Calling for “Spring” from the “Crypto Winter”: The Role and Significance of BGIN and an Invitation to Join Block 9

Why Multistakeholder Rule-Making is Necessary

In the G20 meeting where Japan chaired in June 2019, the importance of multistakeholder dialogues in decentralized finance was explicitly mentioned in the communique. In response to this, the Blockchain Governance Initiative Network (BGIN) was established in April 2020. BGIN is hosting its 9th annual meeting (Block 9) in Sydney, Australia, from November 19th to November 23rd.

Multistakeholder discussions involve addressing complex issues among a multitude of different stakeholders. When there is no clear solution within a single stakeholder or a small group of stakeholders, it becomes necessary to gather multiple stakeholders to tackle and resolve the issue.

For example, in the realm of cryptocurrencies using blockchain technology, problems related to money laundering and consumer protection issues like fraud cannot be entrusted solely to engineers or regulatory authorities. It’s not feasible to rely on a single stakeholder to accurately identify and solve these issues, as they may lack the necessary expertise. In essence, a collaborative effort among diverse stakeholders is imperative.

The same concept may apply to generative AI. Recently, the United Nations announced the establishment of an advisory body for AI governance. However, considering the grassroots development of AI technologies, it remains uncertain whether governance similar to the International Atomic Energy Agency (IAEA) for nuclear power would effectively function in the context of generative AI. On the other hand, creating a multistakeholder forum, including grassroots developers, is no easy task.

An example of a somewhat functioning multistakeholder governance model is the one we encounter daily — the governance of the Internet. The Internet operates without a central authority, and standards are established through a process of “rough consensus” and “running code,” verified by the eyes of numerous stakeholders. As a result of over 30 years of such collaborative efforts, we continue to enjoy a universally accessible and innovative Internet. The process by which Internet governance was established has been documented in a report from a past investigation conducted by the Financial Services Agency, which is available for reference.

BGIN aims to draw lessons from the history of the Internet community and provide a platform for stakeholders in the blockchain space to foster common understanding and collaborative problem-solving.

To put it bluntly, much of what has been termed the “Crypto Winter” since last year can be attributed to a lack of communication among stakeholders. In the midst of revelations of lax business practices and malfeasance, have those involved in blockchain businesses taken effective steps to address the concerns of governments and regulatory authorities? Have regulatory bodies effectively communicated with a technology they can’t regulate single-handedly? Furthermore, as some individuals continue to closely monitor the actions of the U.S. SEC, have they engaged in communication with regulatory officials and, when necessary, persuaded them of the value of the technology? From my perspective, while a few individuals have put effort in this direction with the establishment of BGIN, the industry as a whole may not have dedicated sufficient resources to such endeavors.

In fact, the Internet Engineering Task Force (IETF) held its conference in Yokohama in March of this year, where standards for the Internet were discussed. In recent years, discussions related to blockchain have also taken place within the IETF. The stability of blockchain technologies, including P2P networks, owes much to the extensive efforts made by IETF Meeting participants to engage in technical discussions and compile common documents. Ideally, blockchain engineers should be present at IETF meetings. However, when I inquired at an ETH Global Tokyo side event in April about attendees’ participation in the IETF conference in Yokohama, not a single person had attended. This is the reality. In October, the Internet Governance Forum (IGF) held its conference in Kyoto to discuss Internet governance. While IGF operates under the United Nations, it involves a multistakeholder approach to discussions, where nations participate as just one stakeholder among many. The agenda covered a wide range of crucial topics related to maintaining the Internet securely and sustainably, and Japanese Prime Minister Kishida’s speech on AI generated significant attention. A session on blockchain governance was also held, though it didn’t become a major focal point.

If there is a desire to emerge from the Crypto Winter, learning from the history of the Internet and nurturing effective communication and collaboration platforms is essential. BGIN serves as such a platform in the realm of blockchain, akin to the IETF and IGF. In the wake of various events occurring after 2022, as the Crypto Winter unfolds, attention on BGIN is increasing.

