – potentially contributing to tax evasion, challenges to global sanction regimes, corruption and money laundering.
- Land registration, licensing and contracting transparency: To ensure companies extract resources responsibly and comply with rules and fee requirements, effective governance and a process to determine who has the rights to extract natural resources, under what conditions, and who is entitled to the land is essential.
- Commodity trading and supply chain transparency: The commodity trading sector is facing substantive challenges in assessing and verifying the authenticity of for example oil trades. Costly time is spent by commodity traders reviewing documentation of often poor quality. The expectation of the sector is firstly to eliminate time spent verifying the authenticity of traded goods and secondly to reduce the risk premium on trades. Transactions from resources and commodities trades are often opaque and secretive, allowing for governments and companies to conceal how much money they receive from trading, and leading to corruption and evasion of taxation.
In the below we provide a selection of the nascent but growing literature on Blockchain Technologies and Extractives across six categories:
- Blockchain Technologies and Extractives – Promise and Current Potential
- Blockchain Technologies and the Governance of Extractives
- Beneficial Ownership and Illicit Flows
- Land Registration, Licensing and Contracting Transparency
- Commodity Trading and Supply Chain Transparency
- Global Governance and Disclosure Practices
- Industry-Specific Case Studies
Selected Readings
Blockchain Technologies and Extractives – Promise and Current Potential
Adams, Richard, Beth Kewell, Glenn Parry. “Blockchain for Good? Digital Ledger Technology and Sustainable Development Goals.” Handbook of Sustainability and Social Science Research. October 27, 2017.
- This chapter in the Handbook of Sustainability and Social Science Research seeks to reflect and explore the different ways Blockchain for Good (B4G) projects can provide social and environmental benefits under the UN’s Sustainable Goals framework
- The authors describe the main categories in which blockchain can achieve social impact: mining/consensus algorithms that reward good behavior, benefits linked to currency use in the form of “colored coins,” innovations in supply chain, innovations in government, enabling the sharing economy, and fostering financial inclusion.
- The chapter concludes that with B4G there is also inevitably “Blockchain for Bad.” There is already critique and failures of DLTs such as the DAO, and more research must be done to identify whether DLTs can provide a more decentralized, egalitarian society, or if they will ultimately be another tool for control and surveillance by organizations and government.
Cullinane, Bernadette, and Randy Wilson. “Transforming the Oil and Gas Industry through Blockchain.” Official Journal of the Australian Institute of Energy News, p 9-10, December 2017.
- In this article, Cullinane and Wilson explore blockchain’s application in the oil and gas industry “presents a particularly compelling opportunity…due to the high transactional values, associated risks and relentless pressure to reduce costs.”
- The authors elaborate four areas where blockchain can benefit play a role in transforming the oil and gas industry:
- Supply chain management
- Smart contracts
- Record management
- Cross-border payments
Da Silva, Filipe M., and Ankita Jaitly. “Blockchain in Natural Resources: Hedging Against Volatile Prices.” Tata Consultancy Services Ltd., 2018.
- The authors of this white paper assess the readiness of natural resources industries for blockchain technology application, identify areas where blockchain can add value, and outline a strategic plan for its adoption.
- In particular, they highlight the potential for blockchain in the oil and gas industry to simplify payments, where for example, gas can be delivered directly to consumer homes using a blockchain smart contracting application.
Halford-Thompson, Guy. “Powered by Blockchain: Reinventing Information Management in the Energy Space.” BTL, May 12, 2017.
- According to Halford-Thompson, “oil and gas companies are exploring blockchain’s promise to revamp inefficient internal processes and achieve significant reductions in operating costs through the automation of record keeping and messaging, the digitization of the supply chain information flow, and the elimination of reconciliation, among many other data management use cases.”
- The data reconciliation process, for one, is complex and can require significant time for completion. Blockchain technology could not only remove the need for some steps in the information reconciliation process, but also eliminate the need for reconciliation altogether in some instances.
