World Economic Forum Publishes Blockchain Governance Taxonomy

The World Economic Forum has published a detailed white paper arguing that blockchain stakeholders should organize in a way that would dwarf even the largest consortia.

Released today, "Realizing the Potential of Blockchain" proposes that a new distributed network of "ecosystems" should emerge to maximize the impact of the distributed ledger technology across three areas: a blockchain platform layer, an application layer and an overall ecosystem layer, where participants analyze legal structures and regulation from a scientific and business perspective.

Among those who have already publicly expressed interest in the concept are the founder of the Enterprise Ethereum Alliance, Jeremy Millar; the executive director of Hyperledger at the Linux Foundation, Brian Behlendorf; the founder of the Chamber of Digital Commerce, Perianne Boring; and Jamie Smith, chief communications officer at Bitfury Group.

Released in coordination with the beginning of the World Economic Forum’s annual Meeting of the New Champions in Dalian, China, the paper argues for the creation of a network that would include innovators, venture capitalists, financial institutions, academics, government agencies and individuals.

Wary of several skeptics who have previously argued against large-scale efforts, authors Don and Alex Tapscott focus on creating a taxonomy for how such a system would function, while proposing that such structures might arise organically once a structure is established.

In the preface to the white paper, the head of the World Economic Forum's Center for the Global Agenda, Richard Samans, described the impact such large-scale coordination could play on the impact of blockchain.

Samans told CoinDesk:

"The extent to which this new technology realizes its potential will depend in substantial part upon how well stakeholders steward its development. There remain important open governance questions regarding both the functioning of the technology and its current and potential applications."

The report was submitted by the non-profit Blockchain Research Institute, founded by Don and Alex Tapscott, with feedback provided by the recently launched World Economic Forum Global Future Council on the Future of Blockchain.

Central to the 46-page document is the concept of what its authors call "stewardship" of the blockchain technology, or the idea that various stakeholders have a responsibility to ensure benefits of the technology accrue to more than just individual projects, but to "citizens" of the world.

Instead of viewing the proposed multi-stakeholder infrastructure as a competitor to the Enterprise Ethereum Alliance, founder Jeremy Millar said that such large-scale coordination aligns with the spirit of his own organization.

He remarked:

"Governance is critical to accelerate mainstream adoption of blockchain technology, and the work of the World Economic Forum, along with Don and Alex, is a most welcomed."

Anticipating challenges

The report kicks off with an analysis of lessons gleaned from the early days of the internet and interviews with several prominent blockchain innovators.

What follows is a breakdown of each of the three ecosystems proposed in the introduction: an ecosystem of platforms (including bitcoin, ethereum, Hyperledger and more); an ecosystem of applications built on those platforms; and the bigger-picture look at the "overall" blockchain ecosystem.

The ecosystem of platforms is then divided into the actual technology that comprises each system, and technologies such as those provided by Hyperledger and Cosmos that seek to facilitate interoperability of each blockchain solution.

Amidst a detailed analysis of scaling problems facing the platforms and difficulties maintaining incentives for "mass collaboration", the report's authors warn that inadequate governance could result in "invisible powers" emerging to exercise influence that poses a potential security threat, and goes against the interests of the overall network participants.

"Such an immature technology would be susceptible to capacity problems, system failures, unanticipated bugs and, perhaps most damaging, the huge disappointment of technically unsophisticated users, none of which it needs at the moment," the authors write.

The parallel network of applications proposed in the WEF paper deals with how various parties interact with the blockchain. On the surface, the network of applications appears to be about how those tools interact with their respective blockchain platforms. But in reality, this section is about how regulators and users interact with the applications.

Citing examples such as distributed computer processing startup, Iconomi, built on ethereum; distributed internet application MaidSafe, built on Omni; and blockchain-as-a service startup Ardor, built on NXT, the report argues that unfamiliarity with the way the technology works is restricting the potential growth of each technology.

From a regulatory perspective, the biggest challenge that could potentially be overcome by a more concerted effort is uncertainty about who might oversee initial coin offerings (ICOs), whose "off-chain equivalents" could end up being regulated, the paper argues. From a customer perspective, a lack of user-friendly interfaces for the non-coding community could result in the creation of systems that leave some of the potential applications of blockchain unfulfilled.

"Our research indicated that there's much work to be done in basic user interface and experience," the authors wrote. "Many of these apps are inaccessible to the average person."

Bigger picture

A third ecosystem proposed in the paper would interact with the platform ecosystem and the application ecosystem in a different way.

Based largely on comments made by National Center of Scientific Research researcher, Primavera De Filippi, and her co-author of a forthcoming book about blockchain by the Harvard University Press, Cardozo Law School Professor Aaron Wright, the white paper concludes that new methods are needed for governance that substitute software for centralized decision-making.

Focusing largely on how consensus is made regarding regulation and scientific research, the paper argues this third network of stakeholders should be designed in part to prevent "powerful incumbents" from exercising disproportionate influence over the direction the stakeholders as a whole are able to proceed.

To guide the interaction of these three networks building with blockchain, the report's authors advocate for the implementation of a "framework" of seven groups based on the Tapscotts' Global Solutions Network.

Specifically, they call for the creation of a standards network, an institutional network, an advocacy network, a watchdog network, a policy network, a knowledge network and a delivery network.

The report concludes: