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How smart contracts can help govern and mine resources in outer space

Blockchain and space expert Brian Israel of UC Berkeley Law discusses space regulations, carbon credit trading and more in this special Forkast.News interview.

Blockchain and smart contracts could one day form the backbone of a growing space industry as governments as well as private companies like Elon Musk’s SpaceX reach more than ever for the stars.

“If you gaze a little bit into the future and imagine a whole supply chain based on celestial body resources, that’s easy to envision, especially if transactions are negotiated between robots,” said Brian Israel, lecturer of space and blockchain law at UC Berkeley School of Law, in an interview with Forkast.News.

Brian Israel

The huge distances involved will cause delays in communication between people on Earth and assets operating in space, which in turn could create issues when it comes to determining specific courses of actions. “You can see the advantage of smart contracts there,” said Israel, who was co-founder of ConsenSys Space and general counsel of asteroid mining firm Planetary Resources, both of which are now wound down.

It may sound like a scenario out of a science fiction movie, but it may come sooner rather than later as NASA recently announced it is looking to pay companies to collect moon samples and bring them back to earth.

Retired Canadian astronaut and former commander of the International Space Station Chris Hadfield also believes that blockchain could one day be an instrumental technology in developing the space industry.

“As we start to settle on the moon over the next couple of decades, and as we start to mine what’s available on the moon, and the companies that are set up to mine asteroids, as the cost of access drops, it becomes even more prevalent, how are we going to manage that?” Hadfield said in a recent interview with Forkast.News. “There’s a huge opportunity there.”

See related article: Astronaut Chris Hadfield on blockchain’s next frontier: nodes in orbit, and settling the moon

Watch Israel’s full interview with Forkast.News Editor-in-Chief Angie Lau to find out how blockchain’s potential uses in space, including helping coordinate and govern private companies through smart contracts.

Highlights

  • How blockchain could be used in space: “[Blockchain enables] what I think of as private ordering among operators in space: allowing operators to enter into private contracts to make enforceable commitments with each other in ways that had been difficult, bordering on unworkable before.”
  • What role would humans have? “Smart contracts work best for commitments that are relatively objective and objectively verifiable, which is not everything. I personally see a value in using smart contracts in a hybrid way to use arbitrators as an oracle — to have human arbitrators in the oracle loop.”
  • How to make smart contract enforceable: “For that to work, that would require all the parties to a contract to basically lock up a substantial amount of value in the contract in sort of escrow.”
  • Creating rules and regulations for space: “Can smart contracts, or at least as the technology matures, enable, say, satellite operators to make enforceable commitments to each other, almost to self-regulate?”

Full Transcript

Angie Lau: Welcome to Word on the Block, the series that takes a deep dive into blockchain and the emerging technologies that shape our world at the intersection of business, economy, and politics. It’s what we cover right here on Forkast.News. I’m Editor-in-Chief Angie Lau. Well, we’ve been talking a lot about space a lot.

A lot of people are thinking about how blockchain can be integrated into mining resources for the rich asteroids and minerals that exist in space. Well our next guest, Brian Israel, thinks about that a lot too. He’s currently a lecturer at UC Berkeley Law on space law and blockchain, but formerly he was co-founder of ConsenSys Space, a subsidiary of ConsenSys that acquired Planetary Resources, a blockchain-based company that looked at using blockchain as the world looked to space to mine raw materials. Brian Israel joins me right now. Brian, welcome. It is great to see you.

Brian Israel: It’s a pleasure to be here.

Lau: What should we be thinking about when we look to the stars? It really, truly is the final frontier; it is the future. What is in our future right now?

Israel: Well, I think deeper exploration of our solar system and even human settlement of the moon and Mars is in our future, but really, space is ever-present in our present as well, in ways that we probably take for granted and don’t think about, as we rely on an ever-increasing range of services, from GPS to weather forecasting to the pretty imagery in Google Maps and the like. And those services are growing.

