The European GDPR imposes powerful obligations on custodians of personal data to handle that data respectfully. Among the obligations is the right of the persons concerned to demand deletion of the data when no longer needed, and the right to receive a copy in structured format.  The logic of this leads to a P2P data model.  Business and political interests suggest that there is no reason for Europe to pull back when insisting that this logic be applied to its logical end – data, computing and control at the edge rather than the center.  Europe is sensitive to the dangers of too much information being aggregated and European companies have not been winners in the race to create and monetize large aggregations.

Some may doubt whether a system of technologies and actors can exist in which most of the benefits of hub-based transacting can be enjoyed even without massive aggregations of data.

IoT shows the way.  A really functional system of “things” working with one another requires that they be able to do so “locally” – by communicating either directly with one another or via an intermediary who is nearby.  An IoT-equipped furnace must be able to authenticate an IoT-thermostat, verify that the thermostat is who it claims to be and has authority to direct the furnace.  The furnace also needs to verify that the thermostat has the funds – some kind of balance of some kind of currency – and transfers the funds to the account of the furnace, so the furnace can pay for the fuel.  All this needs to be able to occur even if neither furnace nor thermostat can communicate with the outside world.  The internet connection might be down.  For security reasons, too, it is better if the information doesn’t leave the house, except as needed to coordinate with others.

The problem of the thermostat and furnace of course can be scaled up.  The parties might be two ships or two banks.  Their need for action might be less urgent, but ideally they would want the same reliability in dealing with others as the thermostat and furnace enjoy. Their problem is technically less demanding, a lesser-included case.

Governments might want the same independence for their operations and for their economies, companies and citizens.  The technology that solves the problem of IoT interactions can assure the independence of communities, including even countries.

 

 

On Friday, March 3, I attended a conference organized by the Stanford Technology Law Review whose title was “Regulating Disruption.”Foot Note

“Disruption” is intended in the Silicon Valley sense of “innovation.” With only a mild stretch, “regulating disruption” can be parsed two ways:

The disruption of regulation, and
The regulation of disruptive activities.

The two parsings join in at least one place:

Effective regulation of disruptive activities will require disrupting regulation.

Digging into this a bit:

Innovative activities can push boundaries, upset relationships, newly expose or aggregate weaknesses, and otherwise cause mayhem.

Innovative activities can be broadly banned, at least in some places and for some time.  But some innovations are genuinely helpful and desired, and some arrive uninvited.

Ideally, a regulatory system would respond rapidly and narrowly to curb the most deleterious effects, and take fuller shape as knowledge of the advantages and dangers accumulates. Regulation would distinguish among different situations and  would respond to “experience.”

The open source community’s iterative system of text sharing can help.  Let’s start with a look at the structure of regulation.  Regulation has layers, including:

  • Quasi global – treaties and community rules such as the EU
  • National – legislation, regulation and precedents
  • Local – like national, and often multi-layered – e.g., state, county, municipality or region, department, city.
  • Trade group or marketplace – membership in an association or market may impose duties, which may be expressed as rules or contracts.
  • Insurers, brokers and others who expect or require conformance.
  • Peer-to-peer agreements and forms – documents “signed” by pairs (or groups) of persons. These are often intermediated by counsel.  Legal departments and law firms nudge transactions into patterns by their forms and expectations.

CommonAccord is addressed to the bottom layer – P2P documents such as contracts, permits, organizational documents. Modularity and reuse as practiced by software developers permits radical improvements in efficiency, transparency and precision. Sharing those materials via git (and GitHub) allows bottom-up quasi-codification that can rise up the chain to wider adoption.  The dynamic is not novel, there are many forms that currently work as quasi-standards, but the new tools can make it radically more efficient, rapid and flexible.

Handling legal text as “prose objects” allows:  i) very efficient use of standards, ii) full flexibility of customization and iii) organic migration of customizations into standards.

In the 19th Century, the common law courts, overwhelmed by the complexities of contract arrangements caused by the industrial revolution, and influenced by economic thinking, declared themselves incompetent to judge the merits of those arrangements and retreated to formalisms such “offer,” “acceptance,” and “plain meaning.” The assumption was that parties were in the best position to judge the fairness and best structure of relationships.  Through experience and diligence, parties in markets would self-regulate. Reality fell short of the theory, in some respects quite substantially.   The consequences of that abstention and wave of innovation are still being worked out in contract practice.