The Significance of BGIN

There may be arguments suggesting that different stakeholders in the blockchain industry already interact through various “events.” Indeed, there is no shortage of events that resemble “festivals,” where a conglomerate of panels featuring well-known personalities discuss similar topics.

However, at such gatherings, the same faces often engage in repetitive conversations. The limitation of these events lies in their style, where attendees merely listen to panel discussions featuring well-known figures. Despite the efforts to bring together a large number of people in one place, there is often a lack of articulation of differing opinions, and these discussions are rarely documented in a manner that can facilitate learning for others. In many cases, attendees may leave with a sense of having heard interesting discussions but quickly return to their everyday lives the following day, ultimately forgetting the insights they gained. In such a scenario, little progress is made in addressing the underlying problems.

The primary objective of BGIN is to foster a shared understanding among diverse stakeholders about the challenges that cannot be resolved by a single stakeholder (which is the case for most issues). These challenges include areas where regulatory authorities, central banks, blockchain business operators, academia, and even cypherpunks who distrust governments can engage in discussions. BGIN aims to publish these discussions as common documents and make them available for further action by each stakeholder. Some of these documents may eventually become global standards, constituting a critical aspect of global rule-making in the blockchain space. BGIN is effectively pioneering what is now being pursued as part of the “Hiroshima AI Process” for AI that was initiated at the G7 Summit in Hiroshima in May of this year.

From the perspective of “standardization,” ISO TC307, for example, is working on standardizing blockchain technology, and I am also involved in this effort. However, ISO standardization is an “international standard” involving nations, and it progresses through a one-country-one-vote system, which may not align well with the grassroots development of technology in blockchain. Furthermore, attendance at these meetings is limited to individuals approved by each country’s committee, making it difficult to imagine the involvement of cypherpunks in document creation.

On the other hand, various blockchain projects have documented technical specifications and governance principles under their unique governance structures. Examples include Bitcoin Improvement Proposals (BIPs) and Ethereum Improvement Proposals (EIPs). However, the participation of stakeholders such as authorities and general users in these discussions is rarely observed. As revealed in a report by the Financial Services Agency (FSA), there is a significant gap between the ideal and reality of on-chain governance. In other words, the current approach is not effectively contributing to multistakeholder problem-solving.

BGIN’s Purpose and Progress

BGIN, established in March 2020, has now been in existence for three and a half years. Through bi-weekly Zoom meetings and three annual general meetings, two working groups have engaged in discussions and document creation regarding various issues. As of now, they have published nine documents, including links to the following:

• Study Report on Selective Disclosure
• Proposal of Principles of DeFi Disclosure and Regulation
• Soulbound Tokens (SBTs) Study Report
• NFT Study Report Part 1
• Incident Response of Decentralized Custody: A Case Study
• Study Report for Ransomware Reaction Part 1
• Present and Future of a Decentralized Financial System and the Associated Regulatory Considerations
• Discussion Points: Potential Points of Failure of Stablecoins and DeFi
• Potential Points of Failure for Stablecoins

Currently, projects involving the creation of documents are in progress for SBT (Soulbound token), wallets, privacy protection in DID (Decentralized Identifier), credentials, and zero-knowledge proofs. Anyone can review the documents being worked on, provide comments, and make content suggestions.

• Wallet Governance, Policy and Key Management
• Soulbound Token Study Report — Part 2
• Token Economy Compliance with SBTs
• Zero Knowledge Proof and its Applications (currently open for public comments on Google Docs).