You may have seen headlines that Elon Musk’s company, SpaceX, is fielding a so-called mega constellation of satellites in low Earth orbit to provide broadband Internet. Amazon has a rival constellation to provide broadband Internet, which will be great as far as blanketing every square inch of Earth in Internet, but also creates challenges as space is large — maybe infinitely large — but the area around Earth, where the satellites can provide useful services, is relatively limited. And so it’s an exciting time in space because we are seeing new applications and new entrants, new kinds of actors, whereas at the dawn of the space age, it was the province of governments, really two superpowers.

There are [now] many more governments involved. There are many more companies, and universities, and non-governmental players from an increasingly diverse range of countries that are involved, which is wonderful. So there’s this new dynamism. Of course, it creates governance challenges as well, and really, I think the most fundamental of them is, well, there is the space for which there is no sovereign who is in charge of space. And so how do you get a single set of rules of the road for all these satellites moving at 17,000 miles an hour approximately, around Earth? And that becomes quite a challenge.

Lau: And so then what is the role of blockchain here?

Israel: I think it’s really a question about the roles of blockchain, and I think a lot of them, like many applications of blockchain, are theoretical at this moment and are really just starting to take hold. So there’s the traditional intuitive applications – what blockchain does well in terrestrial economies, it could do well in aerospace for things like supply chain integrity and things like that.

Personally, where I think it adds something new, a capability that’s not just marginally better but was entirely impossible before, is in enabling what I think of as private ordering among operators in space: allowing operators to enter into private contracts to make enforceable commitments with each other in ways that had been difficult, bordering on unworkable before. And I think that particularly, as it becomes increasingly difficult, first of all, for the top-down approach to the governance of working everything out on the international plane. Having governments extend these rules out to private operators doesn’t scale very well to the present diversity and number of spacecraft operators.

I think there is a lot of demand for a governance technology to allow these operators to make enforceable commitments to do the things that they know are in their common interest. And I see smart contracts as providing those opportunities. Maybe not immediately, right now; as anyone who works with the technology knows, it has great promise but it can be clunky in its present implementation. But you can see the arc, or at least I can.

Lau: I do too, in that you take a look at the mess that is Earth right now — we have Covid, we have geopolitical tensions, we have U.S.-China trade disputes that have extended beyond and into technology. There’s just a lot of territorial rights, trade disputes and things like that. In space, it truly is a non sovereign entity, as you said. Everybody is there: governments alongside private enterprise are in space.

So then how do we tie back down to how we want to do business with each other and to play fair? Essentially, that’s what the rules are, that we’re trying to create. It’s interesting to hear that blockchain, at least in terms of smart contracts, can tie the relationship, at least the business relationship between two parties, back down to Earth so that everybody plays by the same rules, essentially.

Israel: Yeah, one dimension of blockchain that I think is transformative really comes into focus if you think about what’s hard about traditional legal contracts, when you have, say, parties from a dozen, two dozen different countries, of course, a contract has value; it’s enforceable because the legal system of the nation-state will enforce it. But when you have parties from many, many countries, it becomes very difficult, sometimes impossible to agree on whose country’s legal system is going to have jurisdiction over this contract and enforce it.

It introduces all manner of business risk and uncertainty, whereas smart contracts dispense with that. The rules and the consequences are hard-coded, so you don’t have to worry what a foreign court is going to do, you can look at the source code and have a pretty good understanding of what will happen. Of course, you can code it — you can make the wrong kind of arrangements, you can fail to foresee something that you wish you would have foreseen, but it removes that level of risk. It introduces other hiccups as well.

Lau: Hiccups like what?

Israel: Well, for one, I think smart contracts work best for commitments that are relatively objective and objectively verifiable, which is not everything. I personally see a value in using smart contracts in a hybrid way to use arbitrators as an oracle — to have human arbitrators in the oracle loop. And then you still have the value of these automaticity of enforcement of smart contracts, where you’re not having to then go into the court that has jurisdiction of a party you just won a judgment against, and enforcing its assets.

