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Blockchain and the governance of algorithms

Geschreven door Ben van Lier - 29 juni 2017

Ben van Lier
Governance is the process of governing a collective unit such as a city, an organisation or a group of people and their activities. The governance of such a collective unit or system is made up of a set of rules and regulations that is developed to optimise the functioning of the collective unit or system. The development and application of a blockchain is based on collaboration between people and the rules, algorithms (such as paxos, ripple, etc.) and software (bitcoin, ethereum) they have developed and which enable the independent implementation of these rules and regulations by computers. The whole of man-made rules, algorithms, software and computers determines the functioning of the blockchain.

Hissam et al.[1] refer to such a combination as a socio-adaptive system: “systems in which humans and computational elements interact as peers.” According to Hissam et al., the properties of the whole of a system such as the blockchain develop: “from the properties of both types of elements and the nature of their collective reaction in their environment.” Communication and interaction between people, algorithms and computers creates a new whole, such as a blockchain, which shapes new applications such as cryptocurrencies, smart contracts and smart systems with joint decision-making capabilities. At the same time, however, this throws up all kinds of new issues, such as how to organise the governance of the new whole of a blockchain.

Algorithms

In 1927, the philosopher Heidegger [2] described the way in which we, as human beings, approach phenomena in our world. In Heidegger’s theory, a phenomenon is something that presents itself to us without this “something” necessarily being an object in terms of structure and inner coherence. That which we humans approach as a whole should, in his view, rather be seen as ‘equipment’, i.e. a kind of tool that cannot actually be observed but does give meaning to what we use the equipment for. Interconnected equipment is, according to Heidegger, always connected with other equipment. Together, the equipment shapes what we see as an object, as well as the functionality of this object, or we shape what we perceive as reality.

In Heidegger’s view, things are never stand-alone or revealed to us for the first time. They are, in fact, produced by structures and interrelations of that which we perceive or experience in reality. Heidegger’s equipment concept is similar to that of algorithms and software that people use nowadays to construct blockchains and shape and use objects such as cryptocurrencies or smart contracts. A blockchain is not something that is entirely new, but is rather a newly constructed structure, an interconnection of modern tools in the form of algorithms, software and computers.

Finn [3] (2017) defines an algorithm as a kind of recipe: “an instruction set, a sequence of tasks to achieve a particular calculation or result, like the steps needed to calculated a square root to tabulate the Fibonacci sequence.” A constructed algorithm delivers, in his view, a reliable result when realised within a predefined time span by the computers running the algorithms, thereby realising what they were intended to realise.

The results realised in unison are, according to Finn, now becoming so important for us as human beings that we can no longer close our eyes to the assumptions, suppositions and choices that have been incorporated into the structure and the functioning of these algorithms and software. He states the following on this: “The apparent transparency and simplicity of computational systems are leading many to see them as vehicles for unbiased decision-making.” According to Finn, changes brought by algorithms are also leading to a seemingly automatic reconstruction of our existing legal and ethical frameworks. At the same time, these algorithms are also shaping a new reality, as Finn concluded based on mathematical rules and implicit assumptions incorporated into that, which are not instantly evident to the general public.

Governance

The bitcoin blockchain is shaped by an ecosystem of interrelated algorithms. These algorithms organise consensus on the interrelation of (a block of) information transactions performed within the network. The internal coherence of a blockchain is thus provided by ‘Heideggerian equipment’ in the form of interrelated algorithms that create an outcome in the form of, for example, cryptocurrencies or smart contracts. Our perception of how these new currencies or smart contracts are created also leads to a new reality of networked systems that are jointly capable of autonomously performing reliable information transactions for us on a global scale.

For De Filippi and Loveluck [4] (2016), governance of the interrelated set of algorithms is twofold, i.e.: ‘governance by the infrastructure,’ organised through the bitcoin protocol and ‘governance of the infrastructure’ which is all about the development and management of algorithms that realise information transactions in the network. The whole of the bitcoin blockchain is, according to De Filippi and Loveluck, much like: “a highly technocratic power infrastructure, insofar as it is built on the automated technical rules designed by a minority of experts with only limited accountability for their decisions.”

Within this network, De Filippi and Loveluck distinguish two important groups: one of passive users who are only interested in performing information transactions, and one of active users in the form of what are known as miners who make processing power available to the network for transaction validation purposes. In the theory of De Filippi and Loveluck, the second group is: “the community of developers, who are contributing code to the bitcoin project with a view to maintain or improve its functionalities.” In this latter group, only a limited number of persons have the capability to edit the source code of the system.

De Filippi and Loveluck provide a detailed description of how a proposal to make changes to the functioning of the source code led to a crisis in the existing governance structure of the bitcoin blockchain. As a consequence of this crisis, according to De Filippi and Loveluck, “a small number of individuals became responsible for the long-term sustainability of a large collective open source project, and the project rapidly fell prone to interpersonal conflict once consensus could no longer be reached among them.” The analysis of this crisis made it clear to De Filippi and Loveluck that the ‘trustless technology’ in the form of a public blockchain seems to stay outside of the existing frameworks of, for example, the government and other organisations, but that the public blockchain still: “remains subject to the (invisible) politics of a handful of individuals – the programmers who are in charge of developing the technology and, to a large extent, deciding upon its functionalities.”

Conclusions

The conclusions formulated by De Filippi and Loveluck tie in with claims by Atzori [5] who said that: “In a world increasingly reliant on technology and ruled by networks, whoever owns and controls these platforms will always have a significant power over civil society on a global scale.” We as human beings still perceive technology and networks as interconnected physical objects. We are barely mindful of how the algorithms needed for the functioning of these platforms are developed and managed. We see the results of the networks as traditional objects that we, as human beings, accept, ignore or reject, but are not interested in the changes these digital objects trigger in our living and work environment.

Our world is changing rapidly due to the increasing intensity, intelligence and autonomy of these interconnected algorithms. The effects of all these developments can, as Boucher [6] claims, “be found in more subtle impacts upon broad social values and structures. These impacts are associated with the values that are embedded within technology. All technologies have values and politics, usually representing the interest of their creators.” The influence algorithms have on existing social values and structures, and the way in which governance of these algorithms in general, and of the blockchain in particular, has been organised, should therefore be higher on the national and international political agenda. Further research into new governance models for the management and maintenance of such algorithms that intervene in our existing world is of vital importance for that.

Tags:Blockchain