Blockchain Research Workshop

Opening remarks: Prof. Itai Sened, Dean, Gershon H. Gordon Faculty of Social Sciences, and Head of the Boris Mints Institute, Tel-Aviv University

We are moving beyond the concept of resource scarcity, which was the cornerstone of global economics, and a new economic approach is needed to cope with the current economic environment as the rapid growth of human capital and the transition to AI-based systems worldwide make it unlikely that scarcity will persist for long. According to the New Wealth of Nations study, which indicates that wealthy nations will become even wealthier, the disappearance of scarcity acts as a constraint on a global scale that must be addressed. Scarcity is also fading from the field of energy; while it is generally assumed that Blockchain technology is limited by electricity, recent evidence had shown that many entities in this sphere are moving their operations outside of the urban landscape, using renewable energy instead of fossil fuels. Additionally, knowing that distributed ledger technologies and artificial intelligence are not energy sensitive urges us to create solutions that will utilize Blockchain technology for society's needs and prevent it from creating distortions in the economic system. At this point, research plays a critical role in convincing institutions to take appropriate action; Public policy challenges associated with this issue include mismanagement of exponential growth, a tendency for old money to control new wealth, and an inability of social structures to adapt to fast and large-scale changes in this field.

Prof. Eviatar Matania, Head of the Security Studies program, Tel-Aviv University

Current Challenges in Cyber Security - The State Perspective

Policymakers face a structural-operational challenge in cybersecurity, as the government's perspective and understanding of the field are not being studied, advanced as they are in the enterprise sphere. To create an effective cyber defense eco-system, cybersecurity operations need to be centralized into a hub run by a central cyber operational agency along with security forces. Most states lack agencies that can share information in the field, both domestic and international. There is a technological challenge in research and development in the field of cyber defense; most governments allocate their security budgets to address the needs of businesses rather than moving to state-level solutions and establishing a Digital Security Dome. When addressing the issue from a techno-strategic viewpoint, the complexity of the diverse cyber systems makes us wonder what approach should be taken to create an anti-fragile and efficient cyber defense mechanism and whether it can be accomplished? It is estimated that in ten years, everything will be interconnected and dependent on cyberspace, so another point of view that should be included in the discussion is the global perspective. How should standards and terms for international agreements and policies be set, and what infrastructures and sectors should be included in these agreements so that regulations will be effective and be enforced. These factors lead to the field of Political Science since cyberspace and cybersecurity are defined differently by different regimes; raising the questions of what is an authorized or permitted action? and by whom will it be decided?

Prof. Zoran Djikanovic, University of Donja Goroca, Montenegro

Digital Payments

Since the advent of digitalization, Distributed Ledger Technology and Blockchain have become essential tools for society. As we focus on researching Blockchain technology's impact from a philosophical aspect, we notice a contradiction between nation-state and global business aspects. The laws and regulations required to adopt new technologies are not keeping pace with the business world, making it more challenging to implement digitalization. Covid-19 took a toll on the global economy - sharp declines and fluctuations in capital and other asset prices, lower government bond yields, increased cost of corporate loans, reduced market liquidity, deteriorating creditworthiness of many borrowers, and increased risk of investors withdrawal. Therefore, the financial sector is now experiencing negative trust, causing downward spirals, accelerating digitization and digital identification, and adapting national micropayment requirements - it is at this point where the contrast between the Centralized system and DLTs should be identified. If DLT systems are centralized, the financial system will perform better, and central management will be independent of the banking system; the adaptation is associated with high implementation costs and significant security risks. Adopting public Blockchain provides benefits such as ease of integration among the various parties and low maintenance costs. There is, however, a need to address privacy concerns. Researchers at UDG suggest that the optimal solution is a private or consortium Blockchain platform that meets Know-Your-Customer requirements. It conforms well to Anti-Money Laundering policies and offers impenetrable privacy, but it is more expensive to maintain. As many Blockchain projects are already in operation in various fields, it is essential to standardize blockchain technology specifically for financial purposes.

Prof. Dr. – Ing. Katarina Adam, Department of Business Administration and Engineering, University of Applied Sciences, Berlin

Bridging Blockchain and Business

Most of our intellectual property, valuable data, reporting database, and inside information are sources of income as intangible assets that need to be protected. In general, Blockchain is related to the economy, civil society, and the state, so a holistic approach is needed to protect increased wealth in all aspects. The interaction between society and business leads to technological advancements, such as the digitalization of services. The approach bridging Blockchain and business needs to consider both old economies that focus on creating jobs and a new economy that targets creating stock market values. An integral part of defining how Blockchain technology should be used to value detection and utility analysis of the different technology users. To properly understand the field and be able to map the stakeholders precisely, we need a multi-disciplinary approach, a structured approach, process expertise, education, IT skills, and management skills.

