Blockchain Governance 105: International Law
Global blockchains = global blockchain governance.
Vlad Zamfir’s Blockchain Governance 101 (BG101) is a great intro to the complex question of how to regulate different types of on-chain, off-chain, and against-the-chain activities.
Zamfir’s piece prompted us to respond, followed by a reply by Zamfir. Then Vitalik Buterin & others stopped by to drop truth bombs. Michael Haupt has promised a response to BG101, which we eagerly await.
Generalizing a bit, here’s where we stand:
- Blockchain Governance 101 (Zamfir) — mapping the field
- Blockchain Governance 102 (CleanApp) — critiquing cartographers
- Blockchain Governance 103 (Zamfir) — self-governance
- Blockchain Governance 104 (Buterin) — immutability as governance
- Blockchain Governance 105 (CleanApp) — int’l law & governance
- Blockchain Governance 106 (Zamfir) — good faith
- Blockchain Governance 110 (you) — [ ??? ]
Of the five possible governance outcomes discussed by Zamfir in BG101, we think “international law” is the most pressing because it’s the most consequential, and the most misunderstood.
Analysts know that global blockchains² require global blockchain governance, and that “international law” is one type of global governance regime. But only a few people have outlined what “international law of blockchain” would look like.
This piece offers some guidance through a series of discrete reflections on the relationship between crypto & international law. This is a long read (and it was a long “write”), but the time invested will be amply repaid.
Thesis: International Law (IL) isn’t just one potential future blockchain governance outcome; IL is today’s and tomorrow’s actual governance reality. The bigger question is how open these international legal blockchain governance processes are, should be, and will be.
1. Why International Law?
Aside from the fact that leading blockchain developers have expressly invoked international law as a possible governance pathway, there are other reasons for analyzing blockchain governance through international law.
- International law is already governing the blockchain in myriad direct and indirect ways. Understanding (or, at minimum, acknowledging) these existing processes is a prerequisite for building effective long-term governance models.
- International law offers excellent contrasts for what not to do in governance.
2. Crypto ≈ CryptoLaw
To understand the international law dynamics of the Crypto Legal Matrix, it’s important to take stock of crypto’s own deeply legalistic conceptual and institutional DNA.
At Ethereum, for instance,
Dev Wood had good reasons for inventing CryptoLaw to explain Ethereum’s many utility propositions. Ethereum founders had good international law reasons for instituting the Ethereum Foundation as a Stiftung in Switzerland, of all places.
Crypto will profit from more analysis of those utility propositions & constitutive acts instead of trying to put the CryptoLaw genie back into some pre-crypto bottle.
Whether you’re Bitcoin maximalist who wants to focus solely on crypto as “immutable money,” or a crypto dev who wants to do something meaningful for society, you must acknowledge that Law is our social BIOS.
Law is the “code” that translates abstract ideas like “money” and “society” into tangible material form through the threat of the legitimate use of force (e.g., “law en-force-ment”).
As blockchains/crypto/DLT continue their march to global scales and global adoption, they will get much more legalistic, not less.
As intra- & inter-blockchain governance gets more legalistic, pan- & supra-blockchain governance (e.g., international law of blockchain) will get even more complex.
In a well-conceived governance future, added complexity across various blockchain governance settings is matched by added governance capacity in those settings.
The alternative is higher legal risk & more conflicts.
3. Crypto & IL Are Conceptual Twins
Crypto & IL are different governance systems, but they use the same conceptual building blocks and speak the same governance vernacular: Legalese (e.g., “smart contract” as a purportedly “self-en-force-ing” instrument).
Once we remember that CryptoLaw is a paradigm invented by crypto folks for translatability and adaptability, we begin to see striking parallels between the structure of blockchain legal argument and the structure of international legal argument.
Like any tool, these Legalese insights are already in use by interventionists and non-interventionists in pursuit of their respective agendas.
CleanApp’s agenda here is more modest. We’re just translators — decrypting CryptoLegalese for the international law & global governance community, and decrypting IL legalese for the global crypto community.
A Rosetta Stone between Crypto and IL maximizes the likelihood of good governance outcomes in Crypto and IL institutions. For instance, “Crypto IL” can improve IL and Crypto by highlighting the existential need for inclusive participatory governance models.
Blockchain developers and node operators know that broader participation in governance lowers systemic risk by spreading risk mitigation duties (& opportunities) across a much larger number of blockchain stakeholders. IL embeds similar logics into international relations.
In game theory, economics, crypto, this is an illustration of network effects, a coordination problem, and so on. In international relations & international law, this is manifest in doctrines like collective security, “uniting for peace,” and so on.
The terms may be different, but they relate to similar conceptual problems corresponding to similar functional needs.
4. Crypto & IL Are Twins, But Not Equals
Seeing parallels between the Crypto Legal Matrix & the International Legal Matrix gives blockchain stakeholders a big advantage in global governance deliberations, but only if crypto stakeholders take positions of parity, not FUD, vis-a-vis existing legal actors.
