Periodic Reporting for period 4 - BLOCKCHAINSOCIETY (The Disrupted Society: mapping the societal effects of blockchain technology diffusion)
Período documentado: 2022-07-01 hasta 2023-12-31
Blockchain technologies were subject to much hype and a substantial level of disappointment in the last few years. The project gave a fair and hype-free assessment of the technical innovations under the umbrella-term 'blockchain'. In particular, the project focused on the following application domains, and assessed their viability from a legal, sociotechnical, political and economic perspective:
- decentralization and censorship resistance networks
- self sovereign identity, identity provision, compliance with data protection and privacy regulation
- Intellectual property, copyrights, IP licensing
- value exchange, financial networks, alternative currencies, and their relationship with the fiat currency systems from a socio-economic and legal perspective
- trust production, trustworthiness of techno-social networks and infrastructures, both centralized and decentralized.
Our work is focusing on the boundary work between technical/engineering possibilities and affordances, the possibilities allowed by existing and new legal frameworks, and the socio-cultural, political and economic realities, which together shape the environment in which blockchain applications may fail or succeed. The main theoretical construct we focus on is trust in and trust by decentralized techno-social systems. We conclude that that the expectations around the revolutionary potential of the technology were exaggerated, and unfounded. The technology not only can be regulated (contrary to many suggestions earlier), but needs regulation in order to create certainty around its potential applications. Regulated blockchains however lose some of the novelty that would distinguish them from other, existing software applications. What is more, the technological design, in its current form stands in contrast with the expectations spelled out in applicable legal frameworks, making their effective use in these domains, such as data protection, privacy, or fintech, difficult and problematic.
- decentralization and censorship resistance networks
- self sovereign identity, identity provision, compliance with data protection and privacy regulation
- Intellectual property, copyrights, IP licensing
- value exchange, financial networks, alternative currencies, and their relationship with the fiat currency systems from a socio-economic and legal perspective
- trust production, trustworthiness of techno-social networks and infrastructures, both centralized and decentralized.
Our work is focusing on the boundary work between technical/engineering possibilities and affordances, the possibilities allowed by existing and new legal frameworks, and the socio-cultural, political and economic realities, which together shape the environment in which blockchain applications may fail or succeed. The main theoretical construct we focus on is trust in and trust by decentralized techno-social systems. We conclude that that the expectations around the revolutionary potential of the technology were exaggerated, and unfounded. The technology not only can be regulated (contrary to many suggestions earlier), but needs regulation in order to create certainty around its potential applications. Regulated blockchains however lose some of the novelty that would distinguish them from other, existing software applications. What is more, the technological design, in its current form stands in contrast with the expectations spelled out in applicable legal frameworks, making their effective use in these domains, such as data protection, privacy, or fintech, difficult and problematic.
We explored the following domains:
Blockchain and copyright, Digital currencies, Identity management, and Data management.
The summary of our findings is the following.
Blockchain and copyright
Our question in this domain was whether blockchains and smart contracts can disrupt the current way of how music and audiovisual works are registered, licensed, distributed, used and remunerated. We explored this in [1, 19, 36, 39] (numbers refer to the numbers in the publications section of the final report). We found that though it is theoretically possible to map copyrights to a metadata structure on blockchains, in practice this is incredibly complicated. What is more, the need to keep on-chain licensing information in sync with off chain licensing acts requires intermediaries which must keep track of licensing acts in both spaces. This beats the purpose of proposed disintermediation, while adds extra technical complexity. The NFT “revolution” does not serve as a useful case study for copyright related applications, as in most cases NFTs existed outside of the copyright regime, and when intellectual property related issues arose (such as misappropriation, unlicensed use, or other disputes), parties conferred to the protections provided to them by the traditional legal and institutional frameworks.
Digital currencies
We explored how digital currencies fit into the wider system of payment methods and systems in [11, 12, 15, 23, 27, 33, 34, 37]. We compared cryptocurrencies, fiat currencies, Central Bank Digital Currencies, and alternative money systems (such as local currencies): their regulatory compliance, use cases, associated risks, social and economic functions. We found that absent of proper regulation cryptocurrencies are purely speculative devices, irrespective of their ideological (libertarian, or communitarian) charge. The incoming MICA regulation, on the other hand, renders such crypto assets just one out of many, technologically complex, and high-risk financial instruments. We identified the platformization of payment infrastructures a much more relevant development for the future of money infrastructures than blockchains/cryptocurrencies.
Self-sovereign identities
We explored in depth whether users can and should be encouraged to keep all their personal data on their own devices, wallets, and exercise self-sovereignty vis-à-vis the state and the giants of surveillance capitalism in [2,6, 9,13, 14, 28, 29, 32, 38, 41]. We found that blockchain based storage/exchange of personal information is incompatible with the current GDPR and EIDAS regulations in the EU. Much touted tools, such as zero-knowledge proofs are unrelated to blockchains, and in any case, state institutions currently in charge of maintaining secure identities for citizens will always be necessary to provide a failsafe in identity management.
Data management
In light of the current European digital strategy, especially the Data and Data Governance Acts, we studied whether blockchains, fundamentally shared databases can serve as the underlying technological infrastructure for secure, safe, and trustworthy data sharing practices, and data intermediary institutions. We explored these questions in [7, 10, 21, 25, 26, 31, 35]. Our finding was that data sharing is first and foremost an organizational/governance question defined slightly differently in each domain it arises (such as health data, or open government data), and the technical properties of the blockchain systems are often antagonistic towards such domain-specific governance questions due to their design properties, such as immutability or anonymity.
