Existing and Potential Use Cases for Blockchain in Public Procurement

Curated on Posted on by Stefaan Verhulst

Paper by Pedro Telles: “The purpose of this paper is to assess the possibility of using blockchain technology in the realm of public procurement within the EU, particularly in connection with the award of public contracts. In this context, blockchain is used as an umbrella term covering IT technologies and cryptographic solutions used to generate consensus on a distributed ledger.

The paper starts by elaborating how blockchains and distributed ledgers work in general, includ-ing the drawbacks of different blockchain models and implementations, before looking into recent developments for distributed consensus that may herald some potential.

As for public procurement, blockchain has been used in three real use cases in Aragon (Spain), Colombia and Peru, with the first two not passing from the pilot stage and the latter being deployed in production. These use cases are analysed with an emphasis in what can be learned from the difficulties faced by each project.

Finally, this paper will posit two specific areas of EU public procurement practice that might benefit from the use of blockchain technology. The first is on data management and accessibility where current solutions have been unsuccessful, such as cross-border certification data as required by the European Single Procurement Document (ESPD) and e-Certis or the difficulties with contract data collection and publication. The second, on situations of clear lack of confidence on public powers, where the downsides of blockchain technologies and the costs they entail are an advantage. Even considering these potential scenarios, the overall perspective is that the benefits of blockchain solutions do not really provide much value in the context of public procurement for now…(More)”.

Proof of Stake

Curated on Posted on by Stefaan Verhulst

Book by Vitalik Buterin and edited by Nathan Schneider: “The ideas behind Ethereum in the words of its founder, describing a radical vision for more than a digital currency—reinventing organizations, economics, and democracy itself in the age of the internet.

When he was only nineteen years old, in late 2013, Vitalik Buterin published a visionary paper outlining the ideas behind what would become Ethereum. He proposed to take what Bitcoin did for currency—replace government and corporate power with power shared among users—and apply it to everyday apps, organizations, and society as a whole. Now, less than a decade later, Ethereum is the second-most-valuable cryptocurrency and serves as the foundation for the weird new world of NFT artworks, virtual real estate in the metaverse, and decentralized autonomous organizations.

The essays in Proof of Stake have guided Ethereum’s community of radicals and builders. Here for the first time they are collected from across the internet for new readers. They reveal Buterin as a lively, creative thinker, relentlessly curious and adventuresome in exploring the consequences of his invention. His writing stands in contrast to the hype that so often accompanies crypto in the public imagination. He presents it instead as a fascinating set of social, economic, and political possibilities, opening a window into a conversation that far more of us could be having…(More)”.

Non-Fungible Tokens (NFTs)

Curated on Posted on by Stefaan Verhulst

Report by the Congressional Research Service:Non-fungible tokens (NFTs) have become popular as unique and non-interchangeable units of data that signify ownership of associated digital items, such as images, music, or videos. Token “ownership” is recorded and tracked on a blockchain (a digital database that records data on a decentralized network of computers without the use of a central authority). In the future, supporters believe NFTs will be used as digital representations of physical items, such as a deed to a house or title to a car. NFTs are commonly used to record and represent ownership of an item, verify authenticity, and enable exchange. However, they do not necessarily reflect the legal ownership of an asset or grant copyright to a digital or physical item. NFT owners purchase only the right to the NFT’s blockchain metadata or “token,” not the underlying asset, unless otherwise specified in external contracts or terms and conditions. NFTs share many similarities with cryptocurrencies, and they are commonly bought and traded using cryptocurrency. Both NFTs and cryptocurrencies are built and tracked on blockchains, and they share much of the same customer and community base. However, cryptocurrencies are fungible, meaning interchangeable, whereas NFTs are unique and therefore non-fungible. Most users create and buy NFTs on dedicated NFT marketplaces. For a typical NFT, it is created or “minted” on a blockchain, auctioned off or sold at a fixed price on an NFT marketplace, and “stored”in the buyer’s digital wallet. Smart contracts (self-executing contracts or lines of computer code on a blockchain) can mint NFTs or transfer them from one owner to another. In combination, blockchains and smart contracts are the backbone of the NFT ecosystem…

