Reports

COALA’s Identity & Reputation Working Group focuses on the various challenges and opportunities of blockchain technologies at the critical intersection of privacy, data integrity, and security. This working group investigates different blockchain-based identity systems, including current credential management and access control systems, and analyzes these projects against existing regulations and policies for identity verification, and privacy issues regarding digital authentication.  

This working group has developed a thorough technical analysis of existing blockchain-based credential management and access control systems that provides: (1) overview of the state-of-the-art of technological advances in blockchain-based identity systems; (2) a technical benchmark in which various metrics can be applied across projects to assess the extent of “decentralization” of their underlying architecture; (3) in-depth analysis of each existing system’s architecture that enables the public to better understand how specific technical decisions bear on the inherent tradeoffs between usability, individual privacy, control, interoperability, and systemic security.

The group also focuses on the challenges and risks of leveraging blockchain technology for identity solutions and the security and privacy considerations that may need to be taken into account during the conception and development of these technical solutions. This group aims to elaborate a policy framework that contemplates (1) hard requirements mandated by law (2) policy analysis of tradeoffs between usability, individual privacy & systemic security; (3) best practices for the development and deployment of blockchain-based access control and credential management systems.

We live in a knowledge economy, a world where value creation is shifting away from moving atoms around, to moving bits around. The value in this economy comes from ideas, which are —by their very nature— inherently intangible. Intellectual Property (IP) laws provide a set of legal tools by which authors, artists and creators can manage rights over their intellectual creations. Managing IP includes claiming rights in a particular idea or expression, and transferring these rights to a third party, through an outright assignment or licensing of rights. The goal of this working group is to identify key areas in which blockchain technologies may be applied for the management of intellectual property, including the deployment of digital rights management systems, micropayments, and peer-to-peer content discovery or compensation systems. The working group also aims to investigate how blockchain technologies can be used to create alternative business models and viable structures to promote innovation and creativity without increasing artificial scarcity on digital assets.

This working group investigates the ways in which blockchain technologies can enable new organizational structures and distributed governance models, and how these could be used to “regulate” or “govern” the deployment of blockchain-based applications. This working group focuses on exploring and developing sense-making and decision-making tools, to building new paradigms of organizational structures and social system design.

We have identified three distinct areas to address:

Governance of the infrastructure

We investigate the mechanisms used to “regulate” or “govern” the deployment and operations of existing blockchain-based applications. We explore current implementations of blockchain-based governance systems, and investigate the pros and cons of on-chain vs off-chain governance systems. In particular, this group focuses on issues of recentralization and the invisible “soft power” inherent in structures where stakeholders and hierarchies are opaque. 

Governance by the Infrastructure

We investigate governance systems developed thus far to support the operations of DAOs: from plutarchy, to futarchy, to the new types of meritocratic organizations that operate via a distributed reputation system and analyse their advantages and drawbacks, especially with regard to the risk of power concentration and re-intermediation. This group also analyzes how governance systems optimize for particular outcomes in terms of decentralization, inclusive participation, speed of decision-making, efficiency, and scalability.

Hybrid Systems of On-Chain & Off-Chain Governance

Much of today’s discourse around governance of blockchain-based systems focuses inordinately on “decision-making” or “on-chain” governance, ignoring other critical facets of decentralized governance, e.g., sense-making, building common knowledge and legitimacy, and identifying the relevant pool of stakeholders. This working group analyzes the pros and cons of on-chain and off-chain governance mechanisms, and aims to elaborate hybrid systems that leverages automation for certain atomic governance functions, and enables human intervention where judgment is required. The goal is to build governance systems that allow for more democratic and participatory decision-making and coordination. 

COALA’s Regulation  Tech Working Group focuses on two goals: (1) to investigate and elaborate blockchain-based techno-legal tools and legal frameworks that deploy technological advances to support current regulatory and policy goals;  and (2) to explore how blockchain technologies can be specifically deployed for institutional governance.

