Decentralized Autonomous Organizations: Beyond the Hype

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?

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

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

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

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

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)”.

Ethiopia’s blockchain deal is a watershed moment – for the technology, and for Africa

Iwa Salami at The Conversation: “At the launch of bitcoin in 2009 the size of the potential of the underlying technology, the blockchain, was not fully appreciated.

What has not been fully exploited is the unique features of blockchain technology that can improve the lives of people and businesses. These include the fact that it is an open source software. This makes its source code legally and freely available to end-users who can use it to create new products and services. Another significant feature is that it is decentralised, democratising the operation of the services built on it. Control of the services built on the blockchain isn’t in the hands of an individual or a single entity but involves all those connected to the network.

In addition, it enables peer to peer interaction between those connected to the network. This is key as it enables parties to transact directly without using intermediaries or third parties. Finally, it has inbuilt security. Data stored on it is immutable and cannot be changed easily. New data can be added only after it is verified by everyone in the network.

Unfortunately, bitcoin, the project that introduced blockchain technology, has hogged the limelight, diverting attention from the technology’s underlying potential benefits….

But this is slowly changing.

A few companies have begun showcasing blockchain capabilities to various African countries. Unlike most other cryptocurrency blockchains which focus on private sector use in developed regions like Europe and North America, their approach has been to target the governments and public institutions in the developing world.

In April the Ethiopian government confirmed that it had signed a deal to create a national database of student and teacher IDs using a decentralised digital identity solution. The deal involves providing IDs for 5 million students across 3,500 schools which will be used to store educational records.

This is the largest blockchain deal ever to be signed by a government and has been making waves in the crypto-asset industry.

I believe that the deal marks a watershed moment for the use of blockchain and the crypto-asset industry, and for African economies because it offers the promise of blockchain being used for real socio-economic change. The deal means that blockchain technology will be used to provide digital identity to millions of Ethiopians. Digital identity – missing in most African countries – is the first step to real financial inclusion, which in turn has been shown to carry a host of benefits….(More)”.

Blockchain and Citizenship: Uneasy Bedfellows

Paper by Oskar Josef Gstrein and Dimitry Kochenov: “…Distributed Ledger Technology can be an effective tool for resource distribution. As individuals and organisations explore innovations which allow to redefine the rules of access, possession and sharing these developments also become important for the future of self-determination. Demonstrated through credit scoring and ‘social credit systems’, the identity of an individual is intertwined with resource access, possession and transferability. A key pre-requisite for participation is formal legal status, which translates to citizenship. However, many proponents of Distributed Ledger Technology focus predominantly on technological features and capabilities, which might enable the implementation of concepts such as decentralised governance, ‘self-sovereign identity’ management, and trust-less transactions based on ‘zero-knowledge proof’. Nevertheless, such narrow consideration overlooks existing legal and political realities. Considering the lessons learned from citizenship, it becomes questionable whether Blockchain as player in the area of identity management will ultimately increase human dignity, or further manifest traditional patterns of discrimination and inequality….(More)”.

The Next Generation Humanitarian Distributed Platform

Report by Mercy Corps, the Danish Red Cross and hiveonline: “… call for the development of a shared, sector-wide “blockchain for good” to allow the aid sector to better automate and track processes in real-time, and maintain secure records. This would help modernize and coordinate the sector to reach more people as increasing threats such as pandemics, climate change and natural disasters require aid to be disbursed faster, more widely and efficiently.

A cross-sector blockchain platform – a digital database that can be simultaneously used and shared within a large decentralized, publicly accessible network – could support applications ranging from cash and voucher distribution to identity services, natural capital and carbon tracking, and donor engagement.

The report authors call for the creation of a committee to develop cross-sector governance and coordinate the implementation of a shared “Humanitarian Distributed Platform.” The authors believe the technology can help organizations fulfill commitments made to transparency, collaboration and efficiency under the Humanitarian Grand Bargain.

The report is compiled from responses of 35 survey participants, representing stakeholders in the humanitarian sector, including NGO project implementers, consultants, blockchain developers, academics, and founders. A further 39 direct interviews took place over the course of the research between July and September 2020….(More)”.

Blockchain Chicken Farm: And Other Stories of Tech in China’s Countryside

Book by By Xiaowei R. Wang: “In Blockchain Chicken Farm, the technologist and writer Xiaowei Wang explores the political and social entanglements of technology in rural China. Their discoveries force them to challenge the standard idea that rural culture and people are backward, conservative, and intolerant. Instead, they find that rural China has not only adapted to rapid globalization but has actually innovated the technology we all use today. From pork farmers using AI to produce the perfect pig, to disruptive luxury counterfeits and the political intersections of e-commerce villages, Wang unravels the ties between globalization, technology, agriculture, and commerce in unprecedented fashion. Accompanied by humorous “Sinofuturist” recipes that frame meals as they transform under new technology, Blockchain Chicken Farm is an original and probing look into innovation, connectivity, and collaboration in the digitized rural world.

FSG Originals × Logic dissects the way technology functions in everyday lives. The titans of Silicon Valley, for all their utopian imaginings, never really had our best interests at heart: recent threats to democracy, truth, privacy, and safety, as a result of tech’s reckless pursuit of progress, have shown as much. We present an alternate story, one that delights in capturing technology in all its contradictions and innovation, across borders and socioeconomic divisions, from history through the future, beyond platitudes and PR hype, and past doom and gloom. Our collaboration features four brief but provocative forays into the tech industry’s many worlds, and aspires to incite fresh conversations about technology focused on nuanced and accessible explorations of the emerging tools that reorganize and redefine life today….(More)”.