Blockchain Technologies and the Governance of Extractives
(See also: Selected Readings of Blockchain Technologies and its Potential to Transform Governance)
Koeppen, Mark, David Shrier, and Morgan Bazilian. “Is Blockchain’s Future in Oil and Gas Transformative Or Transient?“ Deloitte, 2017.
- In this report, the authors propose four areas that blockchain can improve for the oil and gas industry, which are:
- Transparency and compliance: Employment of blockchain is predicted to significantly reduce cost related to compliance, since it securely makes information available to all parties involved in the supply chain.
- Cyber threats and security: The industry faces constant digital security threat and blockchain provides a solution to address this issue.
- Mid-volume trading/third party impacts: They argue that the “boundaries between asset classes will blur as cash, energy products and other commodities, from industrial components to apples could all become digital assets trading interoperably.”
- Smart contract: Since the “sheer size and volume of contracts and transactions to execute capital projects in oil and gas have historically caused significant reconciliation and tracking issues among contractors, sub-contractors, and suppliers,” blockchain-enabled smart contracts could improve the process by executing automatically after all requirements are met, and boosting contract efficiency and protecting each party from volatile pricing.
Mawet, Pierre, and Michael Insogna. “Unlocking the Potential of Blockchain in Oil and Gas Supply Chains.” Accenture Energy Blog, November 21, 2016.
- The authors propose three ways blockchain technology can boost productivity and efficiency in oil and gas industry:
- “Greater process efficiency. Smart contracts, for example, can be held in a blockchain transaction with party compliance confirmed through follow-on transactions, reducing third-party supervision and paper-based contracting, thus helping reduce cost and overhead.”
- “Compliance. Visibility is essential to improve supply chain performance. The immutable record of transactions can aid in product traceability and asset tracking.”
- “Data transfer from IoT sensors. Blockchain could be used to track the unique history of a device, with the distributed ledger recording data transfer from multiple sensors. Data security in devices could be safeguarded by unique blockchain characteristics.”
Som, Indranil. “Blockchain: Radically Changing the Mining Paradigm.” Digitalist, September 27, 2017.
- In this article, Som proposes three ways that the blockchain technology can “support leaner organizations and increased security” in the mining industry: improving cybersecurity, increasing transparency through smart contracts, and providing visibility into the supply chain.
Identity: Beneficial Ownership and Illicit Flows
(See also: Selected Readings on Blockchain Technologies and Identity).
de Jong, Julia, Alexander Meyer, and Jeffrey Owens. “Using blockchain for transparent beneficial ownership registers.“ International Tax Review, June 2017.
- This paper discusses the features of blockchain and distributed ledger technology that can improve collection and distribution of information on beneficial ownership.
- The FATF and OECD Global Forum regimes have identified a number of common problems related to beneficial ownership information across all jurisdictions, including:
- “Insufficient accuracy and accessibility of company identification and ownership information;
- Less rigorous implementation of customer due-diligence (CDD) measures by key gatekeepers such as lawyers, accountants, and trust and company service providers; and
- Obstacles to information sharing such as data protection and privacy laws, which impede competent authorities from receiving timely access to adequate, accurate and up-to-date information on basic legal and beneficial ownership.”
- The authors argue that the transparency, immutability, and security offered by blockchain makes it ideally suited for record-keeping, particularly with regards to the ownership of assets. Thus, blockchain can address many of the shortcomings in the current system as identified by the FATF and the OECD.
- They go on to suggest that a global registry of beneficial ownership using blockchain technology would offer the following benefits:
- Ensuring real-time accuracy and verification of ownership information
- Increasing security and control over sensitive personal and commercial information
- Enhancing audit transparency
- Creating the potential for globally-linked registries
- Reducing corruption and fraud, and increasing trust
- Reducing compliance burden for regulate entities
Herian, Robert. “Trusteeship in a Post-Trust World: Property, Trusts Law and the Blockchain.” The Open University, 2016.
- This working paper discusses the often overlooked topic of trusteeship and trusts law and the implications of blockchain technology in the space.