This transfer of value is automatic. For that to work, then, at least as far as — maybe there’s a limit to my imagination, but at least as far as I know, that would require all the parties to a contract to basically lock up a substantial amount of value in the contract in sort of escrow. That might not be commercially that palatable, if the parties aren’t used to doing that in their regular course of business.

Lau: And/or, that might be a tough thing to do if it’s about future earnings or future income. So this is really fascinating. What I’m hearing is that you could actually source code, which essentially is terms and conditions of a contract, and that the flow of money or goods and services can transfer between two companies — if A, then B. So if A, goods are delivered, then B, payment is made.

But that’s easy when you are talking about planetary mining, for example: how much of this specific raw material was actually mined and then delivered to a location. That’s very binary, it’s very clear.

But the hiccups come when I say I’ll do something, and then the shades of gray: “Well, I did that.” “But you didn’t do it the way that I exactly wanted to do it.” And there’s stuff like that. But in space right now, we’re still working on what is still fairly binary. What are the applications, the hiccups, that you see, that’s occurring in space? That would be fascinating to understand.

Israel: Well, I think the example you gave is a great straightforward example. If you put on your science-fiction hat or at least gaze a little bit into the future and imagine a whole supply chain based on celestial body resources, that’s easy to envision, especially if transactions are negotiated between robots. 1.5x the distance between the Earth and the sun, where there’s a long delay in communications, you can see the advantage of smart contracts there.

But I’ve also been thinking more in terms of — can smart contracts, or at least as the technology matures, enable, say, satellite operators to make enforceable commitments to each other, almost to self-regulate? And so as a thought experiment, consider that a critical mass of the world’s satellite operators understand that it’s in their rational long-term business interests to adopt a certain measure on the disposal of their satellites at the end of their mission, so that they don’t become debris, they don’t become junk, and they don’t limit the long-term usability of these orbits.

So that measure costs money. It takes fuel to bring a satellite down. It’s more expensive to design than to build a satellite to have that capability. And so for an operator to do that, it will be a competitive disadvantage if its competitors don’t do that. So it’s a classic collective action problem, and the traditional way for the operators to solve that collective action problem in this admittedly simple thought experiment would be to lobby their governments and say, “this is the rule we want. Please enact it.” So to negotiate a treaty on the international plane, and then the governments that are party to that treaty would adopt national legislation. 

Lau: You’re talking about the equivalent of carbon emissions right now, the problem of carbon emissions on Earth.

Israel: Well, right. And I think that’s a — carbon credit trading is another thing I think about, where I see a difference. That’s a great example and gives me an opportunity to lay out a different dimension where I think blockchain can be transformative. So if you think about carbon credit trading regimes, they’re territorial, they’re limited to a jurisdiction. And even some state jurisdictions — California has one — has a carbon credit trading regime. British Columbia has one. They wanted to interoperate, and so they were trying to work out an agreement so that a company in California can trade credits with a company in British Columbia.

So as you grow the network effect, the value of the credits, the value of the regime, the value of participation grows. But if you think about what it takes to make it possible for any company to trade credits with anyone, it requires a massive web of international agreements and international administration. And then if you think about something like a blockchain network, you think, well, you don’t need that because it’s not territorial.

Lau: And hence in space. Now we’re back in space again. It’s not territorial. 

Israel: In space or for carbon credit trading, I think if you have credit represented as tokens on a blockchain network, what you are placing your trust in, is you essentially have a set of rules that are transparent about how these operate. If this, then that. And you place your confidence in almost virtual certainty that the rules will execute in that way. I think that allows parties to transact with each other without regard to what country they’re coming from. I have to say if the country prohibits that activity, that’s another matter. But it’s without those countries having to get together and link up their various regimes.

Lau: But it does take a market leader. It does take a market leader, say, in space. You need a market leader who will only do business with another firm that agrees to abide by the rules that it sets, and hopefully it’s one that says this is good for everybody, it’s good for space. Less space debris means less things falling down to Earth, means more space in our orbit so that satellites that are working aren’t damaged or hit by other satellites that are no longer working or are garbage. I mean, it’s a good thing that we have less garbage in our orbit as well. So does it take a market leader to serve in that function?

