Can blockchain, a swiftly evolving technology, be controlled?

Blockchain is an exciting technology, but it requires mainstream governments to be able to control it. Name coin

The main momentum of technological change produces knowledge, innovation, new possibilities and, almost inevitably, a huge leap forward in legal problems. This is the case today with blockchain, the newest technological device.

Introduced in 2008 as a technology outlining bitcoin, a digital currency that is created and held electronically without any central authority, the blockchain is a secure digital ledger for any kind of data. This makes record keeping easier and reduces transaction costs.

Its range of applications in commerce, finance and potential politics is becoming wider, and has sparked a debate as to how to regulate the tool.

Goodbye middleman

Because it does not require a centralized authority to verify and validate transactions, the blockchain enables people who cannot directly trust each other to interact and coordinate.

With blockchain, there is no middleman in peer-to-peer exchange; Instead, users rely on a decentralized network of computers that interact through a cryptographic, secure protocol.

The blockchain has the ability to perform “codify” transactions by deploying small snippets of code directly to the blockchain. This code, generally referred to as a “smart contract”, is automatically executed when certain conditions are met.

An early example of smart contracts are corporate-oriented digital rights management (DRM) systems that limit the use of digital files. Having DRM on your e-book may restrict access to content copying, editing and printing.

With blockchain, smart contracts have become more complex and, of course, more secure. In theory, they will always be executed in a planned manner, as neither party has the power to change the code binding a given transaction.

In practice, however, eliminating credible brokers from transactions can create some kinks.

A high-profile smart-contract failure occurred DAO, A decentralized autonomous organization for venture capital financing.

Launched in April 2016, DAO raised over US $ 150 million through crowdfunding. Three weeks later, someone managed to exploit a vulnerability in DAO’s code, Withdrawal of approximately US $ 50 million Digital currency worth from the fund.

The security issue did not originate in the blockchain itself, but rather from issues with the smart-contract code used to operate DAO.

DAO’s crowd-funding page in May 2016.

The validity of the act raised questions, with some arguing that since the hack was actually permitted by the smart-contract code, it was a perfectly legitimate action. After all, in cyberspace, “Code is law“.

DAO argued This is the important question: Should the intent of the code dominate the wording of the code?

A new legal field

Blockchain proponent Imagine a future in which entire companies and governments operate in a distributed and automated fashion.

But smart contracts have a range of enforceable issues, which have recently been outlined White paper By London law firm Norton Rose Fulbright.

How can we resolve disputes arising on a self-executed smart contract? How do we identify what kind of contract terms can be properly translated into code, and which ones should be left in natural language instead? And is there a way to combine the two?

It is not yet clear whether the code can address the required levels of complexity to change the legal language. Ultimately, the ambiguity inherent in the language of law is a feature, not a bug: it compensates for unforeseen cases that must be evaluated on a case-by-case basis in a court of law.

Traditional covenants recognize that no law can index the entire complexity of life, as it alone predicts its future development. They also accurately define terms that can be enforced by law.

Smart contracts, by contrast, are snippets of code, both defined and enforced by the code underpinning the blockchain infrastructure. Currently, he has no legal recognition. This means that when something is wrong with a smart contract, the parties have no legal recourse.

The founders of DAO learned this lesson last year.

Creative friction of law

If blockchain technologies are ever to go mainstream, governments will have to establish new legal frameworks to accommodate such complexities.

Positive law Describes behavior and punishes noncompliance. It can demolish the ideal that a concerned government wants to achieve, demonstrate a moral vision for society or reintroduce the power structure of current governance.

Technological developments, on the other hand, are often oriented towards profit and change.

There is an inherent tension here. Laws can delay the development of technology and therefore hurt the competitive advantage of an entrepreneur or even a state.

Take the case of nanotechnology regulation In European Union v. United States. European law therefore reduces risks This may limit the technology’s potential, losing its competitive edge against the US.

This is another fact about the law: slow and reactive, it can be a great annoyance.

But since technological development began to accelerate rapidly in the last century, legislation has played an important role in helping societies maintain some of the standards already set for cohabitation.

Harvard law professor Lawrence Lessig on law and blockchain technologies.

Our legal system can sometimes be ancient in today’s fast-moving world. But to adjust to new technologies, it is important to have those who can define (re) our lives before we change our laws. Room for debate and time for social conflicts to take place.

The law operates this act of constructive friction. It can restore human agency against fierce technological development.

Given all the excitement over blockchain technologies, it is likely that interested parties will soon seek legal recognition and state-approved enforceability of smart contracts.

These emerging technologies are still very new, subject to adequate analysis of their social, economic and political implications. More time is needed to assess how blockchain can be deployed in a socially beneficial manner.

Blockchain technology is set to constitute an important component of tomorrow’s society. The legal system – as slow as it is – may just be that we are good at its core to ensure that this new tool is deployed in a manner consistent with established principles and values.

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Vasilis Kostakis receives funding from IUT (19–13) and a B52 grant from the Estonian Ministry of Education and Research.

Wolfgang Drechsler receives funding from an IUT (19–13) grant from the Estonian Ministry of Education and Research.

Primavera de Philippi does not work for any company or organization for funding, consulting, own shares or would benefit from this article, and has not disclosed any relevant affiliation beyond their academic appointment.

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