- “Smart trusts” on the blockchain will distribute trusteeship across a network and, in theory, remove the need for continuous human intervention in trust fund investments thus resolving key issues around accountability and the potential for any breach of trust.
- Smart trusts can also increase efficiency and security of transactions, which could improve the overall performance of the investment strategy, thereby creating higher returns for beneficiaries.
Karsten, Jack and Darrell M. West (2018): “Venezuela’s “petro” undermines other cryptocurrencies – and international sanctions.” Brookings, Friday, March 9 2018,
- This article discusses the Venezuelan government’s cryptocurrency, “petro,” which was launched as a solution to the country’s economic crisis and near-worthless currency, “bolívar”
- Unlike the volatility of other cryptocurrencies such as Bitcoin and Litecoin, one petro’s price is pegged to the price of one barrel of Venezuelan oil – roughly $60
- And rather than decentralizing control like most blockchain applications, the petro is subject to arbitrary discount factor adjustment, fluctuating oil prices, and a corrupt government known for manipulating its currency
- The authors warn the petro will not stabilize the Venezuelan economy since only foreign investors funded the presale, yet (from the White Paper) only Venezuelan citizens can use the cryptocurrency to pay taxes, fees, and other expenses. Rather, they argue, the petro represents an attempt to create foreign capital out of “thin air,” which is not subject to traditional economic sanctions.
Land Registration, Licensing and Contracting Transparency
Michael Graglia and Christopher Mellon. “Blockchain and Property in 2018: At the End of the Beginning.” 2018 World Bank Conference on Land and Poverty, March 19-23, 2018.
- This paper claims “blockchain makes sense for real estate” because real estate transactions depend on a number of relationships, processes, and intermediaries that must reconcile all transactions and documents for an action to occur. Blockchain and smart contracts can reduce the time and cost of transactions while ensuring secure and transparent record-keeping systems.
- The ease, efficiency, and security of transactions can also create an “international market for small real estate” in which individuals who cannot afford an entire plot of land can invest small amounts and receive their portion of rental payments automatically through smart contracts.
- The authors describe seven prerequisites that land registries must fulfill before blockchain can be introduced successfully: accurate data, digitized records, an identity solution, multi-sig wallets, a private or hybrid blockchain, connectivity and a tech aware population, and a trained professional community
- To achieve the goal of an efficient and secure property registry, the authors propose an 8-level progressive framework through which registries slowly integrate blockchain due to legal complexity of land administration, resulting inertia of existing processes, and high implementation costs.
- Level 0 – No Integration
- Level 1 – Blockchain Recording
- Level 2 – Smart Workflow
- Level 3 – Smart Escrow
- Level 4 – Blockchain Registry
- Level 5 – Disaggregated Rights
- Level 6 – Fractional Rights
- Level 7 – Peer-to-Peer Transactions
- Level 8 – Interoperability
Thomas, Rod. “Blockchain’s Incompatibility for Use as a Land Registry: Issues of Definition, Feasibility and Risk.“ European Property Law Journal, vol. 6, no. 3, May 2017.
- Thomas argues that blockchain, as it is currently understood and defined, is unsuited for the transfer of real property rights because it fails to address the need for independent verification and control.
- Under a blockchain-based system, coin holders would be in complete control of the recordation of the title interests of their land, and thus, it would be unlikely that they would report competing or contested claims.
- Since land remains in the public domain, the risk of third party possessory title claims are likely to occur; and over time, these risks will only increase exponentially.
- A blockchain-based land title represents interlinking and sequential transactions over many hundreds, if not thousands, of years, so given the misinformation that would compound over time, it would be difficult to trust the current title holder has a correctly recorded title
- The author concludes that supporters of blockchain for land registries frequently overlook a registry’s primary function to provide an independent verification of the provenance of stored data.
Vos, Jacob, Christiaan Lemmen, and Bert Beentjes. “Blockchain-Based Land Registry: Panacea, Illusion or Something In Between?“ 2017 World Bank Conference on Land and Poverty, March 20-24, 2017.
