Category Archive: Massimo Chiriatti

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Smart Contracts as new laws? Better handle with care

(Sole24Ore) “A contract is an agreement”, this was the mandatory phrase for starting a private law exam test after which we would discuss the conditions for its validity. Today, university memories are coming back as contracts are revised in technological form; indeed they’re called Smart Contracts. This brilliant intuition came from Nick Szabo who proposed them in 1994, even before Bitcoin and the diffusion of the Internet.
Let’s start with the definition:
“Smart Contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause. Smart contracts aim to provide security superior to traditional contract law and to reduce other transaction costs associated with contracting.”
The words in bold about automatic performance of the clauses is a source of opportunities and risks, questions and doubts. One thing is certain: A Smart Contract isn’t a contract, but only the part related to agreements performance.
Until now, when one of the contracting parties feels the other party didn’t respect a clause of the contract then a third party need to be called in order to settle the conflict. This neutral authority has always been a human one. Now, we rely increasingly on technology to facilitate relationships between humans, even if this could seem an oxymoron. Maths (or should we say cryptography) intends regulating any operation between each one of us, close or far, a known or unknown stakeholder.
How do technology and economy meet at this point?
If a contract represents the formalization of an agreement, how can we make it secure between parties that remotely agree and maybe don’t even know each other? The answer is
Smart Contracts based on Blockchain technology.
The contract then becomes an instructions set. If it can be codified, it can also be “computed”, i.e. if the conditions are satisfied, it ensures that performance is automatic.
It sounds like a futuristic scenario, but in reality the Internet of Things (IoT) includes this form of contracts for new services. All is fine, in the end “equal justice for all”, not only for those who possess the power. Eliminating all excess of human discretion which leads to long and inconclusive civil lawsuits is actually one step forward.
But in which direction?
If we choose the one that leads to no human discretion at all, the risk may be even greater. These systems are fascinating, they open up incredible scenarios, but they also are autonomous and immutable. This isn’t good, machines must remain instruments. They mustn’t have the last word. Otherwise this will be the first step on a slope in which decision power is given to machines. Instead, we would like machines that assist us in the decision-making process. We must leverage them but not be ruled by them. The variability of emotions remains a human factor that we shouldn’t give up.
The third party, not human, to which we entrust the performance of contract can’t always be mathematics. We hope for a coexistence with the practitioners: the new generation lawyer will have to know how to write a Smart Contract, for example translating the clauses into computer code as shown in the figure.
All this to emphasize the fact that Smart Contracts should be used to control the performance, and never to judge. New technologies require for behavioral models to adapt. . We must use them according to their usefulness, without extremisms. We will use these instruments but wisely, because we don’t live in a deterministic world. Not yet.
Author: Massimo Chiriatti, technologist and member of

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With Bitcoin time is not more money

(Sole24Ore) Money is a social convention with which communities facilitate economic exchanges, usually to the extent of the technology currently available. In this way, we have progressed from barters and swaps to currency with intrinsic value, be they anything from banknotes to wire transfers to gold coins.
We have experienced all of the positives and negatives of fiat money; we now have the freedom to decide together whether to accept the new technology or not.
The use of bitcoins makes the time a neutral factor: never in favor or against any party.
Time, related to fiat currencies as a result of inflation, is now an independent variable which reverses the most important financial concept that we have used for millennia.
If time is no longer the master, then the people are no longer directly subject to the phenomena caused by it, such as:
Currency also usually has the function of “store of value” which, by its inflationary nature, means that said currency keeps losing value over time. All this contributes incentives for spending and circulation. From the point of view of trade, this is a good thing. With an inflationary currency, holding the money is a sure loss.
With the traditional currencies, such as the euro or dollar, and because no one wants to lose value, you feel obliged to spend it or invest it, triggering the avalanche of compound interest and cross (not just monetary) between all actors involved.
It is the free decisions of economic agents to enter the time in the transactions to create artificial debts and credits to be paid by a certain date, but that is not inherently linked to the nature of Bitcoin. It remains a voluntary choice, not imposed by the monetary system’s infrastructure.
From a theoretical point of view, a peer can really be defined as a peer if there is no asymmetry of resources; i.e., if none of the parties is favored or disadvantaged by some factor, such as the time.
The Bitcoin system provides that the money supply is predetermined, not subject to discretionary decisions, therefore, betting on variable time does not make sense. (It’s not a deflationary currency, because the supply grows a lot at the beginning to power the system and then remains stable and predetermined for a long time).
For this reason even a millionth of a bitcoin has value, and above all it no longer has an expiration date as fiat currencies do. It’s important to note that bitcoin is not the only possible future; the open-source community continues to generate hundreds of other models with alternative incentive structures.
Are we going to lose the flexibility in regulating the money supply during a crisis with Bitcoin? Yes, and it will be a problem. Some might not view the issue of not being able to create speculative bubbles printing and pumping more money than necessary in the system as a problem, though. For the first time in centuries, the decision to print money has been released from the control of the Government.
It’s time to take a step forward and disengage from people who run central banks? If the number of people who benefit increase or have positive expectations about the future value of bitcoin, then adoption will increase, and show an appreciation of the currency against other currencies; otherwise, we will experience other things, as the ancient history of the world has shown.
It is the currency market, beautiful in its simplicity and unforgiving nature.
Making money timeless allows freedom from the top-down approach. All of this Bitcoin stuff excites the experimenters, confuses the public, and scares those who have interests to protect.
If we free ourselves from the authorities, particularly by people, organizations – and time – you can choose your favorite model for a new social convention.
Author: Massimo Chiriatti, technologist and member of

