By Matheus Darós Pagani
CEO of 4CADIA Foundation
Humanity has found different ways to deal with dilemmas of trust throughout history. In many tribes, gossip, ostracism, and direct physical coercion are often used to govern social relations and control deviation and cheating.
The more complex the human groups become, the more important the institutional arrangements become, which impose costs and benefits for human action, leading to more or less satisfactory collective results, depending on the effectiveness of the institutions and their ability to adapt to change.
Law arose as an institutional arrangement to try to govern societies over the centuries. Composed of a body of norms sanctioned by the state, which is the entity that holds (ideally at least) the monopoly of the use of force, and regulates civil and economic life in numerous aspects, defining the space of freedom and control.
The emergence of an information society, with hundreds of millions of interactions taking place on a global scale, has introduced many new different problems that have burdened this arrangement.
Economic exchanges became dependent on a large number of intermediaries, financial institutions, credit operators, central banks to local governments and international treaties. The absence of a global State has prevented the consolidation of a law system capable of imposing the same regulations in an efficient, transparent and secure manner.
The very nature of exchanges in the internet world, with providers and companies vying for information in a silent war against people’s privacy, has made these interactions subject to all kinds of fraud, cheating and dilemmas of trust.
Since the beginning of the Blockchain revolution in mid-2008, countless people around the world have sought to explore new forms of interaction without the need for intermediaries to ensure transactions and overcome dilemmas of trust.
In this model of governance of human relations, it is no longer the law, but the architecture that has gained ever more importance in the scenario. Architecture means the hardware or software arrangement in which the network is inscribed. With blockchain, the actors on the network assume that all information is immutable and that the system is sovereign to define how much values each portfolio holds based on the code that was agreed between the parties. To use the expression by Lawrence Lessig, which is already famous, Code is Law, in cyberspace.
Therefore, with blockchain, the idea of Smart Contracts has acquired an unprecedented meaning. Originally, contractual clauses such as barriers, guarantees and boundaries for property rights were thought that could be incorporated into hardware and software in such a way as to impose onerous costs for their non-compliance that do not depend on the human performance of an agent acting as a third party in the relationship. However, with the possibility of developing a public blockchain, the guarantee of compliance with these conditions has been transferred to all users of the network, which is now governed by a self-impulsive material mechanism, intrinsic to the distributed existence of the smart contract on the blockchain.
Thus, it is no longer the rules or laws that bind individuals, but objective codes with clear purpose, completely cold as to the status, influence, social situation or any attribute of the parties involved. This approach combines cryptography and cryptoeconomics for the structuring of decentralized and robust peer-to-peer networks, which thrive over time, and are immune to interpretations and interests. What is code actually happens.
We are talking here about an institutional arrangement that is potentially far more effective than the law itself, subject to interpretations, interests, corruption and high-handedness. It is not yet possible to know how this code-structured world will look like. Considering that Roman law is one of the bases of Western civilization as we know it today, it would not be frivolous to say that we are facing the first signs of the birth of a new era that none of us could ever conceive a little more than a decade ago.
That future may be closer than you think. In some societies, projects such as Open Law have already been accepted as official instances for validation of legal contracts in blockchain. The great shift is already underway. The question now is who is going to step up and who is going to be left behind.
