Earlier this week (on Sunday night, in fact), I came across a definition and understanding of “legal systems” that has really cleared up a lot of things that have been weighing heavily on my mind for a long time. Here it is:
Legal systems are protocols for the management of disputes.
This includes protocols for preventing disputes and for managing the whole lifecycle of disputes, from inception to resolution. It captures both descriptions of these protocols (“legal code”) and their execution (“operation of law”). It might need to be refined, but it’s useful enough as given here.
Disputes arise in blockchain governance. We follow protocols for managing them.
Ergo, crypto law exists.
The purpose of this writing is to 1) document some of today’s crypto law, to 2) agitate for a change in crypto law; to convince the cryptocurrency community to abandon a crypto law (a law that I’m calling “Szabo’s law”), and 3) to agitate for the inception of a new crypto legal system.
I am prepared to die on this hill.
Crypto Law, Today
I have identified a number of crypto laws, and believe that the following three crypto laws are the most important laws in cryptocurrency today, in the sense that they are the most operative in the day-to-day management of disputes in blockchain governance:
Crypto Law #1: Don’t Break the Protocol.
The spirit of this law is simple and natural. Disputes in blockchain governance are not to ever be resolved by the introduction of known critical bugs into the blockchain protocol. Critical bugs can cause the bridge to collapse, and there are people on the bridge at all times. Systemic collapse and noticeable degradation in the system’s quality always lead to disputes, and these disputes are to be avoided by preventing collapse.
It is the responsibility of developers, engineers, and architects to ensure that the software is maintained, that systemic failures don’t occur, and that when they do (as will happen, because of the sorry state of the software development industry), to remedy the situation as quickly as possible.
Anyone can halt a proposal to merge a change to the blockchain protocol by clearly pointing out that a critical bug is introduced by the proposal. This is crypto law (in fact, and not because I have just declared it to be the case).
How this law is interpreted, however, can get complicated. Blockchain core developers have precise and detailed pictures of what is considered a breaking change, and what is not. Their views are generally overlapping (for example, everyone agrees that the system crashing or having a consensus failure is breaking), however, but they also have disagreements (for example, backwards incompatible changes are considered to be breaking changes in more cases in Bitcoin governance than in Ethereum governance).
Crypto Law #2: Keep Crypto Law Legal.
This one came as a surprise to me, so it might come as a surprise to you, too. Or maybe not!
Crypto law operates inside many jurisdictions of many legal systems and is very much structured by attempts to avoid disputes with/in these legal systems. Developers and other crypto people structure their affairs in an effort to prevent disputes that might be brought to (and by) existing legal systems. As a result, crypto law operates legally in the jurisdictions of these legal systems. At least for now.
Devs make technical decisions in order to minimize their exposure to possible liability; they will choose a solution that involves assuming less liability over one that involves more, all else being equal. They will often cite their concerns that something might be illegal under some existing legal systems, or that they will be sued for their exercise of power, as motivations for their decisions.
I am not commenting on the effectiveness of efforts to keep crypto law legal, but I want us all to observe that the management of disputes in blockchain governance are very much structured by attempts to avoid disputes with existing legal systems.
The cryptocurrency community didn’t come up with this law. That crypto law is structured by existing legal systems is a natural consequence of the fact that crypto law operates in the jurisdictions of existing legal systems. And while for some participants in blockchain governance it may be possible to remain anonymous or somehow else avoid structuring their affairs in accordance with the operation of law, most participants in blockchain governance are public people who make an effort to position themselves in a manner that doesn’t get them in trouble with existing legal systems. Because of this reality, “keep crypto law legal” is crypto law. At least for now.
Crypto Law #3: Szabo’s Law.
I’m naming this crypto law after Nick Szabo, since I am pretty convinced that he created it, popularized it, and brought it into crypto law. I’m sorry if I’m missing anyone else who deserves credit for it, but I’m just going to assume that Nick is responsible so I can keep my sentences short.
Szabo’s law is simple: Do not implement changes to the blockchain protocol unless the changes are required for the purpose of technical maintenance.
It’s called “blockchain governance minimization”, but it can also justifiably be called “crypto law minimization”, because of the following crypto legal consequence:
Crypto law does not (at least not crypto legally) manage disputes by making changes to the blockchain protocol, unless they are justified as needed tech maintenance.
