Oxford University: Blockchain sector on ‘silent collision’ course with the law

The University of Oxford has shared analysis of the relationship between blockchain developers and the rule of law. It claims the blockchain industry is on a “silent collision course” with lawmakers, and a major overhaul is sorely needed.

Anastasios A. Antoniou, member of the EU Blockchain Observatory and Forum , argues blockchain evangelists open ‘Pandora’s box’ by suggesting complicated smart contract systems create “order without law.”

“The primary source of friction between blockchain and law can be traced to the implied proposition that code-driven frameworks running on blockchains can and should operate outside our jurisdictional legal orders,” writes Antoniou. “ This is most clearly illustrated when considering the deployment of blockchain-based organisations running entirely on autonomous code, without human consensus.”

Already, the world’s major blockchains aren’t exactly compatible with the law. Take, for example, Europe’s new GDPR guidelines . Among other things, the new rules stipulate data stored on the internet must be deletable upon request.

For immutable blockchains like Bitcoin, such control goes against the very ethos on which they’ve been built.

Other challenges include defining “assetised tokens” as securities, and deciding liability when blockchain-driven organisations (DAOs) malfunction.

Can governments control blockchains?

Antoniou posits that blockchains are not immune to the influence of nation states, despite the ever-present rhetoric saying otherwise.

He proves his point by arguing nation states are actively regulating blockchains indirectly. World governments have made Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) procedures a frustrating standard for cryptocurrency exchanges, services, and regular investors.

Indeed, the makers of the Paxos Standard stablecoin recently confirmed to Hard Fork that government regulators would only approve the coin if they included backdoors for the freezing and seizing of cryptocurrency by law enforcement.

Antoniou believes it is better to lean into this working relationship with the law, rather than push against it.

[…] If distributed ledger technology seeks to attain its full potential, it should not attempt to evade or circumvent law,” he suggests. “Code should rather embrace the law and engage in an interaction which advances them both.”

Not all blockchains are the same

The struggle between law and blockchain innovation could be actually be endless, Antoniou warns. As developers do not create all blockchains equally, each blockchain could require personalized treatment from lawmakers.

It is precisely this diversity rendering existing frameworks obsolete, and only new, adaptable rules can provide legal certainty to cryptocurrency markets.

Reassuringly, Antoniou does clarify that any new legislation “should serve to recognize and uphold the effects of transacting on blockchains.”

But still, states are not likely to legislate blockchains in identical ways. Some jurisdictions may foster the blockchain industry, making them a more attractive choice for new projects, while others may reject the technology altogether.

This can actually drive innovation – but only if blockchain developers work with legislators and regulators to create rules that work for the benefit of everyone involved. If there’s no engagement, old laws may end up suffocating new projects before they can get off the ground.

If you’re interested in everything blockchain, chances are you’ll love Hard Fork Decentralized. Our blockchain and cryptocurrency event is coming up soon – join us to hear from experts about the industry’s future. Ticket sales are now open, check it out!

Ripple (XRP) is centralized and terribly flawed, researchers say

Times have been difficult for the cryptocurrency market, but particularly for Ripple – and it seems things are about to get even worse. Popular exchange desk BitMEX has unleashed a scathing critique of the controversial digital currency that deems its system centralized and goes on to disband most of its value propositions.

The report – titled the “The Ripple Story” – ultimately concludes that Ripple “ does not appear to share any interesting characteristics with crypto tokens like Bitcoin or Ethereum, at least from a technical perspective.” The full entry can be found here.

Among other things, BitMEX notes that while Ripple was initially conceived as a means to enabling a peer-to-peer trust network where individuals could directly lend funds to each other, its network architecture will most probably remain “ unstable and the trust networks are unlikely to be regarded as reliable.”

This ultimately leads the researchers to doubt the long-term efficacy of the system.

More worryingly though, the report seems to suggest that once most trust networks come to be regarded as unreliable, the entire system could “centralise towards a few large banks and fail to be sufficiently different to the existing financial system,” making it liable to regular banking defaults.

