Citizens’ digital infrastructure as a new element of modern society critical infrastructure Leonid A. Reingold1, Elena A. Reingold2, Alexander V. Soloviev3, Oleg S. Grin4 leonidrein@gmail.com | l_r@mail.ru | soloviev@isa.ru | osgrin@msal.ru 1 LLC DIAVER, Moscow, Russia; 2 LLC MCD PARTNERS, Saint Petersburg, Russia; 3 Institute for Systems Analysis Federal Research Center “Computer Science and Control” of Russian Academy of Sciences, Moscow, Russia; 4 Kutafin Moscow State Law University, Moscow, Russia Widespread digitalization of the modern society - the emergence of digital devices, the introduction of Internet of Things, the development of Big Data processing and other technologies result in new challenges. Not only industrial and corporate automation that has already been considerably covered by the legislation initiatives but also the digitalization of everyday life has started to constitute a critical infrastructure in the modern society. This largely happens because digital devices substituting traditional technologies owned by citizens are incorporated into corporate, financial and state business processes. For instance, citizens’ devices are becoming the source of primary data for energy and utility companies. More opportunities for the direct interaction of automation solutions between themselves resulting in a controversial synergy effect have been emerging recently. The article addresses specifics of citizens’ digital infrastructure in the light of critical infrastructure, in particular the necessity and special aspects of legal and regulatory framework and possible development trends of this functionality. Keywords: Internet of Things, Big Data, smart contract, digitalization, critical infrastructure. • updated or reconfigured (e.g. by the update of 1. Introduction embedded software); Digital infrastructure of modern society becomes • replaced by a new device due to the low cost caused by critical for its functioning, which is reflected in the massive replication. legislation [1]. Critical businesses are not limited to finance, corporate and state regulation spheres. Digital 3. Possible solutions infrastructure formed and used by the citizens also becomes When building society's digital infrastructure it is critical nowadays. Equipment owned by individuals important to take into account changes happening at the becomes an element of global infrastructure affecting the personal level. Risks should be detected and prevented – functioning of large systems. unauthorized access to IoT objects, phishing of personal Very often personal automation solutions are necessary data, location tracking etc. In order to do so it is necessary extensions of corporate systems. For instance, the to have solutions enabling to prevent unauthorized use of shutdown of financial, communication or other subsystems IoT infrastructure, and solutions allowing establishing servicing citizens’ mobile devices can cause a collapse in mutual trust between them and other personal digital the modern society. Traditional, non-digital technological devices. solutions may either not function or solve only a limited Solutions for the diagnostic of unnatural or unexpected number of tasks. However, a massive failure of citizens’ behavior of IoT objects and prevention of these states either peripheral devices also may cause critical implications. For by the user himself or automatically are highly sought- example, a modern finance system largely operates in after. These solutions should be implemented technically digital environment. Transactions, operations, analytical and must be automatically supported by legislative norms functions are performed in an automated environment. In and regulations. case of unexpected failure of automated solutions, It is crucial to reasonably define areas of responsibility including citizens' devices, the shift to previous “paper” for incorrect or fraudulent functioning of personal devices. information processing technologies may not be possible For instance, it should be clearly defined in the legal and result in overall collapse of the financial system. In the framework who is responsible for the incident – the user of article, we will address the issues of incorporation of the device, the owner of the device or infrastructure citizens and their devices into the critical infrastructure of interacting with the device, the manufacturer of the device the modern society. or software installed on the device or external intruder. In should be clear to everybody which actions must be 2. The challenges of citizens’ modern performed by conscientious users of an IoT device or a infrastructure system consisting of these devices to provide a sufficient Citizens’ devices interact directly with each other on the response in order to avoid liability for the damages caused basis of certain contracts. These contracts are made by these devices. automatically and require special legal and regulatory Providing a widespread incorporation of digital infrastructure. Smart contracts are a good example of this. devices, including for instance IoT devices, there is a need Every person owns several “smart” devices that can be: for the new methods to support social and economic • programmed; structure of the modern society. • used simultaneously in concerted manner; Every person in modern circumstances has to be technologically-savvy, demonstrate a new level of Copyright © 2020 for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0) situational awareness and understand the behavioral culture the application of such technology. With the use of smart of digital society. This should be ensured by new norms and contracts, it is possible to implement automated means of regulations in the sphere of digital technology. communication, for example, for settlements between Devices in the public digital infrastructure are