It’s a law that completely excludes other crypto legal processes from touching the blockchain protocol. Except as it is related to tech maintenance.
Nick Szabo has popularized (and legalized) his law in a few ways:
- By popularizing autonomous software in the crypto legal form of smart contracts
- By arguing that the minimization of responsibility for developers isolates them from legal risk
- By arguing that crypto legal systems with Szabo’s law are more socially scalable than systems with more legal and political power.
Nick’s crypto law is responsible for a lot of the talk (and law) around the blockchain being immutable, and needing to remain immutable, and has justified decisions by developers to refuse to make changes to the blockchain protocol when they are engaged in blockchain governance disputes (for example in the Bitcoin block size debate). The DAO hard fork was a clear violation of Szabo’s Law, and it offended Nick enough that he disowned Ethereum in favor of Ethereum Classic. But Szabo’s law has been cited in Ethereum blockchain governance disputes after the DAO hard fork (specifically, in the still-unresolved stuck funds dispute). Indeed, Nick Szabo’s law is often cited by core developers to justify their choices in blockchain governance disputes. Szabo’s law is therefore crypto law.
In Awe of Nick Szabo’s Crypto Legal Achievements
Before I dig in, I’m going to take the opportunity to express humility in light of the crypto legal work that Nick has managed to do, apparently working with only the power of his crypto legal mind, and his writings on blogs, mailing, and the like. It’s an impressive — groundbreaking — achievement.
Nick Szabo forged a crypto law and popularized a legal theory that created software that is way more autonomous than society is capable of creating without the use of law.
In truly revolutionary cypher-legal-punk style, he created autonomous software with a crypto law and a legal theory that is profoundly and radically anti-legal and anti-political.
That the political and legal climate of the world was ready to embrace a legal theory and a law that is premised on the idea that legal and political processes are unworkable and need to be ruthlessly minimized, that software needs to be autonomous to be trusted is absolutely astonishing.
What a time to be alive!
Certainly Nick has vision and judgment — there is no way that the blockchain space could have gotten to where it is now, with crypto law the way it is, if people across the globe weren’t jaded enough by the evolution of legal and political processes to be attracted to Szabo’s law. Nick saw the opportunity and acted on it to create a truly global (crypto legal) revolution. It’s really something remarkable. I am humbled by his insight, his foresight, and the effectiveness of his cypherpunk activist work.
And all things considered, it seems like cryptocurrency is going to remain more — or less — legal. At least for now!
So I take my hat off to you, Nick Szabo, in awe of your mindnumbingly brilliant and successful crypto legal activism! Thank you! No really — Thank you! Mad respect to you, sir!
But now — sorry Nick — I’m going to do my best to persuade the reader that we need to abandon Szabo’s law as soon as possible.
Against Szabo’s Law
Unfortunately for everyone, Szabo’s radically anti-legal crypto law is too radically anti-legal to be part of a sensible crypto legal system. Szabo’s law minimizes crypto law. It comes at the exclusion of all other crypto law that might be concerned with making changes to the blockchain protocol. Hopefully you already see how absurd this is, but I’m going to spell it out as clearly as I can, in the following four parts:
- Szabo’s Law breaks Crypto Law #2 (Keep Crypto Law Legal)
- Szabo’s Law is politically loaded, not politically minimal, apolitical or anti-political
- Szabo’s Law has an insecure and aggressive legal posture
- Szabo’s Law is not a part of the most socially scalable crypto legal system
Szabo’s Law breaks Crypto Law #2 (Keep Crypto Law Legal)
Nick Szabo sold blockchain developers on the idea that the minimization of blockchain governance and of crypto law would minimize their exposure to legal risk, by requiring them to exercise only the minimum amount of crypto legal power and judgement possible.
Unfortunately for these developers who probably had no legal training of any kind, Nick’s legal theory is actually very stupid, and based on a naive interpretation of how existing legal systems will interact with crypto legal systems.
If the response when a legal system brings a dispute to blockchain developer is “sorry, we can’t do anything for you”, as it will almost always be under Szabo’s law, then it has two natural reactions (assuming that the legal system believes that the devs can’t do anything). The first is for the legal system try to handle the disputes without any recourse through changes to the protocol. The second is to minimize the damage caused by unresolved or irremediable disputes by making the use and development of the blockchain protocol illegal.