Theory
In terms of the overarching theoretical frameworks, we did extensive work on two questions: trust and decentralization. Decentralization, as the underlying principle of blockchain based systems was explored in [3,4,17,20,30,40], where we explored how decentralization as a technological property, as an aspiration, as an ideology, and as an organizational form co-exist and interact with each other in the blockchain space. We also highlighted that technical decentralization efforts may be hindered by political, economic and governance dynamics, which inevitably lead to recentralization in various blockchain applications.
The second theoretical framework we built was around the trustworthiness of centralized vs decentralized techno-social systems, and the nature of trust produced by such systems. We systematically addressed various aspects of this question in [8, 16, 18, 22, 23, 24, 42]. We found that algorithmic safeguards of technology trustworthiness are in and by themselves insufficient. We also analyzed the nature of trust such systems produce in social, economic, and interpersonal relations, and found that the form of trust (or rather, trustlessness) which blockchains promote can be socially detrimental.
Blockchain and copyright, Digital currencies, Identity management, and Data management.
The summary of our findings is the following.
Blockchain and copyright
Our question in this domain was whether blockchains and smart contracts can disrupt the current way of how music and audiovisual works are registered, licensed, distributed, used and remunerated. We explored this in [1, 19, 36, 39] (numbers refer to the numbers in the publications section of the final report). We found that though it is theoretically possible to map copyrights to a metadata structure on blockchains, in practice this is incredibly complicated. What is more, the need to keep on-chain licensing information in sync with off chain licensing acts requires intermediaries which must keep track of licensing acts in both spaces. This beats the purpose of proposed disintermediation, while adds extra technical complexity. The NFT “revolution” does not serve as a useful case study for copyright related applications, as in most cases NFTs existed outside of the copyright regime, and when intellectual property related issues arose (such as misappropriation, unlicensed use, or other disputes), parties conferred to the protections provided to them by the traditional legal and institutional frameworks.
Digital currencies
We explored how digital currencies fit into the wider system of payment methods and systems in [11, 12, 15, 23, 27, 33, 34, 37]. We compared cryptocurrencies, fiat currencies, Central Bank Digital Currencies, and alternative money systems (such as local currencies): their regulatory compliance, use cases, associated risks, social and economic functions. We found that absent of proper regulation cryptocurrencies are purely speculative devices, irrespective of their ideological (libertarian, or communitarian) charge. The incoming MICA regulation, on the other hand, renders such crypto assets just one out of many, technologically complex, and high-risk financial instruments. We identified the platformization of payment infrastructures a much more relevant development for the future of money infrastructures than blockchains/cryptocurrencies.
Self-sovereign identities
We explored in depth whether users can and should be encouraged to keep all their personal data on their own devices, wallets, and exercise self-sovereignty vis-à-vis the state and the giants of surveillance capitalism in [2,6, 9,13, 14, 28, 29, 32, 38, 41]. We found that blockchain based storage/exchange of personal information is incompatible with the current GDPR and EIDAS regulations in the EU. Much touted tools, such as zero-knowledge proofs are unrelated to blockchains, and in any case, state institutions currently in charge of maintaining secure identities for citizens will always be necessary to provide a failsafe in identity management.
Data management
In light of the current European digital strategy, especially the Data and Data Governance Acts, we studied whether blockchains, fundamentally shared databases can serve as the underlying technological infrastructure for secure, safe, and trustworthy data sharing practices, and data intermediary institutions. We explored these questions in [7, 10, 21, 25, 26, 31, 35]. Our finding was that data sharing is first and foremost an organizational/governance question defined slightly differently in each domain it arises (such as health data, or open government data), and the technical properties of the blockchain systems are often antagonistic towards such domain-specific governance questions due to their design properties, such as immutability or anonymity.
Theory
In terms of the overarching theoretical frameworks, we did extensive work on two questions: trust and decentralization. Decentralization, as the underlying principle of blockchain based systems was explored in [3,4,17,20,30,40], where we explored how decentralization as a technological property, as an aspiration, as an ideology, and as an organizational form co-exist and interact with each other in the blockchain space. We also highlighted that technical decentralization efforts may be hindered by political, economic and governance dynamics, which inevitably lead to recentralization in various blockchain applications.
The second theoretical framework we built was around the trustworthiness of centralized vs decentralized techno-social systems, and the nature of trust produced by such systems. We systematically addressed various aspects of this question in [8, 16, 18, 22, 23, 24, 42]. We found that algorithmic safeguards of technology trustworthiness are in and by themselves insufficient. We also analyzed the nature of trust such systems produce in social, economic, and interpersonal relations, and found that the form of trust (or rather, trustlessness) which blockchains promote can be socially detrimental.
We are progressing beyond the state of the art in the following domains:
- identity provision, intersection of self-sovereign identity architectures, and GDPR
- financial privacy, and the trade-offs between financial regulation, and data protection and privacy in cryptocurrency applications
- trust mediation through technical systems, and the trustworthiness of trust mediators
- different (technical, legal) modes of data governance
In these fields the project produced novel, groundbraking research published in leading Q1, oftentimes d1 journals in law, computer science,
- identity provision, intersection of self-sovereign identity architectures, and GDPR
- financial privacy, and the trade-offs between financial regulation, and data protection and privacy in cryptocurrency applications
- trust mediation through technical systems, and the trustworthiness of trust mediators
- different (technical, legal) modes of data governance
In these fields the project produced novel, groundbraking research published in leading Q1, oftentimes d1 journals in law, computer science,