Papers Relating to Bitcoin and Related Topics in Law: Part I

This article was first published on Dr. Craig Wright’s blogand we republished with permission from the author. Read Part 2, Part 3 and Part 4.

Annotated Bibliography: Part I

The term decentralization has become a core theme when it comes to describing how blockchain-based monetary systems work. Since the terminology was first documented in the seminal work of Baran (1964), networks have been developed to integrate the robust functionality that comes from decentralization and distribution of functions over multiple locations. Nevertheless, Bodó et al. (2021) show how the terminology related to network decentralization has developed into a political discussion unrelated to the underlying network technology.

Annotated bibliography

Baran, P. (1964). On distributed communication networks. IEEE Transactions on Communications, 12(1), 1–9. https://doi.org/10.1109/TCOM.1964.1088883

Baran (1964, p. 1) presented a seminal work analyzing how a “distributed communication network concept in which each station is connected to all adjacent stations rather than to a few connection points, as in a centralized system” has a “payoff for a distributed configuration in terms of survivability in cases of adversarial attacks targeting nodes, links, or combinations of nodes and links”. While the paper is referenced extensively in relation to blockchain networks, the structures representing centralized, decentralized, and distributed networks do not apply to any blockchain system. Rather, systems are such as Bitcoin deployed in a small-world network No mention of a small-world network would be expected in Baran (1964), as such network structures would not be documented until 1996.

Nevertheless, the concept of distributed networks also applies to small-world networks. A small-world network encapsulates the advantages attributed to centralized and distributed networks described by Baran (1964). Accordingly, the use of the paper by those in the “cryptocurrency” industry to refer to the political decentralization of Bitcoin can be shown to be in line with the original concepts of the work of communication networks. The author noted how distributed networks had better survivability. The features of blockchain networks integrate such advantages, providing a more secure network than those offered by traditional centralized systems, including banks.

The article is important in demonstrating the misuse of vocabulary within the current research related to blockchain networks. Using the author’s work, but not presenting it in terms of computer science and networks, but using it to represent the political and social science terminologies of decentralization, the article demonstrates the fundamental aspects of resilience associated with distributed networks and the way in which such systems can be controlled of individual units and yet decentralised. Therefore, the political case associated with cyberpunk and crypto-anarchist writers promoting Bitcoin can be shown to be disingenuous.

Bodó, B., Brekke, JK, & Hoepman, J.-H. (2021). Decentralization in the blockchain space. Internet Policy Review, 10(2). https://doi.org/10.14763/2021.2.1560

Bodó et al. (2021) note how Baran (1964) implemented a theoretical typology of communication networks. The model presents a difference between centralized, decentralized and distributed networks in the telecommunications industry. While the model is often referenced and argued to represent Bitcoin and related networks, the description of decentralization and distribution presented generally within the networking and computer science fields is not used. Rather, the distributed system will be referred to as one meshand Baran did not create small-world networks like Bitcoin, which were not referenced in the literature until 1999.

Bodó et al. (2021, p. 4) claim that “central nodes can unilaterally set the terms of use of the network” and that they operate with higher efficiency and lower cost than distributed networks. Nevertheless, the statements are made without the support of evidence, and the argument for higher resilience and the ability to set rules on centralized systems, but not on distributed systems, is presented dogmatically, without validation or evidence. While the paper documents decentralization as a social construct, the various references used in support also uncritically present an analysis of what the authors believe should be achieved, rather than what actually happens.

The article demonstrates the lack of critical awareness or analysis in research related to blockchain technology. In analyzing the concept of centrality and decentralization in blockchain systems, the authors present no evidence related to network science or the mathematical measurements of centrality in graph-based networks. Consequently, the authors demonstrate the pseudoscientific agenda associated with promoting decentralization and offer a means of falsifying the argument presented in the article.