Szabo’s firm hypothesis is that legal systems will be satisfied with their ability to manage the disputes that arise in blockchain governance but which cannot be remedied by crypto law thanks to Szabo’s law.
I can imagine lots of possible disputes that can’t be resolved (and will be ongoing) without changes to the blockchain protocol, and so my hypothesis is that Szabo’s law will make cryptocurrency illegal in many jurisdictions. Disputes that are not being adequately resolved by crypto law will be brought to existing legal systems, who in turn in some cases will not be properly able remedy the situation because they cannot change the blockchain protocol.
It should not be surprising, but a crypto legal system operating on principles as anti-legal as Szabo’s law will naturally eventually become illegal. As a result, Szabo’s law is in conflict with Crypto Law #2.
I’m not done arguing this point, I am going to come back to it after describing the legal posture of crypto legal systems that adopt Szabo’s law.
Szabo’s Law is politically loaded, not politically minimal, apolitical or anti-political
While Szabo’s Law is sold on the principle that politics is to be minimized, its crypto legalization was a deeply politically motivated act. I don’t know what Szabo’s political goals actually are, but it is safe to assume that he believes that they can be brought closer to reality by legalizing autonomous software into existence.
Not only does the legalization of Szabo’s law determine governance outcomes (always in favor of not intervening with the execution of software), it minimizes the space for political and legal conversations that question whether those outcomes are desirable.
It locks blockchain governance and crypto law on a collision course with the consequences of creating autonomous software. It’s impossible to predict all of the ways that this can go wrong, impossible to predict all of the disputes that will arise if we go down this route, but it is the route that Szabo chose for us based on his worldview.
He imagines a world in which crypto political and legal processes are necessarily going to go against either his personal preferred political outcomes, or against the public good, and therefore must be minimized.
This positioning makes sense if Szabo wants to do something very politically unpopular or something very illegal. It also makes sense if Szabo is so radically jaded that he believes that crypto law and politics cannot be worth the effort, no matter what form the crypto legal system might take.
But in either case, Szabo’s clear intention is to use crypto law to determine blockchain governance outcomes without participating in blockchain politics (which, conveniently, is to be minimized according to Szabo’s law). The legalization of Szabo’s law was therefore a highly politically charged crypto legal action.
Szabo’s law is not anti-political. It is a law that is aimed at shutting down political debate in order to guarantee Nick’s preferred political ends.
I regard this kind of anti-social behavior to be bad-faith participation in blockchain governance.
Szabo’s law has an insecure and aggressive legal posture
I don’t just mean that shutting down political debate is an insecure way to achieve your political goals.
Crypto law’s current posture of “we don’t deal with disputes that aren’t related to maintenance” and “sorry, there’s nothing we can do for you” is insecure and aggressive.
“We don’t deal with disputes that aren’t related to tech maintenance” is insecure in crypto law’s ability to legitimately manage the disputes that might arise in blockchain governance.
“There’s nothing we can do for you” is an aggressive posture, when someone has a legitimate dispute.
And why is crypto law insecure and aggressive?
Because of a radical law born of the view that politics and law are completely unworkable and not worth trying in any circumstance or configuration whatsoever. Because of Nick Szabo’s insanely stupid crypto law.
Nick is insecure in his ability to participate in political and legal process, and in his ability to come up with legal systems that actively manage disputes, and his crypto law reflects it. He is very aggressive in his quest to create autonomous software, and his crypto law reflects it.
This legal posture is in direct conflict with Crypto Law #2. It invites conflict with existing legal systems. Legal systems don’t like to be involved in disputes with insecure, aggressive legal systems.
Nick’s legal posture might be cool as a kind of radical cypherpunk crypto legal philosophy. Maybe. But it’s not appropriate for blockchain governance, not today, and probably not ever.
Szabo’s Law does not create the most socially scalable crypto legal systems
I don’t think that Nick imagines that an aggressive and insecure legal posture is the most socially scalable legal posture. And it obviously isn’t.
Nick believes that a crypto law that legalizes autonomous software will form a better basis for socially scalable society than is possible under any conceivable crypto legal system that is more political or legalistic.