The collaboration methods of the open source software community provide a way to bring reality closer to the theory of parties wisdom embedded in contracts.

Foot Note:  The subtitle of the conference may resolve the dual meanings of the title. The full title is  “Regulating Disruption: Responding to Emerging Technologies” .

The codification of legal and a simple peer-based approach to transacting may be the way that civil society exercises control over the coming, concentrated and largely automated system of production.  Codified legal could be the lever, the “place to stand,” for efforts such as The Future of Life that seek to move (preserve) the earth.

Santi Siri asked about “understanding.”  It appears that the issue of collaborative legal codification is solved, but how to scale understanding by non-experts?

The short answer might be that codification allows the inexperienced to follow paths beaten by the more expert crowd.

Here is a longer, layered answer.

Ian Grigg (@iang_fc) has written an excellent piece on smart contracts, blockchains, Ricardian Contracts,  the role of legal, etc.  It is long, with a lot of history, and brings the discussion back to basics of an ideal transacting system.  In a nutshell: Ian Grigg’s Ricardian contracts and digital assets prehistory – an interview by Anthony Lewis of R3.

Ian mentions the link between Ricardian Contracts and CommonAccord in The Sum of All Chains.

The core is two “triples.”

Data Model Triple

The first triple is the data model.  He expresses the order differently, but it is the same as: 1) a record with parameters, 2) some legal prose, and 3) some software code.  We express this as two jumps:

  1. A record has parameters and references its context.
  2. The context includes i) prior step and other materials, ii) prose and iii) code.

Record and Context

The technical reader will notice that the linkage among records is a semantic triple.

Triple Entry

The second triple is Triple Entry bookkeeping – a somewhat confusing phrase IMHO, but simple idea.  To have a good system of record (proof), the minimum viable configuration is for there to be three copies of the transaction.  Mine, yours, and one kept in trusted hands.   Just two copies is not enough because one of us could alter theirs, and make a false claim.  How could an arbiter resolve that argument?  By looking into the eyes of each party?  Eye-gazing can be reduced if there is a third copy in the hands of someone whose reputation is more important to them than their stake in the transaction.

But the additional copy creates a confidentiality and data security problem, and this gets bigger with each additional copy.   So the ideal is one copy for me, one for you and one in a trusted place.  The confidentiality and security problem can be further reduced by writing just the hash of the record to a trusted place.

Generalizing this further, is is something like the number of parties plus 1.  Parties +1  copies.  Parties +a hash.

I find the “triple entry” to be confusing because I understand the “double” in “double entry” bookkeeping to refer to the left-side and right-side of a T account.  It seems that the triple (and therefore double) of Triple Entry refers to the fact that each party keeps a T account, with mirroring entries vis-à-vis the other party’s T account. https://en.wikipedia.org/wiki/Debits_and_credits#T-accounts

There are lots of reasons to want a peer-based transacting system.  As a starter – it would greatly reduce the complexity of managing our affairs, since a peer-based system would be consistent.   It would reduce the cost, since a peer system would necessarily be or become open source.  It would allow a far broader group of contributors to participate in making things better.  It could reduce the concentration of information (and power).  Done well, it could greatly increase data security by eliminating the need to share data broadly.

Europe has not been the home of as many of the internet winners as other areas.  It has, of course, been the home of many of the most impactful technologies, such as the web (Berners-Lee) and Linux (Torvalds).  And many of the ideas and people who built the internet eco-system started someplace and found their their way to Silicon Valley, Seattle, Boston, Austin, etc.

In a piece here, we argue that Europe, perhaps precisely because it has been more a source of ideas, data and customers than an home for hubs, may well lead the P2P transformation.  This will also be part of a transformation of the “business model” of much of the web from a for-profit model to a for-purpose model.  This is an extension of the dynamic of open source.

EU-e-Commerce

Added a page for the overall thesis – there should be a Center for Decentralized Law (CDL) or Center for Decentralized Governance (CDG) – or perhaps Center for Governance.  In any event, a not-for-profit, public benefit organization that is the trustee for smart contract materials, including legal code.  Center for Decentralized Governance