Blockchain and the Law: The Rule of Code

"This is a book that’s focused purely on the legal questions. It fleshes out the idea that this technology is a new kind of law, that this is an opportunity to build structures that serve the same purpose as law but achieve the ends by means of technology. It fits into a long-standing debate in internet law. There’s the famous Lawrence Lessig phrase, ‘code is law’, this idea that software and the architecture of online systems can regulate behaviour the same way law does. So this book is really focusing on that alternative. It’s also something I talk about in my book. I think it’s important but I see it as only one part of it. Yes. What’s interesting is that the two authors posted a draft law review article a couple of years before the book, about the same topic. In a way, the book grew out of the article, but they actually became considerably less aggressive in their claims about the technology’s potential. In my book, I argue that the technology is one thing that can regulate; the law is another. Then, there are also other mechanisms, like economic incentives and social norms and communities. Again, this comes from the work of earlier scholars like Lessig. “The exercise is not just to say, ‘Can blockchain serve as a new kind of law-like mechanism?’ The real question is, ‘Should it? What are the benefits and what are the risks of that kind of system?’” The exercise is not just to say, ‘Can blockchain serve as a new kind of law-like mechanism?’ The real question is, ‘Should it? What are the benefits and what are the risks of that kind of system?’ I think, in most cases, starting with a code-based system is likely to be problematic because we’re going to get situations like the DAO, where there are so many potential failure states. What we really need is for these systems to operate in parallel. We need to start by thinking about out how to harmonize them and the set of public policy concerns. If we want to make sure that people who are buying investment products have the right information to make good decisions and appropriate recourse if they are cheated, then we can start to get into the kinds of mechanisms whereby a cryptocurrency-based token might be able to do that. So that’s my orientation—as opposed to starting with the idea that this thing is happening, here’s what it does and let’s start with understanding its law-like function. I’m concerned that that’s going to take us too far. These two authors are both legal scholars. They are very thoughtful. There are many people who, unlike this book, talk about the idea of code as law in the blockchain and completely ignore the downsides. They, to their credit, talk about the downsides and try to address them but I still think we need to start in a different place. Yes, and they wouldn’t disagree with that. I don’t want to overemphasize my critique. It’s more about the extent to which we are really thinking about these different mechanisms and trying, at the outset, to come up with hybrids. It depends what you’re looking to get out of it. If you’re interested in questions about law and how law relates to computerized network systems and look at blockchain from that perspective, then yes, Lessig’s work is absolutely foundational. There’s a whole lot of literature in that field, but that would definitely be the starting point. Get the weekly Five Books newsletter Then there is Fukuyama’s book, Trust . There are also other books I talk about, like Robert Putnam’s Bowling Alone . There are a number of people who have written about the concept of trust thoughtfully that are useful. They don’t talk about blockchain, but about the value of trust and what it means. The other set of literature that is really helpful is about governance, in particular Elinor Ostrom’s work . She looks at how communities and organizations can successfully govern themselves without formal legal enforcement at the base. There’s a lot of really interesting work and she won a Nobel prize in economics based on that work. Blockchain is something that purports to achieve the same goal, but in somewhat different ways. So I think we can learn a lot from those ideas."