Bonnet, S., & Teuteberg, F. (2022). The Impact of Blockchain and Distributed Ledger Technology for the Governance, Protection, Enforcement and Monetization of Intellectual Property: A Systematic Literature Review. Information systems and E-Business Management. https://doi.org/10.1007/s10257-022-00579-y

In this analysis of property rights enforcement and monetization using blockchain technology, Bonnet and Teuteberg (2022) examine the different types of intellectual property and how they apply to blockchain technologies such as Bitcoin. The paper starts with an analysis of the more commonly implemented forms of intellectual property. In analyzing such research, the authors review both media as they apply to the Internet and distributed ledger technologies as they apply to smart contracts. In the course of this process, the authors review the concepts presented by Lawrence Lessig regarding the crypto-anarchist concept of “code as law” and include the question of whether blockchain technology needs legal enforcement or whether it can become an enforcement system in its own right, outside of governmental and regulatory control.

In the analysis, the authors mention many types of intellectual property rights, including copyright. However, database rights and the protection that will arise through the creation of a ledger are overlooked. Such an omission is surprising, given the scope of the review. Bonnet and Teuteberg (2022, p. 16) find that “[n]early half of the selected publications believe the technological challenges represent the most important obstacles were further adoption, and at the top of the list is a lack of scalability”. The limitations around processing and storage are presented as intractable problems that will limit the use of blockchain technology.

The scope of the publication is considerable, covering many articles on the subject. Such work is valuable as a starting point for analyzing intellectual property rights as it applies to blockchain technology, and will form a background for analyzing the existing work on the topic despite the author’s neglect of database rights. The authors argue that the technology is immature and will take time to be implemented from a technological and legal standpoint. The finding shows that the research done in my study is valuable if it is successful and is currently believed to be unattainable.
Bonsón, E., & Bednárová, M. (2019). Blockchain and its implications for accounting and auditing. Meditarian Accountancy Research, 27(5), 725–740. https://doi.org/10.1108/MEDAR-11-2018-0406

The authors define “Blockchain [as] a distributed digital ledger used to record and share information through a peer-to-peer network” (Bonsón & Bednárová, 2019, p. 725). Nevertheless, the terminology associated with such terms has not been adequately described. Peer-to-peer (P2P) refers to the ability to directly connect and exchange information between users. Nevertheless, the reference to P2P networks has documented the erroneous idea of ​​a peer connecting to another peer through a mesh network. Such a structure has been advanced but fails to describe the implementation of blockchain-based systems such as Bitcoin (Javarone & Wright, 2018).

The authors refer to the immutability of a blockchain system. Here they note how changing a record would require changing a previous transaction in a block that has been created, and that would be impossible due to the decentralized nature of the technology (Bonsón & Bednárová, 2019, p. 726). Yet such thinking overlooks the methods used in accounting systems to update and change records. For example, in accounting processes that use paper-based records, the immutability of the existing records requires the addition of external journals that can be linked to the general ledger. Such a structure is possible within any blockchain network and its implementation will ensure that the system remains immutable and records the entire transaction journal that captures all changes.

Bonsón & Bednárová provide an example of the benefits of reducing economic uncertainty (2019, p. 729). In addition, the ability to reduce agency costs and share information openly, in a way that reduces asymmetry, provides economic benefits for many organizations. The biggest benefit can be argued to come from the increased transparency and auditability (2019, p. 730) that will come from a single verifiable source of accounting information that cannot be changed without leaving an audit trail of the changes. Nevertheless, the authors also argue that the limitations of scalability associated with a blockchain-based system (2019, p. 732) limit the benefits that can be attributed to a business. However, by demonstrating the interconnection and transaction speed of the primary systems of the blockchain network, it will be possible to demonstrate how the system can scale, providing all such benefits.

Additional references

Javarone, MA and Wright, CS (2018). From Bitcoin to Bitcoin Cash: A Network Analysis. Proceedings of the 1st Workshop on Cryptocurrencies and Blockchains for Distributed Systems, 77–81. https://doi.org/10.1145/3211933.3211947

This article has been lightly edited for clarity.

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