I am very skeptical about his position, because I don’t believe that autonomous software is at all safe, you know, for humans in society.
Nick knows that autonomous software isn’t always going to be legal or politically popular, and he is determined to use crypto law to shut down any legal and political coordination that would undermine his mission. This antisocial behavior makes me question whether Nick is even concerned with the social scalability of public blockchains.
Assuming that Nick has good intentions, then I am absolutely certain that Nick Szabo is not the best legal thinker in the world. Someone can come up with crypto law that is more socially scalable than the crypto law Nick came up with so he could bring autonomous software into the world. There’s no doubt about it.
Maybe enough people are as radically paranoid of legal and political processes as Nick that even a slightly more reasonable crypto legal system will be broadly seen as untrustworthy. I don’t know. But I’m ready to have faith and to bet my life that we can do much, much better than the insecure, aggressive crypto law we have today.
A much more secure crypto legal posture is possible if we abandon Szabo’s law
Crypto law doesn’t have to be this way.
Legal realities do not warrant the posture of today’s crypto law.
Cryptocurrency is more-or-less legal. We need to relax.
Szabo’s law is anti-legal and anti-political. We need to abandon Szabo’s law to adopt a more open and secure legal posture. One that acknowledges rather than shrugs off its responsibility to carefully manage disputes. One that does not write crypto law to push politically unpopular outcomes on society. We can’t adopt a secure and open crypto legal posture without first abandoning Szabo’s law.
But we don’t need to know anything about the future of crypto law to assume a more secure posture, and benefit from the more comfortable position. We can immediately embrace a much more correct position, one that does not change crypto law except by abandoning Szabo’s law:
Crypto Law is responsible for managing disputes in blockchain governance, and making sure that they are resolved via legal processes that don’t break the protocol.
Crypto law is still nascent, and I have no clear picture where it will go in the future. But I don’t need to know where it will go to see that it needs to abandon Szabo’s law in order to develop in a healthy way.
We cannot foresee the nature of all of the blockchain governance disputes that will arise in the future, and need to retain the ability to remain flexible enough to adapt to changing circumstances, we cannot afford to blindly pledge our fates to a future with autonomous software.
We have crypto law because we have protocols for managing blockchain governance disputes. We need these protocols to be sensible, so that we don’t create unnecessary headache and hardship when disputes arise. We need to believe in our ability to manage blockchain governance disputes based on sound crypto legal work — which means not breaking the protocol and keeping crypto law operations legal — at an absolute bare minimum.
We should admit that we need more legal principles, and more crypto law. We should admit that we need to come to a new understanding of how disputes in blockchain governance ought to be resolved.
We should admit that we collectively have an obligation to manage the disputes that will arise from the operation of global public blockchains to the best of our crypto legal ability, so that as many people as possible can enjoy the benefits of global public blockchains.
This secure, open-minded posture is much more comfortable than the aggressive, insecure posture we have today.
I hope you’re already feeling more comfortable!
If crypto law fails to tactfully manage disputes, the result is more plausibly going to be that blockchains (and the operation of crypto law) become illegal, than that blockchains remain legal and autonomous and become as widely adopted as Nick Szabo imagines they will. The only way the law-abiding public can have the most benefit from global public blockchains is with a new crypto legal system.
For A New Crypto Legal System
Nick Szabo took it upon himself to use crypto law to summon autonomous software.
In response, we must take it upon ourselves to use crypto law to conjure up a new crypto legal system, one that is able to keep Szabo’s beast in check.
I am calling upon crypto law people to recognize that they uphold principles of law that are incompatible with Szabo’s law.
I am calling upon crypto law people to strike down Szabo’s law, and to establish a new crypto legal system in its wake.
No one should do this alone. Not me, not you, not Nick Szabo. It needs to be a global best effort that taps into the bests legal thought available, that is rigorously treated by the best legal minds on the planet, from as many legal traditions and schools of thought as possible. We can’t afford to screw it up. And we have no idea how it’s going to turn out.
We can’t let Nick Szabo stop us from establishing a new crypto legal system. His paranoid conviction that legal systems are completely unworkable and are best ruthlessly minimized cannot be justified by impartial reasoning in legal or political analysis. The genius crypto legal footwork that Nick did to legalize Szabo’s law is an impressive feat, and says a lot about our current legal and political climate, but his legal theories are not a sound basis for any system of crypto law.