Report by the Congressional Research Service: “Non-fungible tokens (NFTs) have become popular as unique and non-interchangeable units of data that signify ownership of associated digital items, such as images, music, or videos. Token “ownership” is recorded and tracked on a blockchain (a digital database that records data on a decentralized network of computers without the use of a central authority). In the future, supporters believe NFTs will be used as digital representations of physical items, such as a deed to a house or title to a car. NFTs are commonly used to record and represent ownership of an item, verify authenticity, and enable exchange. However, they do not necessarily reflect the legal ownership of an asset or grant copyright to a digital or physical item. NFT owners purchase only the right to the NFT’s blockchain metadata or “token,” not the underlying asset, unless otherwise specified in external contracts or terms and conditions. NFTs share many similarities with cryptocurrencies, and they are commonly bought and traded using cryptocurrency. Both NFTs and cryptocurrencies are built and tracked on blockchains, and they share much of the same customer and community base. However, cryptocurrencies are fungible, meaning interchangeable, whereas NFTs are unique and therefore non-fungible. Most users create and buy NFTs on dedicated NFT marketplaces. For a typical NFT, it is created or “minted” on a blockchain, auctioned off or sold at a fixed price on an NFT marketplace, and “stored”in the buyer’s digital wallet. Smart contracts (self-executing contracts or lines of computer code on a blockchain) can mint NFTs or transfer them from one owner to another. In combination, blockchains and smart contracts are the backbone of the NFT ecosystem…

Despite substantial market growth over the past two years, NFTs are still relatively nascent. In their current form, NFTs have implications in a variety of policy areas:
– Consumer protection. There are a number of risks to consumers in the NFT ecosystem, and some NFT marketplaces and digital wallets lack basic features to protect consumers from fraud and misleading or deceptive practices.
– Financial regulation. Depending on the purpose and use of NFTs, some NFTs and NFT platforms may fall under existing financial regulatory regimes and definitions.
– Copyright and intellectual property. The relationship between NFTs and the legal ownership of digital or physical property is unclear. Some existing regulations may impact NFT markets.
– Energy and environmental. Both minting and selling NFTs require substantial amounts of energy, which has raised concerns about their environmental impact…(More)”.

Radical Friends: Decentralised Autonomous Organisations and the Arts

Curated on Posted on by Stefaan Verhulst

Book edited by Ruth Catlow and Penny Rafferty: “In recent years DAOs have been heralded as a powerful stimulus for experimentation to reshape new cultural value systems for interdependence, cooperation, and care. At a time when the mainstream artworld is focused on NFTs, this book refocuses attention toward DAOs as potentially the most radical blockchain technology for the arts, in the long term. Contributors engage with both past and emergent methodologies for building resilient and mutable systems for scale-free mutual aid. Collectively, the book aims to evoke and conjure new imaginative communities, and to share the practices and blueprints for the vehicles to get there…(More)”.

Decentralized Autonomous Organizations: Beyond the Hype

Curated on Posted on by Stefaan Verhulst

WEF Report: “Decentralized autonomous organizations are disrupting whole sectors. From finance to social networking to philanthropy, these code-driven, community-governed entities are changing the way we work. Yet these organizations also confront challenges of cybersecurity, governance, and regulatory uncertainty. The Crypto Impact and Sustainability Accelerator and Wharton Blockchain and Digital Asset Project have teamed up with an international group of crypto experts, civil society leaders, and builders to examine this nascent, but critical, emerging form…(More)”.

Are blockchains decentralized?

Curated on Posted on by Stefaan Verhulst

Trail of Bits report: “Blockchains can help push the boundaries of current technology in useful ways. However, to make good risk decisions involving exciting and innovative technologies, people need demonstrable facts that are arrived at through reproducible methods and open data.

We believe the risks inherent in blockchains and cryptocurrencies have been poorly described and are often ignored—or even mocked—by those seeking to cash in on this decade’s gold rush.

In response to recent market turmoil and plummeting prices, proponents of cryptocurrency point to the technology’s fundamentals as sound. Are they?