Israel: I absolutely agree. I don’t see this technology as a magic bullet. I think of it as another governance technology, a new governance technology. So in our toolbox, we have treaties, we have traditional legal contracts, and I think we will soon have a viable new tool that will have a different set of trade-offs.

Particularly when you think about this international space where there’s no territorial sovereign at all, which is a vacuum in some respects, sometimes it’s easier if you think about who sets the traditional rules of the road, like what side of the road you drive on. Well, that’s easy because it’s always a sovereign. That’s literally the definition of sovereignty: within your borders, you make the rules. Not a thing in space. And so then what?

So it’s a new medium for operators to make rules that they think would best facilitate their long-term interest. Now, another  downside or weakness in that is, these regimes I envision are based on voluntary contract, and they’re based on a critical mass of operators perceiving their interest is better served inside this regime and voluntarily contracting to make themselves bound by it. Without that, it’s not very efficacious.

Lau: Well, I think it boils down back to the people on Earth. How do we want our companies to reflect our values? We’re seeing that with ESG, we’re seeing that with sustainability goals. Increasingly, activist investors are also taking on the hat of people like you and me who decide to vote with their dollars and their investments and/or their crypto, but essentially demand social responsibility from their firms. I think it really boils back down to us here on Earth and how we want to set the rules of the game. And certainly blockchain can enforce that investor agreement that I potentially could sign in the future.

Israel: I think that’s right, and we’re seeing this phenomenon play out even with space junk. To use the precise term of art, there’s an initiative called the Space Sustainability Rating, which is based on the lead certification in the building sector for energy efficiency, and satellite operators will be able to voluntarily submit their operations to be evaluated and get a rating. This is a thing because these operators care about having that rating and they care about having that rating because the stakeholders care about the sustainability of their operations.

You brought up another point that is, I think, central to my interest in the long-term potential of smart contracts, and some of the research projects we did in terms of space. And that is, what can we as individuals, how can we effectuate our values? We can vote with our dollars, but does blockchain allow us a new and better way of voting with our dollars? And one of the theoretical potentials that’s exciting to me, although I think just that — theoretical — is this idea that blockchains would allow people around the world united by a common concern or goal, whether that is climate change mitigation, whether that is inspiring things in space, to pool their resources, to find each other, to organize, to put in relatively small chunks of money individually.

But in aggregate, when you have a truly global pool of contributors, what you get is a pot of money that is more on the scale of what a government would field. And that was something that was the founding vision of ConsenSys Space… it was to build a global citizen space flight space program, a space program like NASA or European Space Agency or JAXA. But unlike those national organizations that are accountable to or controlled by the governments and their appropriators, this would be controlled by a global community of token holders who would put in a relatively small amount of money for tokens to control space missions.

And so in the course of validating that, we did a lot of interviews with space enthusiasts around the world trying to interrogate the two premises of this vision of blockchain and DAOs. One of those is that the trust advantage, relative to just giving money to a nonprofit, to an NGO doing the same thing, would lead people to be more willing to give.

The other was that the ability to participate in decision-making beyond just “here’s my money” might be an inducement. To be honest, I’m not sure that a great swath of Earth’s population is [interested] — the folks we talked to, those are their felt needs. But it’s also hard to tell; when you’re presenting something that doesn’t exist and nothing like it really exists, it’s very hard to do user research for something that is a paradigm shift.

Lau: It’s a fascinating idea. You’ve just literally described the function of NASA, but instead of government dollars where the government is the governance part of it, what if we removed the sovereign and NASA is a taxpayer-funded organization, but what if there was a non-sovereign, publicly funded space organization?

That’s very interesting, and that is the stuff of real science fiction that’s happening in real time right now. Brian Israel, it was a pleasure just to think about all of these things and the potential, but also the reality of what’s happening not only on Earth, but just looking up skyward into space for us. So that was really fascinating. Thanks for joining us on the show today.

Israel: Thanks. It’s my pleasure.

Lau: And thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Forkast.News Editor-in-Chief Angie Lau. Until the next time.