Dr. Joshua Ellul, Director, Centre for Distributed Ledger Technologies, Department of Computer Science, University of Malta

Regulating Blockchain and Blockchain-ing Regulation Monitoring

Blockchain is an umbrella term; part of it refers to software that must be appropriately integrated with hardware before deploying it. In some cases, failure to do so can lead to systems not operating correctly, resulting in material damage and the loss of lives. The use of developer support tools, testing, static analysis, and runtime notification may assist in addressing implementation challenges, but they may not be helpful in safety-critical cases and when code fixes are not possible. Smart contracts and user assurances can address these issues by decentralizing guaranteed execution of logic so that the code cannot be manipulated, and parties know what they agree on since the code is available to all. In Malta, for example, an independent systems audit approach has been taken by the Malta Digital Innovation Authority, DLTs and smart contracts can be registered with the MDIA. The applicant conducts due diligence for the code through the authority, which is a legal entity. Later, Information is stored on a forensic node, which is easy to react to in case of an investigation since the tech admin needs to be in place. Regulating Blockchain is vital for consumer protection, market integrity, and legal certainty. Technology evolves faster than regulations, so looking at the code alone is insufficient when regulatory oversight is required. Now with smart contracts, digital processes can be implemented that cannot be tampered with. In terms of Public Policy, it is essential that legal and IT professionals collaborate to answer regulatory questions by taking a multidisciplinary approach to co-designing regulation and technology on a centralized infrastructure.

Prof. Gordon Pace, Department of Computer Science, University of Malta

Regulatory Texts using Smart Contracts

There is a significant gap between legal contracts as multiparty agreements and smart contracts in the digital sphere. A legal contract is an agreement between parties that regulates a particular behavior. These multiparty agreements can be broken, and there are regulated consequences when a contract is breached. A Smart Contract is a machine-executable code, and its linguistic form and logic differ from traditional contracts since they are programs that enforce unwanted behavior by written codes. How do we move from regulatory texts to Smart Contracts in cyberspace? During the past 20 years, there has been much discussion of the use of deontic logic in computer science, as there has been a significant investigation into the definition of deontic logics that permits one to discuss ideal states of affairs such as obligation, prohibition, and permission. Putting deontology in the context of normative text allows us to analyze it for conflicts, analyze it for subsumed, redundant, and overlapping clauses, and eventually convert deontology into a semantic code, which will display any breach of contract, given the behavior of the parties. A variety of approaches can be broadly categorized into three types: natural language contracts that have been parsed to extract semantics, controlled natural languages that both human and machine scanners can process, and template-based approaches. In order to transform some legal contracts into smart contracts which are legally valid, a streamlined process must be implemented. Blockchain is a significant part of the overall picture, but the transactions would have to be carried out by an additional party without it.

Slavica Tomovic / Bogdan Krivokapic, Institute for Security, Montenegro

Digital Identity

Consumers are increasingly embracing the internet to conduct online transactions - for both purchasing goods and services and banking - from multiple devices. Economic and service environments have become more open to digital identity since the Covid-19 pandemic broke out. The ITU defines Digital Identity as "a digital representation of the information known about an individual, group, or organization". Digital Identity is a key component for conducting online financial transactions; it facilitates customer onboarding, helps prevent money laundering and other fraudulent activities, and streamlines government services provided to citizens. Over the past two decades, digital identity has evolved from being centralized to being self-sovereign. How does that kind of identity interface with Blockchain technology? The user's identity and credentials are directly and autonomously managed by the user, and the system allows to manage a root-of-trust without a central authority; the zero-knowledge protocol is a crucial function of the system that makes this possible. Decentralized identity ecosystems should include validator nodes, observer nodes, edge agents, and root agents. A decentralized identity ecosystem consists of three building blocks: Hyperledger Indy, Hyperledger Aries, and Hyperledger Ursa. Building such a system requires managing writes to production ledgers, horizontal scaling of enterprise issuer agents, handling revocations, backing up and restoring the agent's storage, handling lost devices, and designing mobile applications.

Eve Guterman, Department of Public Policy, Tel-Aviv University

The Monopolies Behind the Wicked Problems: Decentralizing Institutions for Equality

There is a significant change in society, and the social institutions we established to promote the collective social good are not performing as well as we expected. Redistribution of wealth, property rights, collective action, collective choice, and the principal-agent problem are all issues that have been discussed by policymakers and political theorists since the interwar period, providing the foundation for the welfare state and social institutions. By failing to solve them, society incurs a cost in lost resources, a burden on the welfare state, and multidimensional poverty, which occurs through reduced competition, reduced economic growth, and reduced social welfare. Though information is becoming more readily available to more people, the increasing number of actors and lengths of principle-agent-chains makes institutional solutions more complex and collaboration more challenging to regulate. These problems mainly originate from one source, which is a monopoly. There is a crucial need to design new and more efficient digital institutions to overcome the wicked problems under conditions of non-scarcity. As we investigate the interplay of three primary factors: capital formation, information, and governance, these factors result in a monopoly cycle that reduces market competition, consumer surplus, and the quality of life for most individuals. There currently are three central hypotheses that aim to break these monopoly structures and organizations that offer DLT solutions: A universal basic income (GoodDollar), aid distribution for crisis recovery (Sarafu Credit Network), and digital identity networks utilizing the "economic identity" (BankYou - Japan). By applying these methods internationally, many positive effects can be achieved, and people's lives will be improved dramatically.