Over the past year, Trail of Bits was engaged by the Defense Advanced Research Projects Agency (DARPA) to examine the fundamental properties of blockchains and the cybersecurity risks associated with them. DARPA wanted to understand those security assumptions and determine to what degree blockchains are actually decentralized.

To answer DARPA’s question, Trail of Bits researchers performed analyses and meta-analyses of prior academic work and of real-world findings that had never before been aggregated, updating prior research with new data in some cases. They also did novel work, building new tools and pursuing original research.

The resulting report is a 30-thousand-foot view of what’s currently known about blockchain technology. Whether these findings affect financial markets is out of the scope of the report: our work at Trail of Bits is entirely about understanding and mitigating security risk.

The report also contains links to the substantial supporting and analytical materials. Our findings are reproducible, and our research is open-source and freely distributable. So you can dig in for yourself.

Key findings

  • Blockchain immutability can be broken not by exploiting cryptographic vulnerabilities, but instead by subverting the properties of a blockchain’s implementations, networking, and consensus protocols. We show that a subset of participants can garner undue, centralized control over the entire system:
    • While the encryption used within cryptocurrencies is for all intents and purposes secure, it does not guarantee security, as touted by proponents.
    • Bitcoin traffic is unencrypted; any third party on the network route between nodes (e.g., internet service providers, Wi-Fi access point operators, or governments) can observe and choose to drop any messages they wish.
    • Tor is now the largest network provider in Bitcoin; just about 55% of Bitcoin nodes were addressable only via Tor (as of March 2022). A malicious Tor exit node can modify or drop traffic….(More)”

Governance and societal impact of
blockchain-based self-sovereign identities

Curated on Posted on by Stefaan Verhulst

Paper by Rachel Benchaya Gans, Jolien Ubacht, and Marijn Janssen: “Traditionally, governments and companies store data to identify persons for services provision and interactions. The rise of self-sovereign identities (SSIs) based on blockchain technologies provides individuals with ownership and control over their personal data and allows them to share their data with others using a sort of “digital safe.” Fundamentally, people have the sole ownership of their identity data and control when and how it is shared, protecting their privacy. As these data need to be validated to be trusted, they may become a more important data source for digital information sharing and transactions than the formal source of identity controlled by governments. Furthermore, SSIs can be used for interacting digitally with any organization. These developments change the relationship between government, companies, and individuals. We explore information sharing and governance in the digital society using blockchain-based SSIs. In addition, the impact of SSIs on data storage in the digital world is assessed. Technology enactment might result in no greater control or privacy and might only reinforce current practices. Finally, we argue that regulation and a combination of centralized and decentralized governance are still required to avoid misuse and ensure that envisaged benefits are realized…(More)”.

How We Can Encode Human Rights In The Blockchain

Curated on Posted on by Stefaan Verhulst

Essay by Nathan Schneider: “Imagine there is a new decentralized finance app quietly spreading around the world that’s like a payday lender from hell. Call it DevilsBridge. Rather than getting it from the App Store, you access its blockchain contracts directly, using a Web browser with a crypto-wallet plugin. DevilsBridge provides small loans in cryptocurrency that “bridge” people to the next paycheck. The interest rates are far below those of conventional payday lenders, which is life-changing for many users.

But if the payments go unpaid, they grow. They balloon. They reach multiples upon multiples of the principal. As time goes on, pressure ratchets up on borrowers, who become notorious for undertaking desperate, violent crimes to pay back their exorbitant debts. The deal, after all, is that if a debt reaches the magic threshold of $1 million, the debtor becomes a target. A private market of poison-dart-shooting drones receives a bounty to assassinate the mega-debtors.

Anywhere there are laws, of course, this is all wildly illegal. But nobody knows who created DevilDAO, the decentralized autonomous organization that operates DevilsBridge, or who its members are. The identities of the drone owners also hide behind cryptographic gibberish. Sometimes local police can trace the drones back to their bases, or investigators can trace a DevilDAO member’s address to a real person. But in most places where the assassinations happen, authorities are ill-equipped for airborne chases or scrutinizing blockchain analytics.