- The authors propose that blockchain is best suited for the following steps in land administration:
- The issuance of titles
- The archiving of transactions – specifically in countries that do not have a reliable electronic system of transfer of ownership
- The step in between issuing titles and archiving transactions is the most complex – the registration of the transaction. This step includes complex relationships between the “triple” of land administration: rights (right in rem and/or personal rights), object (spatial unit), and subject (title holder). For the most part, this step is done manually by registrars, and it is questionable whether blockchain technology, in the form of smart contracts, will be able to process these complex transactions.
- The authors conclude that one should not underestimate the complexity of the legal system related to land administration. The standardization of processes may be the threshold to success of blockchain-based land administration. The authors suggest instead of seeking to eliminate one party from the process, technologists should cooperate with legal and geodetic professionals to create a system of checks and balances to successfully implement blockchain for land administration.
- This paper also outlines five blockchain-based land administration projects launched in Ghana, Honduras, Sweden, Georgia, and Cook County, Illinois.
Commodity Trading and Supply Chain Transparency
Ahmed, Shabir. “Leveraging Blockchain to Revolutionise the Mining Industry.” SAP News, February 27, 2018.
- In this article, Ahmed identifies seven key use cases for blockchain in the mining industry:
- Automation of ore acquisition and transfer;
- Automatic registration of mineral rights and IP;
- Visibility of ore inventory at ports;
- Automatic cargo hire process;
- Process and secure large amounts of IoT data;
- Reconciling amount produced and sent for processing;
- Automatically execute procurement and other contracts.
Brooks, Michael. “Blockchain and the Fight Against Illicit Financial Flows.” The Policy Corner, February 19, 2018.
- In this article, Brooks argues that, “Because of the inherent decentralization and immutability of data within blockchains, it offers a unique opportunity to bypass traditional tracking and transparency initiatives that require strong central governance and low levels of corruption. It could, to a significant extent, bypass the persistent issues of authority and corruption by democratizing information around data consensus, rather than official channels and occasional studies based off limited and often manipulated information. Within the framework of a coherent policy initiative that integrates all relevant stakeholders (states, transnational organizations, businesses, NGOs, other monitors and oversight bodies), a international supply chains supported by blockchain would decrease the ease with which resources can be hidden, numbers altered, and trade misinvoiced.”
“Conflict Free Natural Resources.” Global Opportunity Report 2017. Global Opportunity Network, 2017.
- In this entry from the Global Opportunity Report, and specifically toward the end of ensuring conflict-free natural resources, Blockchain is labeled as “well-suited for tracking objects and transactions, making it possible for virtually anything of value to be traced. This opportunity is about creating transparency and product traceability in supply chains.
“Blockchain for Traceability in Minerals and Metals Supply Chains: Opportunities and Challenges.” RCS Global and ICMM, 2017.
- This report is based on insights generated during the Materials Stewardship Round Table on the potential of BCTs for tracking and tracing metals and minerals supply chains, which subsequently informed an RCS Global research initiative on the topic.
- Insight into two key areas is increasingly desired by downstream manufacturing companies from upstream producers of metals and minerals: provenance and production methods
- In particular, the report offers five key potential advantages of using Blockchain for mineral and metal supply chain activities:
- “Builds consensus and trust around responsible production standards between downstream and upstream companies.
- The immutability of and decentralized control over a blockchain system minimizes the risk of fraud.
- Defined datasets can be made accessible in real time to any third party, including downstream buyers, auditors, investors, etc. but at the same time encrypted so as to share a proof of fact rather than confidential information.
- A blockchain system can be easily scaled to include other producers and supply chains beyond those initially involved.
- Cost reduction due to the paperless nature of a blockchain-enabled CoC [Chain of Custody] system, the potential reduction of audits, and reduction in transaction costs.”
Van Bockstael, Steve. “The emergence of conflict-free, ethical, and Fair Trade mineral supply chain certification systems: A brief introduction.” The Extractives Industries and Society, vol. 5, issue 1, January 2018.