Institutional Governance:

In this subgroup, we explore the spectrum of ways in which we can leverage blockchain technologies to address the growing deficit of accountability and trust in both public and private institutions by creating incorruptible systems. We have identified two ways in which this can be achieved:

Blockchain-Assisted Governance (ex-post governance mechanisms)

• Using blockchain technologies as a means to improve existing governance structures within an institution, by improving the transparency, auditability, and accountability of its operations.
• Integrating blockchain technologies in traditional governance systems: e.g. What are the various use cases of blockchain technology in corporate and institutional governance that can increase the transparency / trust / accountability of existing organizations?
• Using blockchains to improve the governance of existing institutions: e.g. Improving the transparency of governance structures; improving the verifiability / auditability of pledged actions, and increasing the efficiency / rigidity / of procedural rules via automation and self-execution.

Blockchain-based Governance (ex-ante governance mechanisms)

• Leveraging new opportunities that blockchain technologies provide for the establishment of a new operational layer for human interaction that can support, complement and perhaps replace current, less trustworthy governance structures.

• • Blockchain technology as a lower-level operational layer that establishes the rules and procedures that everyone must follow. In this context, the blockchain acts as the underlying framework on which the decision-making process is done.
  • However —without AI— technology is unable to make decisions. We thus maintain the need for an upper-level governance layer: e.g. Who has the right to make decisions? What is the weight of each participant in the system?  What are the power dynamics that can be found in the system? (Cf. Bitcoin: hashing power, TheDAO: plutocracy)
  • One important problem of market-driven governance models is the risk of centralization: e.g. What kind of governance systems can we implement on top of a blockchain-based system, in order to preserve the decentralized character of it? How to avoid the emergence of oligopolies?

The working group addresses these questions by investigating the use of blockchain technology and smart contracts for enhanced information security and institutional governance, with particular focus on the new opportunities for technological due process and institutional accountability that these technologies provide.

The goal is to identify key areas where smart contracts can outperform existing processes in traditional (legacy) institutions through the use and deployment of decentralized ledger technologies, transparent and tamper-resistant databases, multi-signatures, automated logic, and so forth.  Improvements include reduced transaction costs, increased efficiency, enhanced verifiability and auditability of transactions, and, more generally, a greater degree of transparency and accountability. 

The working group also aims to explore a new generation of security concerns that emerged in parallel with the use of blockchain technologies for distributing and decentralizing control. It does so by identifying and elaborating security standards and key management practices (key generation, storage, usage, access and compromise policies) for blockchain-based applications.

Techno-Legal Tools & Frameworks:

In this subgroup, we investigate and elaborate specific regulatory and policy frameworks for blockchain technology that will balance promote innovation and growth whilst preventing systemic risk and protecting consumers and entrepreneurs against economic harm and illegal activity.  The working group addresses questions in the following macro areas:

• What is the purpose of existing regulations and what are the specific methods used to address specific risk and concerns?
• To what extent can we rely on technical and contractual means to deploy a system of internal validation and self-regulation that complies with policy goals underlying current sectoral regulations?
• Under what circumstances are consumer protection requirements (e.g. safety and soundness) met by technological advances (e.g., blockchain-based applications) in the context of organizational governance?
• How can decentralized identity and reputation frameworks be leveraged to increase trust and reduce privacy harm for Internet-based companies?
• To what extent can blockchain technologies be deployed to achieve regulatory and policy goals?
• How can we leverage blockchain-based solutions to evolve legal and regulatory frameworks?

The COALA Institutional Governance Working Group explores the spectrum of ways in which we can leverage blockchain technologies to address the growing deficit of accountability and trust in both public and private institutions by creating incorruptible systems. This can be done in two ways:

Blockchain-Assisted Governance (ex-post governance mechanisms)

• Using blockchain technologies as a means to improve existing governance structures within an institution, by improving the transparency, auditability, and accountability of its operations.
• Integrating blockchain technologies in traditional governance systems: e.g. What are the various use cases of blockchain technology in corporate and institutional governance that can increase the transparency / trust / accountability of existing organizations?
• Using blockchains to improve the governance of existing institutions: e.g. Improving the transparency of governance structures; improving the verifiability / auditability of pledged actions, and increasing the efficiency / rigidity / of procedural rules via automation and self-execution.

Blockchain-based Governance (ex-ante governance mechanisms)

• Leveraging new opportunities that blockchain technologies provide for the establishment of a new operational layer for human interaction that can support, complement and perhaps replace current, less trustworthy governance structures.