This may sound like a cartoonish scenario, but it’s freshly plausible thanks to the advent of decentralized, autonomous systems on blockchains. Ethereum co-founder Vitalik Buterin jokingly nodded to such dystopian possibilities in early 2014, when he listed possible uses for his proposed blockchain, from crop insurance to decentralized social networks — or perhaps, he said as he walked away from the mic, it could allow for the creation of Skynet, the robot intelligence in the “Terminator” movies that tries to exterminate the human race.

The potential for blockchain-enabled human-rights abuses is real. At the same time, these technologies introduce new ways of encoding and enforcing rights. Imagine the blockchain that DevilsBridge runs on introduces a software update. It bans any smart contract that kills humans. An anonymous investigator presents evidence of what the app is doing, and an anonymous jury confirms its validity; instantly, the contracts for DevilsBridge and DevilDAO no longer function…(More)”.

Blockchain: Novel Provenance Applications

Curated on Posted on by Stefaan Verhulst

CRS Report by Kristen E. Busch: “Blockchain, generally, is a database technology that records and stores information in blocks of data that are linked, or “chained,” together. Data stored on a blockchain are continually shared, replicated, and synchronized across the nodes in a network—individual computer systems or specialized hardware that communicate with each other and store and process information. This system enables tamper-resistant record keeping without a centralized authority or intermediary.

There are multiple types of blockchains, and, depending on the type, recorded data may be accessible to all users or only a designated subset. All blockchains share common characteristics, including decentralization (i.e., no centralized authority), immutability (i.e., the blockchain records are unalterable), and pseudonymity (i.e., how users’ real-world identities are handled). Certain blockchain types may offer greater levels of decentralization and pseudonymity than others. New blockchain applications, such as smart contracts, non-fungible tokens, and decentralization autonomous organizations, may automate processes or replace intermediaries in a variety of fields. Recent developments in blockchain governance protocols and consensus mechanisms have raised concerns about the environmental impact, oversight, and accountability of blockchain networks…

The United States is a hub for private-sector blockchain development, and many states and federal agencies are experimenting with novel blockchain provenance applications,including the Food and Drug Administration and Department of Treasury. Proponents claim that blockchain can increase transparency and efficiency in many fields by enabling auditable and immutable recordkeeping. However, there are equally significant concerns.

Blockchain technologies are maturing and fully developed use cases outside of the financial sector are relatively limited. In some applications, blockchain technologies can add unnecessary complexity compared with using conventional databases or other alternatives. The technology may also pose security and privacy risks if sensitive information is permanently recorded on a blockchain, encryption algorithms are broken, smart contracts malfunction, or digital wallets and other blockchain applications are hacked.

Some blockchains also use energy-intensive processes to validate transactions, which can consume as much energy as small nations. Individual states have passed legislation or established initiatives to develop, incentivize, and regulate blockchain technologies. Some states have taken vastly different approaches to blockchain technologies, so the state-level regulations that do exist vary widely. A handful of federal agencies have released guidance on blockchain technologies in specific sectors, such as finance, but there is little guidance for blockchain applications in other fields, such supply chain logistics, identity credentialing, or intellectual property and asset registration. In the meantime, China and the European Union have invested heavily in blockchain technologies and developed their own respective regulatory frameworks, so international regulations may also conflict with one another…(More)”.

Rehashing the Past: Social Equity, Decentralized Apps & Web 3.0

Curated on Posted on by Stefaan Verhulst

Opening blog by Jeffrey R. Yost of new series on Blockchain and Society: “Blockchain is a powerful technology with roots three decades old in a 1991 paper on (immutable) timestamping of digital content. This paper, by Bellcore’s Stuart Haber and W. Scott Stornetta, along with key (in both senses) crypto research of a half dozen future Turing Awardees (Nobel of computer science–W. Diffie, M. Hellman, R. Rivest, A. Shamir, L. Adleman, S. Micali), and others, provided critical foundations for Bitcoin, blockchain, Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs).  This initial and foundational blog post, of Blockchain and Society, seeks to address and analyze the history, sociology, and political economy of blockchain and cryptocurrency. Subsequent blogs will dive deeper into individual themes and topics on crypto’s sociocultural and political economy contexts….(More)”.