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why you cant cheat at bitcoin

Economic problems Bitcoin solves and why it could change our lives

(Sole24Ore) What is going to happen in the future if the computer is always becoming smaller? Always less expensive, and always more mobile?
Soon, we’ll need to link these computers together in a way that is different from the past, with less centralization. Here, we explain the birth of distributed systems, that coexist alongside the traditional systems without replacing them.
The inherent problems in verifying access rights to information and their management has hindered the development of distributed networks until the publication of the famous Bitcoin whitepaper by Satoshi Nakamoto.
Nakamoto solved two economics problems:
  1. Make digital information (for example, a bitcoin) a “rival good;” and, preventing the owner to spend it a second time
  1. Achieving said result with a public register (the blockchain), where the access to information is “not-excludible”, because it is available without intermediaries – it is public and permanent.
The consequences of the adoption of the blockchain is twofold: on one hand it will lower transaction costs; on the other hand,  it creates a trust network with a group of people who do not know each other. All ensured thanks to the certainty guaranteed by asymmetric encryption.
With the blockchain, we have found a means for automatically certifying our money transfers, in the case of mathematical coins.  In terms of property, with the smart contract first described by Nick Szabo, the blockchain can one day enable patent protection, trusted electronic voting remotely, and even more.
Decentralization has an important effect on transactions. Three areas that benefit are as follows:
  1. Anonymity – if no one knows the identity behind the lists of parties.
  2. Privacy – in the sense that no one knows what you purchased and at what price.
  3. Irreversible – which comes with a lack of monitoring and compensation body.
Now we are able to immortalize forever the information (amounts, documents, debts and credits, etc) and transfer them alone, without intermediaries such as notaries and lawyer. The work to certify these transactions are carried out by the “miners.” They are incentivized by receiving for a small fee (and with the prize of new bitcoins) to cover the fixed costs of specialized equipment and the variable costs of consumed energy.
However, not everything can be fully decentralized. The more mining power is distributed and fragmented, the less risk the network runs into. The power, thus decentralized, is inversely related to corruption.
On this issue, the known Bitcoin popularizer Andreas Antonopoulos, in an incredible article, describes the possible totalitarianism that could happen once someone has taken control of the valuable information that people exchange on the way they spend money.
“If there is control, there is power.”
What innovation can be achieved if you have to ask permission to exchange data?
It is decentralization that creates the conditions that can develop a competition in the offer of services conveyed by the network.
We probably can’t imagine what will happen after the mass adoption of this network for the exchange of information. Just like it was not imaginable what Google and Facebook would come to be before the advent of the Internet. Billions of interdependent people and machines give rise to new business; and when are grouped in federations, thanks to the standard, they create new and completely unexpected ecosystems.
The blockchain is, therefore, a public digital good.
In this field, there is new research in the universities; one of those carried out by an Italian scholar at Harvard known as Primavera De Filippi.
Now you can reverse incentives that led to the infamous “tragedy of the commons”. Because the use of policies based on a blockchain makes it possible to design new systems of incentives, which are certainly more transparent, you can therefore achieve a new form of consent for the self-government of public goods.
Power of intangibles: we now have a (info)structure that does not consume with its use and that we build together.

Author: Massimo Chiriatti, technologist and member of

Bitcoin Blockchain Visualization

Source: The Future of the Web Looks a Lot Like Bitcoin (

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