- This introduction to a special section considers the emerging field of “‘conflict-free’, ‘fair’ and ‘transparently sourced and traded’ minerals” in global industry supply chains.
- Van Bockstael describes three areas of practice aimed at increasing supply chain transparency:
- “Initiatives that explicitly try to sever the links between mining or minerals trading and armed conflict of the funding thereof.”
- “Initiatives, limited in number yet growing, that are explicitly linked to the internationally recognized ‘Fair Trade’ movement and whose aim it is to source artisanally mined minerals for the Western jewellry industry.”
- “Initiatives that aim to provide consumers or consumer-facing industries with more ethical, transparent and fair supply chains (often using those concepts in fuzzy and interchangeable ways) that are not linked to the established Fair Trade movement” – including, among others, initiatives using Blockchain technology “to create tamper-proof supply chains.”
Global Governance, Standards and Disclosure Practices
Lafarre, Anne and Christoph Van der Elst. “Blockchain Technology for Corporate Governance and Shareholder Activism.” European Corporate Governance Institute (ECGI) – Law Working Paper No. 390/2018, March 8, 2018.
- This working paper focuses on the potential benefits of leveraging Blockchain during functions involving shareholder and company decision making. Lafarre and Van der Elst argue that “Blockchain technology can lower shareholder voting costs and the organization costs for companies substantially. Moreover, blockchain technology can increase the speed of decision-making, facilitate fast and efficient involvement of shareholders.”
- The authors argue that in the field of corporate governance, Blockchain offers two important elements: “transparency – via the verifiable way of recording transactions – and trust – via the immutability of these transactions.”
- Smart contracting, in particular, is seen as a potential avenue for facilitating the ‘agency relationship’ between board members and the shareholders they represent in corporate decision-making processes.
Myung, San Jun. “Blockchain government – a next for of infrastructure for the twenty-first century.” Journal of Open Innovation: Technology, Market, and Complexity, December 2018.
- This paper argues the idea that Blockchain represents a new form of infrastructure that, given its core consensus mechanism, could replace existing social apparatuses including bureaucracy.
- Indeed, Myung argues that blockchain and bureaucracy share a number of attributes:
- “First, both of them are defined by the rules and execute predetermined rules.
- Second, both of them work as information processing machines for society.
- Third, both of them work as trust machines for society.”
- The piece concludes with five principles for replacing bureaucracy with blockchain for social organization: “1) introducing Blockchain Statute law; 2) transparent disclosure of data and source code; 3) implementing autonomous executing administration; 4) building a governance system based on direct democracy; and 5) making Distributed Autonomous Government (DAG).
Peters, Gareth and Vishnia, Guy (2016): “Blockchain Architectures for Electronic Exchange Reporting Requirements: EMIR, Dodd Frank, MiFID I/II, MiFIR, REMIT, Reg NMS and T2S.” University College London, August 31, 2016.
- This paper offers a solution based on blockchain architectures to the regulations of financial exchanges around the world for trade processing and reporting for execution and clearing. In particular, the authors give a detailed overview of EMIR, Dodd Frank, MiFID I/II, MiFIR, REMIT, Reg NMS and T2S.
- The authors suggest the increasing amount of data from transaction reporting start to be incorporated on a blockchain ledger in order to harness the built-in security and immutability features of the blockchain to support key regulatory features.
- Specifically, the authors suggest 1) a permissioned blockchain controlled by a regulator or a consortium of market participants for the maintenance of identity data from market participants and 2) blockchain frameworks such as Enigma to be used to facilitate required transparency and reporting aspects related to identities when performing pre- and post-trade reporting as well as for auditing.
“Blockchain Technology and Competition Policy – Issues paper by the Secretariat,” OECD, June 8, 2018.
- This OECD issues paper poses two key questions about how blockchain technology might increase the relevance of new disclosures practices:
- “Should competition agencies be given permission to access blockchains? This might enable them to monitor trading prices in real-time, spot suspicious trends, and, when investigating a merger, conduct or market have immediate access to the necessary data without needing to impose burdensome information requests on parties.”