• • Blockchain technology as a lower-level operational layer that establishes the rules and procedures that everyone must follow. In this context, the blockchain acts as the underlying framework on which the decision-making process is done.
  • However —without AI— technology is unable to make decisions. We thus maintain the need for an upper-level governance layer: e.g. Who has the right to make decisions? What is the weight of each participant in the system?  What are the power dynamics that can be found in the system? (Cf. Bitcoin: hashing power, TheDAO: plutocracy)
  • One important problem of market-driven governance models is the risk of centralization: e.g. What kind of governance systems can we implement on top of a blockchain-based system, in order to preserve the decentralized character of it? How to avoid the emergence of oligopolies?

The working group addresses these questions by investigating the use of blockchain technology and smart contracts for enhanced information security and institutional governance, with particular focus on the new opportunities for technological due process and institutional accountability that these technologies provide.

The goal is to identify key areas where smart contracts can outperform existing processes in traditional (legacy) institutions through the use and deployment of decentralized ledger technologies, transparent and tamper-resistant databases, multi-signatures, automated logic, and so forth.  Improvements include reduced transaction costs, increased efficiency, enhanced verifiability and auditability of transactions, and, more generally, a greater degree of transparency and accountability.

The working group also aims to explore a new generation of security concerns that emerged in parallel with the use of blockchain technologies for distributing and decentralizing control. It does so by identifying and elaborating security standards and key management practices (key generation, storage, usage, access and compromise policies) for blockchain-based applications.

The COALA Smart Contracts Working Group investigates the legal validity and enforceability of smart contracts and the need for alternative enforcement or adjudication mechanisms.

In particular, it focuses on two essential aspects: the definition of a smart contract and its enforceability within existing regulatory frameworks. The group also explores the correlation (if any) between smart contracts and legal contracts, along with the various mechanisms that can be used in order to “glue” these two things together into a mixed (legal and technical) contract. The group looks at examples of existing smart contracts to understand what are the characteristics that will ensure their validity and enforceability under the law.

Specifically, this working group brings together various initiatives aiming at bridging the blockchain world and legal world (e.g. Lexon, Mattereum, DAOlink, Aragon). Currently, the group is working on an overview of the key challenges with regard to the validity and enforceability of smart contracts under different legal jurisdictions, with particular focus on the issues related to the transnational character of these contracts. 

Many of the contributors to this working group also collaborate in the Alegality Working Group, where these concepts are being implemented into a “legal API” that combines smart contracts and legal theory to create “gateways” between blockchain-based systems and the physical world.

COALA’s Crypto-equity Working Group investigates the technical implementation and legal viability of new governance structures based on the issuance and distribution of digital tokens. Blockchain technologies provide new ways of issuing secure and tradable digital tokens on a distributed network. Although these tokens are often described as cryptocurrency, they have many other potential applications, ranging from traditional stocks and securities, claims to an underlying property title, proof of ownership over specific assets, voting rights or other privileges within an organization, and many other use-cases. As a general rule, these digital tokens can be classified into the following categories:

• Shares in a project that serve as a function similar to stock, allowing participation in the decision making and participation in financial upside (i.e. BitShares)
• Tokens which represent ownership in something other than a company, for example intellectual property (i.e. Ascribe)
• Product tokens which are redeemable for a specific product consumable in the context of a decentralized technology (i.e. Ethereum’s gas)
• Access tokens which provide access to a particular set of rights or benefits within a network, similar to membership (i.e. TheDAO)

Some of the aforementioned use-cases might subsist outside of existing legal regimes. Indeed, the legal system is currently lagging behind these new technological developments and does not properly account for the granularity of these digital tokens, which currently stand in the gray-area of the law. Legal uncertainty might dissuade people from adopting these technologies, thus discouraging the deployment of new applications that could be highly beneficial to society.  Hence, while the need for a legal reform is pressing, for the time being, it is important to understand how we can benefit from the opportunities provided by blockchain technologies in a way that remains compliant with the law.

The purpose of this working group is to examine the problems and potential of blockchain-based applications from the standpoint of the existing legal infrastructure. In particular, it hopes to answer the following questions:

• Under what circumstances should tokens issued in the above categories fall under existing regulations? For examples, securities as defined by the 1933 Securities Act.
• Under what circumstance can new legal infrastructure be developed which accommodates these tokens? For example, how can individual tokens be linked to legally enforceable intellectual property.
• To what extent can we rely on technical and contractual means to deploy a system of internal validation and self-regulation that complies with current sectoral regulations?