BGIN’s general meetings, known as Block Meetings, aim to enhance the quality of discussions and document creation by providing a platform for wider discussions with physical meetings in addition to the regular online activities of the working groups. Unlike typical panel discussions, anyone can participate and contribute to the discussions at these meetings, although there is a main discussant. In other words, anyone can be part of the rule-making discussion. The participants in these discussions come from diverse backgrounds, ranging from global regulatory authorities to cypherpunks who typically do not engage with one another. Thus, this is the only place where anyone can participate in rule-making discussions in a permissionless blockchain environment. People from around the world who are involved in rule-making can participate, engage in discussions, and document the content. The value of BGIN lies in promoting a shared understanding and collaborative problem-solving among different stakeholders, documenting that understanding and solutions, and making it accessible to everyone. Some of these will eventually become recognized as standards. This is the true essence of BGIN’s purpose and the path to overcoming the Crypto Winter.

Highlights of the 9th General Meeting (Block 9)

Block 9, taking place over four days, will focus on the following main topics. As previously mentioned, BGIN sessions are not traditional panel discussions, and while there are main discussants who lead the discussions, anyone can participate. The results of these discussions are documented in meeting notes, contributing to future document creation.

Day 1 (Blockchain Governance)
Day 1 will revisit the discussion of blockchain governance in grassroots technical development. Participants, including members who attended the Internet Governance Forum (IGF) in Kyoto in October, will engage in discussions about the challenges of blockchain governance and the consensus on governance methods. A lecture on Ethereum governance will be delivered by the Ethereum Foundation, followed by discussions on identifying governance issues and planning for future documentation.

Day 2 (Financial Applications)
In the morning, the discussion will revolve around the meaning of decentralization in blockchain’s financial applications. Topics will include CBDCs, deposit tokens, stablecoins, cryptocurrencies, DeFi, and the collaboration among these different aspects of “money.” The day will commence with a keynote on decentralized finance in MakerDAO, followed by discussions among central banks, academia, stablecoin providers, blockchain engineers, and more. The focus will be on understanding the differences in nature and the directions for future documentation regarding the collaboration of these financial elements. A session chaired by Carole House, who was involved in digital asset executive orders at the White House, will discuss the R&D strategy for standardizing digital assets currently under consideration by the U.S. government.

In the afternoon, the workshop sessions will split into two parallel sessions, dedicating 90 minutes to the specific editing and discussion of documents related to:

• Potential points of failure of Stablecoins
• Transparency of dApps and Sound DeFi
• CBDC and Privacy
• Smart Contract Security and Governance

Day 3 (Identity, Key Management, and Privacy)
In the morning, discussions will explore new KYC/AML approaches using Privacy Pools, a topic co-authored by Ethereum developer Vitalik Buterin that has generated substantial discussion. Fabian Schar, a co-author, will present the keynote. Subsequently, Zooko Wilcox, a leading figure in ZCash and a cypherpunk, will participate in the discussion of implementation and multi-stakeholder understanding. Conversations will also touch upon blockchain security, privacy, and the crucial aspect of wallet development. Daniel GoldSchrier, the head of the Open Wallet Foundation, will lead the discussion on secure wallet construction and collaboration with multiparty computation.

In the afternoon, the workshop sessions will again split into two parallel sessions, dedicating 90 minutes to the specific editing and discussion of documents related to:

• ZKP and its applications
• Accountable Wallet
• Token and Privacy Impact: World Coin — Biometric information
• Digital Identity — a global discourse

Day 4 (Industry Sessions, and Local Blockchain Sessions)
Day 4 will focus on discussions of industry trends and challenges centered around presentations and panels from sponsoring companies and organizations. There will also be discussions about blockchain trends in Australia, the local context for blockchain, and its development.

Registration for BGIN Block 9 is already open.

You can find more information on the meeting on the conference’s website: BGIN Block 9

https://bgin-global.org/events/20231119-block9

To register for the event, visit BGIN Block 9 Registration page

https://www.eventbrite.com/e/bgin-block-9-meeting-nov-2023-tickets-728679468907?aff=oddtdtcreator

Since the meeting will be held in a hybrid format, local attendance is encouraged, but remote participation is also possible