Many compare the emergence of the blockchain to the arrival of the internet, and anticipate a corresponding transformation in communications, business, and individual freedoms. In Blockchain and the Law, new this month, Primavera De Filippi and Aaron Wright examine both the profound opportunities the technology presents and the legal and even ethical challenges it poses. In the brief excerpt below, they consider possible paths away from our current crossroads between the rule of code and the rule of law.
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When Satoshi Nakamoto released Bitcoin to the world, he had a clear idea in mind, which was reflected in the message he included in Bitcoin’s genesis block:
The Times 03 / Jan / 2009
Chancellor on brink of second bailout for banks
Nakamoto released the Bitcoin network in the middle of a financial crisis, as a reaction to an unstable international banking system. In doing so, he gave birth to a new currency—one controlled not by any government or central bank but only by cryptography and code.
As a global and decentralized payment system that operates without centralized control, Bitcoin held out the hope of newfound economic freedom for those dubious of governmental authority. Early Bitcoin adopters subscribed to the notion of vires in numeris (strength in numbers), a motto emphasizing the fact that, when it comes to money, only math can be trusted.
But Bitcoin was only the first step in a much grander vision. Shortly after Bitcoin’s release, technologists began to realize that the true potential of Bitcoin—the real innovation—was its underlying data structure: a blockchain. While Bitcoin offered the ability to replace the role of central banks and eliminate the need for financial institutions, blockchain technology could be applied more generally to reduce the need for middlemen in many sectors of the economy. Whenever a trusted authority is necessary to coordinate social or economic activity, blockchain technology could provide the necessary infrastructure to replace this activity. The roles of banks, financial institutions, stock exchanges, clearinghouses, content providers, online operators, and even governmental systems could all be modeled by a set of protocols and code-based rules deployed on top of a blockchain-based network.
Blockchain technology presents some risks, however. The technology supports technological systems and decentralized applications that operate independently of any centralized institution or trusted authority. They implement their own internal systems of rules, which often ignore or attempt to circumvent traditional systems of control. Unlike other technological constructs currently deployed on the Internet, these decentralized systems and applications can be governed almost exclusively by the rules of code.
The Internet had already raised a fundamental tension between the rule of law, based on geographical boundaries, and the rule of code, based on topological constructs. The regulation of “cyberspace” lies at the intersection between these two normative systems—which can either cooperate or compete with one another, depending on the circumstances at hand.
At the outset, legal scholars thought that the rule of code would ultimately prevail on the Internet. With code, people could implement their own systems of rules, enforced by a technological construct that operates outside of any legal jurisdiction. This is what inspired a number of technology activists to believe that cyberspace was an unregulatable space that governments did not have the right or ability to control—as opposed to the “meat space,” which is mostly governed by the rule of law.
Eager to bypass the politics of enclosure and control enacted by governments and corporations, these groups believed that the Internet would foster new normative systems, which would facilitate the free flow of information and promote political and cultural autonomy. The Internet marked the beginning of a new paradigm for regulation—one where regulation would be applied through the rule of code, with power dynamics that differed significantly from those of the physical world. Over time, however, governments recognized and embraced the potential for the rule of code to maintain the rule of law on the Internet. Governments have extended their control by requiring that intermediaries change their code to maintain and respect jurisdictional laws.
With the advent of Bitcoin and blockchain technology more generally, we are poised to witness a new wave of decentralization and new calls that the world will—once again—be governed by the rule of code. Echoes of the first Internet wave permeate the discourse around blockchains, with claims that blockchain technology will lead to greater individual freedom and emancipation, as these early technology advocates initially aspired to. Blockchain technology is viewed as a new opportunity by many cypherpunks and decentralization advocates, who see it as a new means for people to liberate themselves from the tyranny of governments and corporations—in ways that are quite reminiscent of the Internet’s early days.