Blockchain is seen as a catalyst of innovation in today’s world of digital infrastructure and social media platforms. Its technology promises to give control of data back to the people through its decentralised manner of operation, and the greater transparency and inclusiveness this yields. Does blockchain lead to a reorganisation of power? Using a combination of computer science, law and political science, ERC grantee Primavera de Filippi looks at the governance of blockchain systems and the ‘invisible powers’ at play.
Why is blockchain often described as a ‘trustless’ technology?
Blockchain technology was originally created to enable bitcoin operations, so mostly for cryptocurrencies. Over time, new blockchains emerged that have a more general purpose. The specificity of this technology is that it enables to create transactions between individuals with particular technological guarantees. The network relies on cryptography to verify that transactions are correct. As opposed to a traditional system with a centralised operator such as a bank, all transactions take place via a protocol. There is a degree of transparency: no one can violate the use of the protocol because the network will simply reject the transaction. Also, information recorded on blockchain can never be removed or modified. Those features combined create what we call a “trust-less” system. As long as one trusts the technology, and the network operates as it should be, then one can interact. However, the extent to which one can trust the technology depends on its governance.
Through participant observation and ‘cultural immersion’, you aim to reveal ‘invisible powers’. What do you mean by that?
When I talk about invisible powers, it is about understanding the particular governance structure, which is technically designed to operate in a particular way. However, at the practical level, it operates in very different ways. On-chain governance is a codified version of whatever has been enshrined in the protocol. Then, there is off-chain governance, which encompasses all the influence and decisions that are taken outside of the blockchain protocol. Oftentimes, these are much more relevant and yet, they are invisible because they are not traceable.
What is recorded in the blockchain is only a small subset of what happens. Many things happen outside that are relevant for shaping its governance. Who are the actors that trade and own tokens? Who develops the code?How are decisions taken about the protocol? Who influences public opinion on social media? It requires ethnographic studies and participant observation to reveal this.
Can blockchain lead to a new organisation of power?
In traditional online services, power is centralised. Whoever operates the system has the power to shut it down, modify the system’s operation and keep people out of the system. They are the sovereign of the platform and have the ultimate power. In blockchain systems, power is distributed among all the users operating the network.
There is a variety of nodes with much less power. The power dynamics are different. That is why we are working on a theory of distributed governance. When power is distributed, participants need to be engaged in distributed governance to get anything done and to understand the way in which diverse actors use this power.
Many analyses of blockchain adopt the model of a centralised governance. However, blockchain governance is polycentric: it does not have one centre of power. It builds upon polycentric governance and actors, which interact with and influence each other with a particular outcome. With this project, we aim to aggregate all these pieces and build a broader theoretical framework around the challenges, opportunities and thinking around this type of governance.
The regulation of blockchains differs across the world. Which one is closest to the ‘ideal’ model of distributed governance?
In the US, they are more focused on regulation; to make sure users are unable to issue tokens, and that the emission of cryptocurrencies complies with financial regulation. There is less effort to provide accommodating legal frameworks. In general, the EU is more interested in encouraging the deployment of the technology and less afraid of cryptocurrencies and blockchain’s security aspects. China has made any cryptocurrency transactions illegal because they want to control internal monetary movements. They recognise the potential of this technology and use it for their own interest to reinforce their hegemony as opposed to using it as a way of increasing institutional trust and accountability.
How has the Covid-19 pandemic affected the development of blockchain technology?
The pandemic demonstrated quite well the limitations of international cooperation regarding vaccine certification, and the need for a privacy-compliant system that provides a sufficient degree of verifiability. In our project, we look at how we can use blockchain technology to create a credential system to ensure that someone is entitled to travel and carry out other activities, and yet does not disclose all personal information. Can we create a shared database without having to rely on a centralised entity?
Today, one needs to trust government agencies that manage the vaccinations and the laws and regulations that provide oversight. In blockchain, one does not need to trust those entities and less oversight is needed because the technology guarantees the operations. As long as you believe that the cryptography will not be broken and that there are no flaws in the system, it is easier for a citizen to interact with those entities. The institutions will become more trustworthy.
Primavera de Filippi received her bachelor and master degrees in Economics and Management from the Bocconi University. She also holds a master degree in Intellectual Property from the University of Queen Mary of London. In her PhD thesis, she explored the legal challenges of copyright law in the digital environment. This guided her research focus on blockchain technology and artificial intelligence. Her current roles include Director of Research at the National Center of Scientific Research in Paris, Visiting Fellow at the Robert Schuman Centre for Advanced Studies at the European University Institute, to Faculty Associate at Harvard University.