His attempt to create autonomous software that is above any (other) law must be foiled by law people who are able to see through Nick’s bogus legal theories.
But we must stand in awe of the astonishing success of Nick Szabo’s law, and of Nick’s evident ability to tap into the distrust that permeates the modern legal and political climate.
And we must pay due tribute to the legal and political climate that legalized Szabo’s law.
Nick Szabo’s crypto law does not do it justice!
If no one should be in charge, then how does Nick Szabo get to use crypto law to ban us from using crypto law?
Nick is insecure about his ability to participate in politics and law, and he wants to use the force of law to conjure up autonomous software, and he doesn’t want us to have a say in the matter.
So why should we take tips from him about how we should handle disputes?
And why should he write our laws? How does he imagine that he can deny us our ability to create our own crypto law?
Nick Szabo’s personal effort to minimize our use of crypto law is not a good crypto legal embodiment of the ethos of our sociopolitical movement today, and it never was.
We need to stop buying into his bullshit.
I don’t trust Nick Szabo to write our laws, or to have sound, impartial judgment about how we should prevent and resolve disputes. And neither should you. Nick Szabo does not represent me, and I am sure that letting Nick dictate our future is not what decentralization is about at all.
Crypto law is a collection of protocols for handling and preventing disputes that arise in blockchain governance.
Nick Szabo has a narrow imagination for what crypto legal systems can be like, and doesn’t even bother thinking about it too much because he categorically dismisses all non-minimized crypto legal systems.
Nick is a visionary cypherpunk activist, that’s for sure, but the legal and political theories that he spreads do not reflect sound, impartial judgement. They reflect his insecure and aggressive crypto legal style.
I will not follow his lead.
Crypto law isn’t decided. It isn’t final. Law doesn’t ever actually operate like that. It’s an institution that humans use to coordinate the management of disputes. We can always coordinate politically to create new institutions, although it may not always be easy.
Crypto law doesn’t need to be Szabo’s law.
And I don’t think anyone has the ability to defend Szabo’s indefensible law.
Nick Szabo says that crypto law is decided and that it must be minimized. But Crypto law isn’t decided, and it must not be minimized.
Nick Szabo wrote and decided on the “decided” crypto law himself, and he propagated legal theories in order to legalize it so that he could have autonomous software.
But crypto law doesn’t need to be Szabo’s law.
We need to be free to build a crypto legal system that embodies the ethos of the blockchain space, one that we can actually be proud of, as opposed to Nick’s insecure and aggressive crypto law (that we should be ashamed of).
We cannot allow Nick Szabo to stop us from using crypto law.
Crypto law will become more secure when we let go of Szabo’s law. Crypto law without Szabo’s law doesn’t suddenly become centralized, hierarchical, or captured by existing legal systems.
Even without Szabo’s law, crypto law has technical and legal limitations, and it is up to crypto law people to have the judgement to make sure that crypto law operations are not in violation of Crypto Law #1 (Don’t Break The Protocol) or Crypto Law #2 (Keep Crypto Law Legal).
But notwithstanding the technical and legal constraints that we cannot escape, crypto law can be almost anything we can imagine, and it can develop to match our changing circumstances.
The future of crypto law isn’t set in stone. It depends on crypto legal actions taken by crypto law people.
For my part, I will start by attacking the legitimacy of Szabo’s law.
And if the stars align and I have the opportunity, I will break Szabo’s law.
Sue me. I don’t care. I am prepared to die on this hill.
I want to thank COALA for providing me with a fantastic introduction to the wonderful world of crypto law. And I want to thank Boris Mamlyuk of @CleanApp and @Crypto Law Review for writing one riveting crypto law blog post after another, for helping me see through Nick Szabo’s crypto legal matrix, for understanding much if not all of this before I could, and for providing me with a great deal of inspiration for this blog.
I have omitted some well-deserved acknowledgments to caution on the side of preserving people’s privacy, and may add acknowledgements in on request.
I’m here to troll the interwebz, I’m not trained in law or licensed to practice law anywhere in the world. No one got to review drafts of this blog before publication. I might have basic facts, definitions and terms completely wrong. Please don’t trust, verify.