On Not Being Immutable

Economist 2/1/25

Regulation of cryptocurrencies was an issue in last November's US election. Molly White documented the immense sums the industry devoted to electing a crypto-friendly Congress, and converting Trump's skepticism into enthusiasm. They had two goals, pumping the price and avoiding any regulation that would hamper them ripping off the suckers.

Back in November of 2022 I added an entry to this blog's list of Impossibilities for The Compliance-Innovation Trade-off from the team at ChainArgos. It started:

tl;dr: DeFi cannot be permissionless, allow arbitrary innovation and comply with any meaningful regulations. You can only choose two of those properties. If you accept a limited form of innovation you can have two-and-a-half of them.

Fundamental results in logic and computer science impose a trade-off on any permissionless system’s ability to both permit innovation and achieve compliance with non-trivial regulations. This result depends only on long-settled concepts and the assumption a financial system must provide a logically consistent view of payments and balances to users.

This is a semi-technical treatment, with more formal work proceeding elsewhere.

Two years later, the "more formal work" has finally been published in a peer-reviewed Nature Publishing journal, Scientific Reports, which claims to be the 5^th most cited journal in the world. Jonathan Reiter tells me that, although the publishing process took two years, it did make the result better.

Below the fold I discuss Tradeoffs in automated financial regulation of decentralized finance due to limits on mutable turing machines by Ben Charoenwong, Robert M. Kirby & Jonathan Reiter.