explicitly elements of the IoT infrastructure. or implicitly registered; objects are being interconnected Smart contracts is a new, evolving technology that and co-used. This connectivity and its usage is often requires conceptual research, technological improvement performed automatically. The examples of connectivity of available solutions, and the development and adoption between objects are – establishing ownership of an IoT of new norms and regulations. Let us discuss some object by a particular person, content and usage rules set by conceptual issues related to the use of smart contracts in that person, object’s location registration and tracking of its digital environment. movements etc. Automated systems can provide The term smart contract is not standard. It does not fully information about the objects connected with or interesting reflect the essence of the technology behind it. It actually to a certain person, about his movements or his usage means not a smart contract but a form of formal contract patterns for IoT objects. A new level of information representation with the use of digital infrastructure that is awareness has led to the emergence of new social and enough for preparation and execution of a contract in economic challenges. digital environment. In [2] it is suggested to use the terms In is not uncommon in digital infrastructure when a smart contract and automated (self-executing) contract as person cannot detect risks arising out of the incorporation synonyms. Besides, the term self-executing in authors’ of IoT devices, new means of communication and opinion more accurately reflects the essence of this processing of information, or assess implications of the use technology. The term digital contract may be suggested – of the new technologies. Besides, possible risks in digital it reflects the fact that operations with contracts using this infrastructure tend to increase due to the development of technology are incorporated into digital infrastructure one device technical characteristics and introduction of new way or another. Smart contract may not be executed as a data processing tools. traditional document but still somehow enables the Many challenges arise out of the development of the execution of necessary arrangements in a particular emergent properties in digital systems. These challenges situation. However, as the term smart contract is the most are associated, for example, with the integration of data commonly used in literature, we will use it here. about the digital devices usage by a certain person and Technological implementation of smart contracts can accumulation of data history. For instance, it is possible to be different. The same requirement, for instance to have a collect data and use it implicitly with the Big Data formalized form and automated execution of some technologies. These methods allow to detect new links contracts can have different technological implementation between objects, e.g. to personify previously anonymous and apply different social and economic technologies. information. The application of these methods may result Under the social and economic technologies, we mean the in the situation when data harmless for a user today may combination requirement – technology that is used to fulfill jeopardize him in future if these data is somehow specified the requirement [3]. The same requirement can be met by or new data aggregation and processing technologies are different technologies; the same technology can be used to applied in unexpected ways. meet different requirements. Thus, there is a need for scientific researches, When talking about smart contract implementation it is development and implementation of tools guaranteeing a often meant the use of Blockchain technology. Many certain level of situational awareness for persons who are authors consider Blockchain as a part of the technology not familiar with the specifics of surrounding digital implementing smart contracts. However, others point out infrastructure, allowing to be efficient in a rapidly changing that smart contract should be technologically- neutral [4]. digital infrastructure environment. Now smart contracts often use Blockchain technology and Tools enabling situational awareness should be thus they are often considered as complementary implemented predictively, i.e. their emergence should technologies [5]; in future the use of smart contracts may precede the development and implementation of new require the application of advanced technologies communication features, IoT devices and systems based on guaranteeing data immutability at the execution of smart them. The new device development process should be contract. Differences and interaction specifics between comprehensive, addressing not only technical and smart contract using Blockchain and a traditional contract technological aspects but also considering psychological, should be taken into account. There is an opinion that smart social, economic and legislative factors. contract fits into the existing system of legal documents and becomes a one more semantic layer of a traditional contract 4. Legal environment around digitalization [6]. Preventive development of regulatory framework for The example of implicit smart contract implementation the application of digital infrastructure is crucial in modern when traditional documents are not produced at all is world. automated taxy ordering system. One of the most well- To implement legal restraints corresponding to the known services of that kind is Uber [7]. A person orders a requirements of the new digital infrastructure it is taxi for the price calculated by the system for a particular necessary to use technologies adapted for the application in itinerary. The price is calculated with consideration to digital environment, e.g. technologies that can operate demand