Dr. Nir Hassid, Tel-Aviv University

The Nature of Cyber Threats and the Road to Global Cybersecurity Regime

How do the cyber powers’ geopolitical considerations shape the global cybersecurity landscape and the debate on global cybersecurity regulation? Several reasons shape and frame the cyber powers’ perceptions of global cybersecurity. The global regulation process started almost two decades ago as the UN started working on an international cybersecurity mechanism (UN GGE led by the USA and UN OEWG led by China and Russia). Despite this, neither forum has achieved success since both provide guiding principles and proposed regulations with political components, making it challenging to apply them from a global perspective, resulting in national security demands that do not meet the minimal requirements for collective security. There should be a new global agenda in cyberspace that will be based on three traditional security principles, allowing states to cooperate in this area: territorial respect, sovereignty, and non-interference in internal affairs. The primary challenges in forming a global agenda in this field are: creating a hegemon and a collective narrative, preventing cyber powers benefit from the lack of a cybersecurity regime, reaching a political understanding as a precondition for the creation of such a regime, and understanding what can still be regulated and how can we achieve equilibrium by considering the states needs and other parties.

Dr. Stevan Sandi, University of Donja Goroca, Montenegro

Multichain platform

In one of our projects in the agri-food sector, we used Blockchain as a test case to create a more accurate sales process in a wine company in Montenegro. The company had problems distributing its bottles to other countries due to geopolitical issues, so to overcome them, we have used Blockchain technology to assist us in editing the bottle tags precisely to each reservation's needs. In this case, the method used was a private Blockchain network. Implementing such a technology requires us to ensure that it is an established technology and to ensure the company's support during its implementation process. It was using Multichain that allowed the platform to be decentralized, transparent, and secure. The implementation process was facilitated by the well-developed and documented API, and the setup of the mobile application was straightforward. The system had a fascinating feature that allowed the transactions to remain private and ensured the anonymity of both the seller and the buyer. The questions that need to be asked in these kinds of projects are: Who can explore the transactions? And are the applications working on open source?

Sabrina Klostermann, HTW

Water Supply and House Connections

As part of the Industrial Engineering program at the HTW, a group of students created a project whose aim was to develop a concept of added value regarding water, incorporating Blockchain technology. This project is called the H2Organizer - a transparent, efficient, and secure platform for house water connections. After developing the first idea for the project, conducting an initial process analysis, and developing a business model, the students created a functional description and a digital model. The platform deals with the following problem: In Germany, the water industry is mainly in the hands of the government; as a result, each area has its own water provider and there is no competition. Today, there are 5,845 water suppliers in Germany, which results in very different system configurations and different levels of digitization within the processing, resulting in inefficient operations. The H2Organizer is a multi-sided platform that integrates a database with a consortium Blockchain system. The platform forms a new standard for the application for house connection since it links all parties involved in the process. The project will use consortium Blockchain for data security. It is expected that this platform will lead to the creation of one consistent, lean platform for all water- and energy-related processes in Germany because it will eliminate existing issues with the application process and use existing resources more effectively.

David Szadach, Mohamed Dekhil, HTW

M&A Transactions

Mergers and Acquisitions (M&A) is a general term used to describe the consolidation of companies or assets through various types of financial transactions. Merge2Go is an application that was created by Industrial Engineering students in HTW Berlin. It is an innovative M&A platform that gives a solution to the main problems in the field; data management, lengthy process, and many participants in the transaction. The application offers lean processes, matching algorithms, and data security through Blockchain, making it easy for buyers and sellers to interact.

Joseph Anthony Debono, University of Malta

Political and Legal Implications of Decentralization

In the course of human history, the development of writing created the centralized state through various accounts, financial information, obligation instruments, land registers, and law codices. Additionally, centralization provided the only solution for the fragility of writing and storing the word of God in its different forms. There are examples of centralization problems throughout history, beginning with the Middle Ages, when states sought to maintain their hegemony over their people. The only systematic decentralized impulse in the history of humanity occurred in the Roman Republic, and their determination never again to be ruled by a single individual or an institution resulted in a strict separation of the powers of the state. Since then, there have not been many improvements in this area, mainly because, in modern democracies and republics, the government is in some way the source of sovereignty. The most significant decentralization event is currently taking place in the world of data; the development of decentralized distributed computing platforms proves an infrastructure for changing a process without human intervention, minimizing the need for a human executive. The separation of money and the state, the state's loss of monetary seigniorage, dramatically reduces the power of the state to gather forces of coercion and deploy them against citizens. Consequently, the state is likely to shrink to the smallest size that citizens are willing to pay for. Also, by vitiating the need for government, DLTs may very well initiate a process through which direct legislative power can be returned to the citizenry, as in the time of the Roman Republic.

[1] This summary was written by Petr Pesov and edited by Yuri Ratomski.