- “Similarly, easy access to the information on a blockchain for a firm’s owners and head offices would potentially improve the effectiveness of its oversight on its own subsidiaries and foreign holdings. Competition agencies may assume such oversight already exists, but by making it easier and cheaper, a blockchain might make it more effective, which might allow for more effective centralised compliance programmes.”
Michael Pisa and Matt Juden. “Blockchain and Economic Development: Hype vs. Reality.” Center for Global Development Policy Paper, 2017.
- In this Center for Global Development Policy Paper, the authors examine blockchain’s potential to address four major development challenges: (1) facilitating faster and cheaper international payments, (2) providing a secure digital infrastructure for verifying identity, (3) securing property rights, and (4) making aid disbursement more secure and transparent.
- The authors conclude that while blockchain may be well suited for certain use cases, the majority of constraints in blockchain-based projects fall outside the scope of technology. Common constraints such as data collection and privacy, governance, and operational resiliency must be addressed before blockchain can be successfully implemented as a solution.
Industry-Specific Case Studies
Chohan, Usman. “Blockchain and the Extractive Industries: Cobalt Case Study,” University of New South Wales, Canberra Discussion Paper Series: Notes on the 21st Century, 2018.
- In this discussion paper, the author studies the pilot use of blockchain in cobalt mining industry in the Democratic Republic of Congo (DRC). The project tracked the movement of cobalt from artisanal mines through its installation in devices such as smartphones and electric cars.
- The project records cobalt attributes – weights, dates, times, images, etc. – into the digital ledger to help ensure that cobalt purchases are not contributing to forced child labor or conflict minerals.
Chohan, Usman. “Blockchain and the Extractive Industries #2: Diamonds Case Study,” University of New South Wales, Canberra Discussion Paper Series: Notes on the 21st Century, 2018.
- The second case study from Chohan investigates the application of blockchain technology in the extractive industry by studying Anglo-American (AAL) diamond DeBeer’s unit and Everledger’s blockchain projects.
- In this study, the author finds that AAL uses blockchain to track gems (carat, color, certificate numbers), starting from extraction and onwards, including when the gems change hands in trade transaction.
- Like the cobalt pilot, the AAL initiative aims to help avoid supporting conflicts and forced labor, and to improve trading accountability and transparency more generally.
Don’t Fight Regulation. Reprogram It
Article by Alison Kutler and Antonio Sweet: “Businesspeople too often assume that the relationship between government and the private sector is (and should be) adversarial. They imagine two opposing forces, each setting their bounds of control. But if you can envision government and business as platforms that interact with one other, it becomes apparent why the word code applies to both technology and law. A successful business leader works with regulation the way a successful app developer works with another company’s operating system: testing it, providing innovative ways to get results within the system’s constraints, and offering guidance, where possible, to help make the system more efficient, more fair, and more valuable to end-users.
Like the computer language of an operating system, legal and regulatory codes follow rules designed to make them widely recognizable to those who are appropriately trained. As legislators, regulators, and other officials write that code, they seek input from stakeholders through hearings and public-comment filings on proposed rules. Policymakers rely on constituents, public filings, and response analysis the way software designers use beta testers, crash reports, and developer feedback — to debug and validate code before deploying it across the entire system.
Unfortunately, policymakers and business leaders don’t always embrace what software developers know about collaborative innovation. Think about how much less a smartphone could do if its manufacturers never worked closely with people outside of their engineering department. When only a small subset of voices are involved, the final code only reflects the needs of the most vocal groups. As a result, the unengaged are stuck with a system that doesn’t take into account their needs, or worse, disables their product.
Policymakers may also benefit by emulating the kind of interoperability that makes software effective. When enterprise systems are too different from each other, people struggle with system unfamiliarity. They also run into interoperability issues when trying to function across multiple systems. A product development team can devote massive amounts of resources to designing and building something to work perfectly in one operating system domain, only to have it slow down or completely freeze in another…(More)”.