and traffic situation. Prepayment or funds automatically. The use of smart contracts is the example of reservation is not needed. The driver that accepted the price set for the trip provides the service, receives payment in cash or by any type of cashless payments. After the trip the • Resistance to fraudulent activities, such as hack of driver and the user assess each other. Obviously, negative software, insufficient information about parties to the assessments can be caused by unsatisfactory service. contract withheld intentionally with mercenary In this example, smart contract is implemented without intentions etc. traditional documents. Correctness of communication • User-friendly design of smart contracts, possibility to between parties is guaranteed by the automated system – if present smart contract in a convenient form. one of the parties does not fulfill its obligations, it is fined • Clear procedures on all stages of contract preparation and the further use of service can be blocked. Technology and execution. supporting data immutability with the use of distributed • Possibility to combine digital and traditional display, ledgers is not needed in this case – the contract is short i.e. availability of software enabling to convert smart term, mutual assessment and sanctions are done contract into the format suitable for both automated immediately. Automated system enabling the service application and perception by people. operation arbitrates the parties. • No high requirements towards resources of the The issue whether a traditional contract should be infrastructure, possibility to scale the system processing supplemented by a smart contract is being brought up in smart contracts. . literature [8]. In our opinion, the example described above • Possibility to work bypassing intermediaries in the demonstrates that at the current level of technological process of contract negotiation and execution. development this is possible only in cases when contract • Availability of interstate agreements on the negotiations can be formalized. This allows to clearly acknowledgement of contracts made by persons specify parties' rights and obligations, register in detail the belonging to different jurisdictions. state of a contract execution and undoubtedly interpret all • Standardization of information processing procedures possible ways of its violation. It may be expected that with the use of smart contracts. further technological development will broaden the scope Obviously, available smart contract implementation of situations where it is reasonable to use smart contracts. solutions do not meet all these requirements. This Technologies similar to the described taxi ordering technology is still in the process of methodological service are becoming more and more popular and are used interpretation and development. However, it is integrated for the provision of services with the help of digital devices by both commercial enterprises and state regulation - smartphones and computers. These technologies authorities of some countries. In the United States, the use considerably change social and economic landscape of the of smart contracts is still regulated on the states level [10]. modern society. Thus, for example, they have In Russia the use of smart contracts and related fundamentally transformed the taxi market – prices technologies is still not enough regulated with regards to decreased due to free competition, traditional taxi ordering legal framework. However, the adoption of some relevant method with the use of a telephone in many cases became norms and regulations is expected in March 2020 [11]. an add-on to the described automated system. However, Legislative framework around smart contracts should operating principles require the development of legislative be implemented considering the widespread use of regulation in order to eliminate potential problems. automated devices. It should be developed taking into Summing up, we can state that the technological account smart contracts use cases in ordinary routine implementation of smart contracts should be done situation in order to guarantee that the new means of according to the following technological and legal communication are understood by a general user, that they requirements: do no cause discomfort and tensions in society. • Impossibility to change a contract content without It may be assumed that the legal system supporting consent of all participants, however, if such consent is digital environment will function similar to the traditional granted, the contract can be changed. Immutability of legal system because despite of new means of life cycle contract’s content is often guaranteed by the use of implementation it attends to the same subject domain and Blockchain technology; still, this is just one of the supports the same activities but with the help of a new possible options enabling smart contract content technology. For example, a promising IoT infrastructure immutability and its execution. will became a formalized and programmed subdomain of • Technological invariance. For example, when the traditional infrastructure. In the context of IoT processing technology is updated or changed for a new infrastructure smart contracts may include for instance the one, available smart contracts should remain valid. following content: • Legally binding. The contract must be duly supported • Service Level Agreements (SLA) in a special format by the norms and regulations in force guaranteeing its allowing to control and assess the fulfillment of mutual execution by the parties involved and providing obligations by devices and their owners at the protection in case of rights violation. However, technological cooperation. excessive regulation that impedes the development, • Settlement and cooperation terms in a broader context should be avoided. not