The post also details a series of questionable practices Ripple resorted to when distributing its XRP reserves to founding members and employees, including founder Jed McCaleb, executive chairmen Chris Larsen, chief cryptographer David Schwarz and others.

It also touches upon the long history of internal disputes between employees and founders like McCaleb’s bumpy departure from the company.

The most troubling part of the report concerns Ripple’s consensus protocol.

“ The image depicts some complexity in the process and the BitMEX Research team is unable to understand the detailed inner workings of the system or how it has any of the convergent properties necessary for consensus systems,” the document reads.

The company conducted some in-house testing with Ripple’s technology but ultimately discovered that the company “is essentially in complete control of moving the ledger forward, so one could say that the system is centralised [sic].”

The researchers proceed to point out that there is nothing inherently wrong with centralized systems. “ Centralisation makes systems easier to construct, more efficient, faster, cheaper to run, and easier to integrate into other systems,” the post says.

“However, some Ripple marketing, like the image below, contends that the Ripple system is distributed, which some may consider misleading,” it adds.

In addition to the shortcomings in its consensus protocol, BitMEX discovered that Ripple appears to be “missing 32,570 blocks from the start of the ledger and nodes are not able to obtain this data.” This could make it impossible to properly audit the company and its whole chain in the future.

One thing to highlight is that BitMEX doesn’t seem to rule out the possibility that Ripple could eventually secure wider adoption.

“ The company has significant financial capital and has proven somewhat effective at marketing and forming business partnerships, and perhaps this could mean the company succeeds at building adoption of the XRP token either among businesses or consumers,” the report reads.

Despite surging up to $3.84 back in the beginning of January, XRP currently stands at $0.71. Indeed, the sudden increase in price of Ripple temporarily made its co-founder Larsen richer than the founders of Google . That didn’t last for long though.

For those interested, the full report is available to read on the official BitMEX Research blog here .

Clarification: Ripple chief cryptographer Schwartz has taken to Twitter to dispute some of claims made in the BitMEX report:

While the BitMEX researchers have admitted that Ripple’s design does prevent certain issues (like the well-known threat of double spending in Bitcoin) better than some blockchain solutions, the criticism laid out in its report still stands:

Apple quietly removes shady cryptocurrency wallet accused of stealing users’ EOS

Apple has quietly removed an allegedly malicious cryptocurrency wallet from the App Store, following numerous complaints from users claiming their EOS tokens had been stolen after using the app.

The app in question, EOSIO Wallet Explorer, came into the spotlight after popular YouTube personalities, the Hodgetwins, posted a video blaming the app for swiping their tokens .

In it, the YouTubers explained that 1,500 EOS ($8,500) were surreptitiously transferred out of their wallet – without their consent or knowledge – not long after using the app.

It remains unclear how many users have fallen victim to the allegedly malicious wallet. There is also no information on how many people downloaded the app, since Apple does not make such data available to the public. What we do know is the shady wallet solution remained on the App Store for nearly three months, following its launch in July; that is despite repeated complaints from users.

The twins, who tout over 4 million subscribers on YouTube, further added they have since filed a request with ECAF (the EOS governing body responsible for processing transaction reversals and account freezes on the network) to have the fraudulent transactions invalidated.

“I just want my damn cones back,” a Hodgetwin told Hard Fork. “That was $15,000 gone.”

Hard Fork reached out to Apple for comment on the Hodgetwins situation. Shortly after, EOSIO Wallet Explorer had already been pulled from the App Store. Apple never returned our requests for comment.

For the record, tons of burned users had taken to Reddit and other social media platforms to warn against using EOSIO Wallet Explorer. The app had also received a slew of negative reviews and theft accusations on the App Store.

We’ve followed up with Apple to ask about the reason for the removal of EOSIO Wallet Explorer and will update this piece if we learn more.

In the meantime: make sure you do some background checks before trusting little-known software providers with your funds – there is always a risk attackers are preying on you, even on the official App Store.

If you’re interested in everything blockchain, chances are you’ll love Hard Fork Decentralized. Our blockchain and cryptocurrency event is coming up soon – join us to hear from experts about the industry’s future. Ticket sales are now open, check it out!