The Blockchain Economics Working group is composed of economists, cryptographers, and protocol architects. As an interdisciplinary group, it aims to develop thought leadership in the emerging field of “cryptoeconomics” —a formal discipline that focuses on the design of blockchain-based protocols for the production, distribution and consumption of goods and services in a decentralized digital economy.

As their name indicates, DAOs are not controlled by any given entity; they rely on smart contracts to establish a set of blockchain-based rules for the governance of an organization, along with a system of tokens that represent some kind of equity (or crypto-equity) in these organizations. As such, DAOs make it possible for people to benefit from pooling resources into a centralized system, without the traditional drawbacks of centralized institutions and hierarchical decision-making. Their governance structure obviate the asymmetrical power dynamics characteristic of centralized institutions, thus significantly reducing the potential for corruption, while increasing transparency and accountability of the organization.

The aim of this working group is to investigate whether DAOs can be deployed as a proxy between a variety of individuals who might benefit from various forms of cooperation or collaboration with one another, but who do not want to rely on a centralized trusted authority. The working group also focuses on the risks that might emerge from the establishment of cryptographically-enforced relationships that might be too rigid and unresponsive for the evolving needs of individuals — which have been, until now, always delegated to other individuals.

Many of the contributors to this working group also collaborate in the Alegality Working Group, where these concepts are being implemented into a “legal API” that act as interoperable “gateways” between blockchain-based systems and the physical world.

The decentralized space continues to grow rapidly, enabling new organizational structures, power dynamics, social interaction and human coordination. It is a new frontier, at the forefront of which we have a responsibility to facilitate the growth of a culture of healthy social and ethical norms that foster individual and collective responsibility. This working group focuses on the following macro issues:

• • What kind of values can we bake into a blockchain-based system?
  • What kind of ethical norms, if any, do we hold innovators in the field to around “trustless” and “self-executing” technologies
  • How do we ensure that these technologies empower people, as opposed to replicating or accelerating the current inequalities and power dynamics?

We work under the belief that “Taking individual responsibility facilitates collective responsibility” (Vlad Zamfir)

COALA’s Identity and Privacy Working Group focuses on the fundamental problem of trust on a trustless Internet. It aims at identifying the various challenges and opportunities of blockchain technologies to the identity/privacy dilemma, elaborating potential interim solutions (e.g., federated KTC) and sketch out a variety of issues related to the developing world (e.g., persistent identity and secure land records) which may require distinct treatment.In addition, the working group explores ways in which blockchain technologies may be applied to existing AML/CTF frameworks. To that end, the group has conducted an exhaustive survey and impact assessment of current AML/CTF policies, as applied to emergent blockchain technologies.

The COALA Alegality Working Group convenes a deeply interdisciplinary group of experts from law, social sciences, and blockchain architecture and protocol design, to explore the challenges and opportunities faced by traditional organizations and bounded jurisdictions as they interact with decentralized networks and autonomous blockchain-based code within global infrastructures.

At its heart, the Alegality WG addresses fundamental questions of interoperability between, on one hand, centralized models defined by borders and identifiable spheres of power, and on the other, emergent decentralized networks characterized by diffuse, soft power and borderless participation.

The Alegality WG focuses on developing evolutionary legal frameworks and building techno-legal mechanisms – a “legal API” – that will enable DAOs and blockchain-based systems to participate and interoperate with traditional systems and legacy rules in the physical space.

Currently, the Alegality Working Group tracks the following issues:

• • Legal domains that intersect DAOs, i.e. areas of law should be prioritized for research and translation for upcoming launches of DAOs (legal formation, contract, property, liability, tax)

• Supporting interactions between DAOs and the legal world:

• • Identifying the limitations of current forms of interactions with the legal world
  • Elaborating new mechanisms e.g., decentralized insurance, contract and property APIs
• Legal Avatars – creating legal representatives, surrogates, delegates, and/or custodians for various functions of blockchain-based systems
• DAO Governance – enforcement mechanisms and underlying ethics of code-based rules
• International Conflict of Laws and their application to the jurisdictional space between global, decentralized blockchain “jurisdictions”