Who Really Uses Ethical Blockchain?

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“Ethics or moral philosophy involves systematizing, defending, and recommending concepts of right and wrong behavior. Ethics seeks to resolve questions of human morality by defining concepts such as good and evil, right and wrong, virtue and vice, justice and crime.” This definition is the pith of “Ethical Blockchain”.

As the definition suggests, ethics are principles that govern people’s behavior. They guide people through situations, which are not always fair and square. Ethics helps people understand several fundamental questions critical for their decision-making. Are my actions beneficial or harmful to the world? What are my duties? How do I decide when my duties conflict?

Defining what constitutes ethical behavior is vital where there is human involvement . Even the field of technology, which is the synergy of people and machines, needs ethics. There are rampant discussions on the ethics for artificial intelligence and autonomous vehicles. We come across opinions on what is considered ethics and what is not and who should be held responsible when machines err .

A.I. ethics are much talked about today. But what about Blockchain, another emerging technology? Is there a need to define ethics for an ecosystem dominated by self-executing , head of community and long-term societal impact at MIT’s Digital Currency Initiative says “Like other “tech ethics” fields, the field of smart contracts? Do we need an “Ethical Blockchain”? Rhys Lindmark blockchain ethics should examine what the technology is capable of doing, and ponder the potential consequences.” He reckons, the impact of the absence of ethics in Blockchain is many-fold.

Blockchain is a leaderless system. It is prone to devolve into anarchy without ethical governance. It is vital to delineate ethical actions for such a decentralized ecosystem.

What forms an “Ethical Blockchain”? It is a guiding framework applied across several aspects, some unique to Blockchain.

Ethical Data Collection

Blockchain is being considered for storing identities (DIDs) of people, companies, and devices. Blockchain’s unique value proposition is its inherent transparency and immutability. But these very strengths can be adverse when storing sensitive identity data. Some ethical questions arise. Is it acceptable to allow public access to sensitive data? What happens if this data causes persecution of people? Can miners or validators misuse the data?

Besides, some countries proscribe the storage of sensitive information outside their jurisdiction. Blockchain is a distributed ecosystem, with members all across the globe. How do we assure the data does not leave a specific jurisdiction? Data privacy laws allow people to request companies to delete their identity information. How will the companies using Blockchain honor this request?

Designing a user-centric approach is key to address data-privacy issues. Protecting users’ privacy is the guiding principle. It is vital to recognize what is an identity. How to collect, store, access, and retain data requires deliberate assessment. Blockchain is not a viable option for storing sensitive personally identifiable data. It is prudent to collect only the minimal information required to assert a user’s identity. Store sensitive information elsewhere, and add the link to the data in Blockchain. Use Zero Knowledge Proofs (ZKPs) to restrict information access only to the intended parties and hide from rest, including the miners and the validators.

Security Ethics

Keeping the sensitive and vulnerable information safe in a distributed ecosystem is vital. Some people opine storing the same data in many systems, safeguards the data from attacks. But, hackers now have not one but several vulnerable targets. How do we safeguard these systems scattered across the globe? The data stored can be encrypted using state-of-the-art encryption mechanisms. Futuristic methods such as post-quantum cryptography can be employed. But, this brings us to the next dilemma — Key Management. Who should have the custody of the key — Individuals or Miners? What happens if the keys are lost?

One person having all the keys is a disaster-in-waiting . It is prudent to engage in multi-party computed keys. Here combination of keys together opens the data-lock. Multi-party keys also ensure no single party can use the data without consent from all involved parties. This is also a fail-safe option when one of the parties loses their key — others can approve the creation of a new key. Yet, it is necessary to ensure that the key is not so distributed that managing it becomes a problem.

Environmental Ethics

Proof-of-Work based blockchain applications such as Bitcoin consume massive amounts of electricity. Immense quantities of fossil fuel power the server farms dedicated to solving the cryptographic puzzles to mint bitcoins. The carbon footprint, energy consumption, and waste generated in the process exceed that of some countries .

We have responsibilities towards building a sustainable future. We can contribute to a habitable environment by switching to renewable sources of energy and environment-friendly algorithms.

Smart Contract Ethics

Smart Contracts are the codified version of the terms and conditions that bind the business transactions . Automatic execution of contracts speeds up the usual time-consuming processes. Payment disbursal on receiving material, which tend to take days, happens in minutes with smart contracts. Despite the benefits, several shortcomings deem smart contracts unfit for prime-time use. Kevin Werbach, an academic at The Wharton School, University of Pennsylvania, reckons that there are lots of situations that smart contracts cannot handle . He agrees that the smart contracts are legally enforceable, yet not all contracts are legal. Suppose there is a contract to kill, would that be legal?

Smart Contracts automate processes, but humans write them. When humans are involved, bias gets added to the system. Choosing a billion-dollar corporation as credit-worthy is a socioeconomic bias against smaller companies. How to imbue ethics against bias and contribute to an ethical blockchain?

Multi-party scrutiny of the code before enforcing the contract gives a broader perspective. Disclosure of the code that resulted in a particular action add trust among affected parties and regulators .

Ethical Governance

Blockchain aimed to liberate the world of intermediaries and central authorities. But, this is still not the case. Today, an oligarchy with resources — mining power, money to stake, or reputation — more than others decide what transactions are acceptable to the blockchain network. A handful of developers or a council of big corporations decide on the changes to the network code. The actual network users will not have a vote. The DAO and Parity hacks are some examples of how a few people decide for the entire community.

Ethical concerns always arise when humans contribute to decision making. Will the decisions have a logical reason? Do the bunch of people who decide have the best interest of users in mind? Who will be responsible for the adverse effects of the decisions?

The ethical governance model is the key. Giving deciding power to the end-users is the ideal approach to a libertarian Blockchain network. When this is not possible, a transparent, democratic approach is essential. The users of the network should elect the decision-makers. This prevents any collusion among the developers or companies running the network. The ramifications of any code change has to be studied carefully. A user-centric and outcome-focused design, and making decision-makers accountable will enforce ethical governance.

Antitrust and Ethics

Blockchain is a team sport; eclectic organizations work together towards a common, shared goal. But such a collaborative ecosystem comes with its challenges. Who “owns” the network? Who has the intellectual property rights? What does joining the big companies’ network mean to the small ones?

To succeed, the organizations must understand no one owns the network . IP rights of all organizations should be honored. All the organizations should understand that they are here for a greater good. It is everyone’s responsibility to contribute to the ethical blockchain.

Incentives Vs Ethics

People and companies across the globe take part in one or more Blockchain network. They verify and approve the transactions submitted on these networks. How to ensure they remain honest? What stops them from rigging the system for their good?

Rewards and punishments have for long motivated people to do or not to do certain things. What if being honest is more rewarding than gaming the system? What if penalties for being bad actors are harsh? Mining rewards in Bitcoin and penalties in the Ethereum 2.0 network intend towards keeping the actors in the network honest. Incentives inspire ethical behavior.

There will always be challenges when implementing anything good. There will be disruptions when we talk of enforcing an ethical code of conduct into the ostensibly liberal blockchain. Yet, till such time people succeed in self-governance, there is a need for explicitly defined ethics.

Originally published at https://www.datadriveninvestor.com on May 22, 2020.

Who Really Uses Ethical Blockchain? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.