With its hard-to-grok memes, Lambos, and CryptoKitties, outsiders would be forgiven for thinking that blockchain is a grand fooled-you-once piece of technological performance art. But just as many ’90s commentators were skeptical about the potential of the internet, today’s naysayers may be overlooking the potential for decentralized currency and applications to transform industries like banking, real estate, and law in ways which governments and other old-guard institutions are only just beginning to fathom.
That’s why the time is right for a book like Blockchain and the Law: The Rule of Code. Authored by blockchain researcher Primavera De Filippi, a faculty associate at the Berkman-Klein Center for Internet & Society at Harvard Law, and law professor Aaron Wright, director of the Blockchain Project at Cardozo Law, Blockchain and the Law explores the implications of the technology in its broadest sense, positioning it in context of the evolution of the internet, and the development of artificial intelligence and autonomous systems which are continually touching more areas of our daily lives.
It’s a fascinating and comprehensive read that poses many questions we should debate and settle before blockchain technology becomes ubiquitous. In a recent interview, BREAKER spoke with De Filippi and Wright about code, crypto-anarchy, blockchain murder contracts, and more.
I wanted to talk about the concept of lex cryptographia, which is central to the book. How does it work?
Aaron Wright: At a high level, you can think of it as creating order without law. It’s a way to construct a system where various parties are ordering their behavior, but instead of being governed by bureaucratic rule—that’s rule administered by the state—the rules are really encapsulated in the underlying software and the concept of a smart contract.
Primavera De Filippi: On the internet we already use code as a mechanism of regulation. But there’s always a way for a centralized authority to influence that code by exerting pressure on the particular platform operator that’s managing it. In the context of lex cryptographia, there is no longer a centralized intermediary, and therefore that kind of behavioral regulation by code becomes much stronger because it can no longer be influenced, at least not easily. Then we explore the way that you can influence lex cryptographia, but not with the usual tools of pressuring centralized intermediaries.
The early adopters of blockchain technology were promoting this idea of disintermediation, replacing financial institutions and so forth, and therefore the initial narrative follows that. But as new people start adopting the technology in terms of governments, the financial sector, and large corporations, the narrative started to change, and new uses were explored which furthered the interest of the new categories of stakeholders.
You write about the ideas of Timothy May and John Perry Barlow, who had a clear idea of how the online world would develop. Like many, you believe this world failed to materialize. How close can blockchain get us to their vision of crypto-anarchy, a technological reduction of the role of the state?
De Filippi: I think the whole concept of the book is exactly this narrative: What the internet promised did not materialize, and that even in the pieces which did, the system has been used for very different purposes than were envisioned in the beginning. With blockchain it’s kind of the same story. The early adopters of blockchain technology were promoting this idea of disintermediation, replacing financial institutions and so forth, and therefore the initial narrative follows that. But as new people start adopting the technology in terms of governments, the financial sector, and large corporations, the narrative started to change, and new uses were explored which furthered the interest of the new categories of stakeholders.
You also write about ‘immoral contracts’, and speculate that a smart contract could be used for something like coordinating an assassination. What inspired that idea, and how plausible do you think it is that we’ll see criminal smart contracts?
Wright: What inspired that idea was research from computer scientists at the University of Maryland and several other U.S. universities, who noted that the fact you can use autonomous computer programs to coordinate commercial activity means it’s just as possible to use those programs to coordinate unlawful activity. Folks who have studied criminal organizations have noted that often they have a hard time engaging in coordinated activity because they can’t go to courts to enforce agreements, so they struggle with trust between members of the organization.
Now, you have a technology that provides for trustworthy payment and performance, and with a degree of pseudonymity or anonymity over time. It seems logical at that point to imagine groups using this technology for things that, in general, society would not consider beneficial. That covers things like gambling, which is more in a gray area as to whether it’s socially acceptable or not, or more extreme examples like the one we cite.
We’ve seen a few cities and counties in the U.S. ban cryptocurrency mining. It’s not about regulating the use cases of cryptocurrency—as the SEC has done with ICOs—but instead about regulating the physical apparatus the network needs to exist. What do you make of this?
