Open Governance
- Contracts
signed and distributed
Ricardian Contract
returned user agreements
implied and form
standards
form contracts
sector norms & associations
dispute resolution
Arbitration
choice of law
UCC
common law
civil law
jurisdiction
courts
cost
use of the Internet?
additional user rights
securities
consumer rules
transaction rules
- agreement between user and issuer
paper?
digital
HTML
signed? hashed?
5PM
Regulation
Presence
absence
Twice
Reserves
cosignatory
repository
Derivatives
mint
operator
5 parties model
Issuer
cosig / mint
rep / op
Manager
User
agency problem
separation of concerns
insider attack - theft
User is Auditor
- The Professional Audit
failure in trust
continual scandals
Arthur Anderson
auditor to Enron
"document destruction policy"
Ernst & Young
audited PeopleSoft
also sold consulting!
judge Murray
no reasonable policies on independence rules
"utter disdain" for SEC's regulations on auditors' independence
are others clean or lucky?
conflicts of interest
bad news does not help fees
change auditors every few years
general consulting - more revenue
finders, minders, grinders
skeptical audience
independent check
expertise
regulated requirement
listing on Exchange
public work
sale of company
partnership
expense
static audit
based on access to internals
derived on expense of communications
results are suppressed
constraint on innovation
written opinion
dynamic audit
real time access
direct access to backend
load on the server
no "window" for fraud
user is empowered
historical record
server archives
user archives
signing and hashing
compared with later information
cash flow analysis
what banks do...
shows debt servicing
avoids rollover fraud
individual account
receipts
balance
access
fees
user can control own account
- balance sheet
- total issuance
manager's account
float issued by mint
users' value outstanding
- reserves
reputation of repository
independent balance check
movements
new mintings
retirement of minted value
manager's sales & buy backs
sales & buy backs of underlying reserves
forms check on balance sheet
- freedom of scrutiny
Ivan the Honourable
forbearance to slander
strength of openness
lists for all
exchange of ideas
market testing
bugs
lurkers...
media
e-zines
reporters - depth
v. Competition
transaction flow?
subscribers?
sanitised in statistics
The user is Free!
free scrutiny
free defence
free marketing
Crypto
hashes in records
entanglement
shared records
digsigs to lock actors
Goals
security
insider
outsider
cost
marketing
competition
profits
Regulator
relationship
- SRS
do not go to the regulator
always comply
provide all doco
be helpful
comparison with flock
money laundering
due diligence
comparison with practice
laws to force disclosure
filings of balance sheets
quarterly
annually
free cash flow
independence of directors
Application Requirements
creates technical system
gaps left by tech
layers 1-4
Governance finishes the security
meets requirements of layers 6,7
Historical
- Why not before?
expense of comms
strength of reputation
independent party
professional standards
single purpose
secrecy in business
leads to Audit
- History of Governance
invention of writing, 6000BC
by numbers
counting stock
double entry bookkeeping 1300
separates errors from fraud
allowed growth of non-family businesses
separation of concerns
invention of cash till 1800
separates shop money from assistant
user enrolled in protocol
trust ownership of assets
Gutenberg to Napster
techniques of mass copying
Gutenberg - paper
Napster - music
lead to copyright
essential - physical component
also useful - contract law
The Future of Governance
direct checks by users
records shared with user
results shared amongst users
crypto to assist records
trusted third parties
control of core but small assets
specialised function
reputation rides on it
auditors
professional auditors -> TTPs
audit work -> consulting on user audits
regulation
more self-regulation
more best practices sharing
more public disclosure
more rules
less relevance
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