covered by SLA . • Compliance with regulations concerning data • Requirements towards service access, formats, volumes processing procedures, for instance with the legislation of data exchange and other parameters specific to the on personal data processing [9]. system consisting of certain devices. • Verifiability and possibility to check the contract by the The contents of smart contracts should be available for parties. the wide application by users who do not have professional experience in digital technologies. It is crucial to address regulates the sphere in order to minimize risks for citizens the challenges of interface usability and use cases for the and social and economic system in general. Besides, the implemented technologies. state provides infrastructure services enabling smart Figure 1 demonstrates types of smart contract users and contracts implementation. These include up-to-date the goals they plan to achieve using this contractual manuals and classifiers enabling standardization of smart instrument. Citizens get a convenient automated tool to contracts content. process personal information. The state controls and Fig. 1. Types of smart contract users and their goals Businesses suggest a smart contract business model of emergence of the new types of digital infrastructure a certain type and implement it. Throughout the life cycle objects, change in their functionality during operation. The of the implemented system businesses strive for acceleration of changes affects the use of digital profitability of the system, provide its modernization and technologies in everyday life. Emergence and rapid general development. adoption of digital technologies by social and economic Design, operation and technological development of system created a new situation in the society impending the this type of smart contract providing sufficient SLA for the loss of control and collisions due to the development of chosen business model is supported by technical and unexpected emergent features. Preventive development of technological solutions. The developed software is focused legislative framework, regulation of digital technologies on citizens; they should understand clearly how to work usage will allow eliminating possible negative situations. with smart contracts. Special attention is paid to the usability and friendliness of the system interfaces. 5. Conclusion Progress in the humanities and natural science is used Digital devices owned by citizens have become a for the research of smart contracts development tendencies, critical element of infrastructure in the modern society. of best ways to incorporate this technological trend into the These are personal communication devices, e.g. social and economic system; it also helps to address the smartphones, and IoT objects, e.g. home management challenges of technology performance. Ensuring solutions, utility resources consumption solutions etc. immutability of smart contract content providing sufficient Traditional communication channels and a significant part operation flexibility is one of these developing trends. of object environment are substituted by functionally Digital infrastructure object features related to smart similar digital devices. New types of violations and contracts such as those of IoT devices can be considered as technological risks arise along with positive results. a type of virtual assets in addition to other types described In these conditions, it is essential to preventively in [12]. implement new legislative framework, new technologies It should be noted that objects of the legislative such as smart contracts that meet the requirements of the framework have its own life cycle – from the adoption to changed environment and allow to provide effective the termination or change for new objects. Life cycle of a norm or a regulation is shortening due to the rapid management mechanisms for the society and eliminate Solovyev Alexander V., Chief Researcher, Department 94 negative situations. ISA FRC CSC RAS. Doctor of Technical Sciences. E-mail: It is also needed to develop and implement norms and soloviev@isa.ru. regulations that precede the development of new Reingold Elena A., lead consultant, LLC MCD PARTNERS, PhD in Economics, docent. E-mail: l_r@mail.ru. technologies and allow to guarantee efficient operation of Oleg S. Grin, Civil Law Chair, Kutafin Moscow State Law social and economic system in new conditions. University, Moscow, Russia, E-mail: osgrin@msal.ru Acknowledgment This paper was supported by the Russian Foundation for basic Research (RFBR) via projects 18-29-16200. References [1] Federal Law of July 26, 2017 N 187-ФЗ "On the Safety of Critical Information Infrastructure of the Russian Federation" (available at http://static.kremlin.ru/media/acts/files/00012017072 60023.pdf July 2017). [2] Grin O.S., Grin E.S., Solovyov A.V. The Legal Design of the Smart Contract: The Legal Nature and Scope of Application. Lex Russica. 2019;(8):51-62 Lex russica. 2019;(8):51-62.] (In Russian). 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(available at https://digitalchamber.org/smart-contracts- whitepaper). [9] Federal Law of July 27, 2006 No. 152-FZ On Personal Data (available at http://www.kremlin.ru/acts/bank/24154). [10] Arizona State Law of March 29, 2017. Arizona House Bill 2417. (available at https://legiscan.com/AZ/text/HB2417/id/1588180). [11] In March, the State Duma may adopt a law on digital financial assets (available at https://versia.ru/gosduma-mozhet-v-marte-prinyat- zakon-o-cifrovyx-finansovyx-aktivax February 2020). [12] Bogdanova E. E. Problems of the use of smart contracts in transactions with virtual property. Lex russica (Russian law). 2019.No 7 (152). pp. 108-118. About the autors Reingold Leonid A., consultant, LLC DIAVER, Candidate of Technical Sciences. E-mail: leonidrein@gmail.com.