Wright: Regulating mining is actually one of the regulatory levers we identify towards the end of the book, so I wasn’t surprised to see overtures in that vein from China and other governments. In many ways, though it’s not a perfect analogy, you can think of miners processing transactions as being similar to ISPs. What they’re doing is recording information to a blockchain, and they don’t really care what type of transactions are being recorded or processed. All they care about is receiving the block reward and/or fees for the transactions. Over the past couple of years for the major blockchains like bitcoin and ethereum, there’s been a fair amount of consolidation in terms of the parties that are processing these transactions, and so they effectively become an identifiable intermediary.
De Filippi: What we describe in the book is how, for instance, if a government has control over the miners who are located in a specific jurisdiction, they can actually enforce rules such as ignoring specific transactions from a particular type of application. In that way, you can rely on miners to censor transactions, ban specific smart contracts, or alternatively to promote specific applications over others. Mining regulation can actually become very sophisticated and very granular as to what type of transaction to process or not.
Decisions will be made by people, but those decisions will then be automatically executed, and all the interactions that will flow from those decisions will be dispatched through a blockchain-based network in a way that is more transparent, and provides more accountability and auditability.
One of the later chapters is abut decentralized autonomous organizations (DAOs) and Meir Dan-Cohen’s idea of a self-owning company managed purely by AI. Are we moving toward a point where we will be employed by machines or autonomous systems?
De Filippi: I think this is almost already the case. Today we are employed by online platforms in many different areas—Uber, Airbnb, and things like this—so of course there is a difference in degree, but increasingly we can see how technology is actually managing and coordinating people. The difference is that with blockchain we can automate specific procedures. So the low-hanging fruit is not a fully autonomous organization in the sense of not having management, but rather an organization which is not just internet-mediated but also blockchain-mediated.
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Decisions will be made by people, but those decisions will then be automatically executed, and all the interactions that will flow from those decisions will be dispatched through a blockchain-based network in a way that is more transparent, and provides more accountability and auditability. At the extreme end of the spectrum, you might have fully decentralized autonomous organizations, but most organizations will remain on the continuum where we’re using some automation and autonomy. It’s difficult to imagine an organization where you actually do not need some kind of human influence on decision making.
You also reference concepts from Max Weber, Michel Foucault, Gilles Deleuze, and Jeremy Bentham, among others. Is it fair to say you think blockchain technology deserves a more sociological analysis than it usually receives?
De Filippi: Definitely. Architecture is politics: The way in which you design particular infrastructure will have significant social and political consequences. With the blockchain it’s important to look at how the same technology used in different manners could lead to completely different outcomes. It could lead to this unregulatable crypto-anarchist vision, while other applications could rely on blockchain to create a totalitarian form of self-executing rules, which would lead to a completely different social order. The conclusion we bring to the book is that when we’re designing these platforms it’s important to try to foresee and understand where those systems lead, and whether we want to promote one particular design over another because of the political and social applications.
Are there any aspects of blockchain technology you think aren’t being examined closely enough, or have unexplored potential right now?
De Filippi: A field I think is emerging now and needs focus is the question of governance. When we think about regulation we need to think about it in a broader sense of the term. not just how you regulate the technology as a third party. More importantly, if we’re creating systems that are autonomous, self-executing, and difficult to regulate from outside, then it becomes fundamental to identify specific governance systems within those platforms that will enable the platform itself to evolve and comply with norms and ethical principles, regardless of whether those norms are imposed by a third party or not.
Wright: One more application I think is just beginning to come into view but will be increasingly important is using a blockchain to distribute media. One of the interesting parts of a blockchain is that it stores tamper-resistant data. There’s been an increasing trend toward making data more malleable on large online platforms, and this technology is really going to challenge those efforts. From the GDPR in Europe to the balkanization of the internet, we’ve seen jurisdictions try to impose restrictions on the internet in specific countries. And here’s a technology which doesn’t know geographic limitation, and doesn’t allow you to remove data once stored. I think that’s going to present some new challenges.