MIT/ID3 Conference Explores “The Ecology of Digital Assets: Identity, Trust and Data”

As more of our personal and public lives become infused and shaped by data from sensors and computing devices, the lines between the digital and the physical have become increasingly blurred. New possibilities arise, with an inexorable momentum that is supplanting time-honored practices and institutions. M.I.T. and ID3 hosted an invitational conference to assess the implications of the transition into a “new ecology of data assets,” where virtualization and ubiquitous computation define new rules, indeed, new social contracts for all forms of human interaction and rule-making.

A very different digital global infrastructure is emerging on the Internet, one that is spontaneous, autonomous, self-healing and wholly distributed without the need for centralized authorities or control. Bitcoin, digital exchanges and other forms of cypto-currencies and “self-signing” ledgers and contracts are but the first generation of a new wave of technologies and services for creating and exchanging value in digital assets.

This new ecology of data assets is both challenging conventional practices of government, law and markets as well as providing entirely new solution-sets for managing the digital identity of people, devices and institutions, and assuring secure, trustworthy communications.

“What once required the authority of a central bank or a sovereign authority can now be achieved through open, distributed crypto-algorithms without regard to borders or human intervention,” said Dr. John H. Clippinger, Executive Director of the Boston-based tech nonprofit ID3. “We are seeing a new kind of highly distributed, self- deploying, self-healing infrastructure that profoundly alters one of the most fundamental precepts of human social and economic organization – the issuance and management of identity, access rights and risk.

Ubiquitous computation, machine learning, the Internet of all things, and the virtualization of institutional and organizational processes are driving a sprawling “datafication of everything” that cannot be governed by existing systems of law and regulations. As recognized at the conference, the design and implementation of new modes of identity management, rule-making and governance require further development and consensus.

Toward that end, in a spirit of cooperative exploration, seventy-five top industry technologists, banking and finance executives, Treasury Department regulators, lawyers and diverse stakeholders convened at the MIT Media Lab on July 30-31, in a small conference co-hosted with ID3. The topic: “The Ecology of Digital Assets: Identity, Trust & Data.”

Among the many prominent participants were former FCC Chairman Reed Hundt; former Assistant Attorney General for antitrust issues and former FTC Commissioner Christine Varney; the CEO of the British think tank Nesta; senior management from Citibank, BNY Mellon Bank, State Street Bank, and Fidelity; and representatives from the U.S. Treasury Department, the Brookings Institution, and the World Economic Forum.

Also attending were prominent European technologists, policy experts, attorneys and finance officials. They all recognized that a new generation of technologies is dramatically changing basic structures of commerce, social practice, governance and law.

As many panels at the MIT/ID3 conference affirmed, the ubiquity of data systems means that we cannot simply look to “outside institutions” like government and law to assure responsible governance and control of data. Effective solutions can only come by developing new systems of control from within the data-usage environment, which includes technology design and self-organized social governance.

Banking and Finance

One of the key sectors affected by the datafication of everything is banking and finance, an industry that is keenly aware of the challenges posed by Bitcoin and other digital currencies. When distributed self-authentication systems can virtually eliminate the need for interchange and custodial fees, it raises fundamental challenges to the viability of banks and third-party guarantors.

As one panelist noted, “Banking is going to change dramatically – with fees going away – because new Internet-based services are beginning to replace the high-value services historically offered by banks alone.” Much of the disruption is being driven by new digital currencies such as Bitcoin and Ripple, whose algorithm-based systems of trust and trading efficiency are eroding conventional business models.

The conference explored many such challenges in small, Davos-style breakout groups, eliciting candid comments about the problems plaguing banking and finance today.

Alex “Sandy” Pentland, who directs M.I.T.’s Human Dynamics Laboratory and the M.I.T. Media Lab Entrepreneurship Program, introduced the idea of “one click secure infrastructures” as a path forward. Such systems allow decentralized, autonomous management of security keys by using a P2P network with distributed hash tables so that all processing and storage is virtualized and done encrypted from the host. By creating very high costs to achieve security breaches and assuring rigorous, continuous authentication, encryption and access controls, it is possible to establish “end-to-end chain of custody for all data.”

A series of striking posters created by the noted designer Bruce Mau addressed some of the key questions on people’s minds – and suggested fruitful ways to answer those questions. A few examples:

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Reinventing regulation for the Bitcoin era

A critical challenge, many participants agreed, is to find new ways to reinvent government regulation. While the future evolution of Bitcoin remains an open question, the distributed technological systems that undergird the currency are here to stay – and those will require the invention of imaginative legal and regulatory frameworks.

Regulation is often more oriented toward addressing familiar problems (consumer protection, labor standards, etc.) in conventional ways rather than allowing experimentation that might produce novel and even more effective, stable solutions. That’s why ID3 and MIT’s Connection Sciences Institute, like so many other participants, are calling on regulators to give their blessings to more “safe harbor” regulatory provisions and “living lab” experiments that can authorize companies to innovate in good faith within certain broad parameters.

Besides the “safe harbor” approach, one proposed regulatory innovation would be to empower individual users – and community of users – to act as self-governing bodies in their own right to protect people’s interests. Using private contract law to devise new sorts of “social contracts,” distributed autonomous organizations (sometimes known as DAOs) may be able to provide more timely, rigorous and responsive “regulation” of problems than conventional regulation.

Similarly, user-centric “smart contracts” that contain built-in algorithmic functionalities may allow consumer to assert greater control over their digital assets than the courts or government agencies.

One of the enduring challenges of moving into the new systems of self-governance and data-management is understanding the new conceptual frameworks and logics that are animating open platforms. It helps to conceive of data as a digital asset with its own dynamic social flow and emergent properties, and to understand how context and personal agency play critical roles in creating new institutions.

For some material about this about account, I am grateful for David Shrier’s two “flash reports” at on each day of the MIT/ID3 conference.

–David Bollier