Here’s IL & crypto today:
Here’s IL & crypto tomorrow (iff both keep reading Crypto Law Review):
There are at least seven lessons here for blockchain governance:
- IL Legalese may seem hard at first, but IL is trying to solve the same core problem that crypto’s trying to solve: how to get actors to do what they said they’ll do.³
- As object oriented programming teaches us, the first step in data modeling is to map the full range of objects (“governance stakeholders,” in Zamfir’s taxonomy) that we want to connect & whose self-governance we want to enable. Identifying and mapping stakeholders who will be most immediately impacted by Blockchain IL is a prerequisite for defining classes of governors & “the governed,” and then building effective governance methods. Returning to the twins metaphor, crypto & IL might actually be 2/3rd of a conceptual triplet, 1/2 of a governance quartet, and so on. In other words, as we start thinking about a possible “Blockchain Rights Treaty” or a UN-based administrative governance mechanism, we must also think strategically about CryptoLaw’s relationship with major global CyberLaw currents, including ongoing debates over global Net Neutrality, data privacy/security, and the enduring legacy of territoriality.
- While we keep scanning the “menu” of governance outcomes in BG101 (& asking the chef for recommendations), it’s easy to overlook one of the most insightful parts of BG101: its incredibly detailed stakeholder map and Zamfir’s explicit position that every affected stakeholder must take personal responsibility in the development of blockchain governance models that will inevitably govern us all. Going back to governance twins versus triplets or quartets, Zamfir’s point is that it’s not someone else’s job to find “conceptual analogues” and “efficient regulatory parallels” — it’s yours. That’s a bummer, because it’s one more thing on the ever-growing to-do list; but this posture is very empowering.
- IL has a vast “code repository” of legal tactics for assuring compliance with norms, ranging from low-cost/high-yield (international arbitration; “good offices;” global administrative law; etc.) to high-cost/low-yield (war). Smart coders know there’s no need to reinvent the wheel. If a particular governance tactic works especially well in IL, chances are high it will work well in “Blockchain IL.”
- The converse is also true. Governance tactics that prove to work well for crypto may scale nicely to international law and global governance. Immutable/verifiable voting mechanisms and fixed on-chain implementation of predetermined voting rules may greatly boost the operational efficiency, transparency, and overall legitimacy of complex international organizations like, say, the World Trade Organization or the amoeba commonly known as “the UN.”
- IL & crypto both speak dialects of Legalese, but IL is a native speaker, while crypto is not. Native speakers often exploit home turf advantage. But even the most self-interested native speakers understand they must adjust to fundamentally changed circumstances. Spanish & Arabic are not P5 languages, but click on UN.org. You’ll see the burden is on the native speaker of Legalese to understand the non-native speaker, not the other way around.
- Smaller “twins” may have more power, especially if they know about “holdouts,” “collective action,” etc. — and have the courage to take a stand. A slide from Vlad Zamfir’s recent blockchain governance presentation explains this in blockchain terms:
We know that additional lessons will emerge from these comparisons, and we look forward to learning from your experience. For now, though, we’ll move to more concrete analytical frameworks.
5. IL Created Crypto
This next point is an intuition that needs far more rigorous analysis than possible here. But here it goes. It’s likely that for today’s dominant stakeholders in crypto and IL, the status quo is the preferable blockchain governance outcome:
Why rush to fix something that’s not broken (for you)?
Here’s a sketch of how crypto & IL are mutually-constituting social orders. Imagine a cowboy movie, or maybe something like Westworld, in which the sheriff (IL) allows the emergence of a villain (say, crypto) because the villain shows the broader society why it needs the sheriff.
In this hypothesis, an exaggerated threat from a manufactured villain is Exhibit A of the sheriff’s indispensability.
IL gives life and fuel to crypto and facilitates crypto’s growth, so that crypto becomes a perpetual threat to States — one that only international law (and crypto-trained international law experts) can handle.
It’s not a difficult argument to make, though it is a very difficult argument to prove.
According to legend, Satoshi Nakamoto invented Bitcoin. According to ethereum.org, Vitalik Buterin “is the creator of Ethereum.” But it’s also possible that IL had as big a role in creating crypto as Satoshi⁴ — whoever she is.
- IL is the very system of territorial states, fiat money, and risk externalization that created the perfect storm known as the Great Recession — the immediate catalyst & context for Bitcoin’s release (IL as problem; crypto as solution).
- IL’s relatively rigid territorial capital control regimes are a major economic (non-speculative) reason behind crypto’s early-stage growth; IL’s tight control of labor mobility is a major cause of economic inequality, which heightens interest in alt-earning opportunities (IL fuels demand; crypto provides supply).
- IL’s fragmented and overlapping jurisdictional maps and fluid jurisdictional markets permit crypto to operate in different legal, alegal, and illegal forms — simultaneously (IL = pluralistic conceptual universe; crypto = ether within this universe).
Your inner crypto-anarchist might be saying: “Aha! This is exactly why ‘the law’ and ‘lawyers’ and ‘the state’ are nothing but self-replicating parasites, addicted to power by any means necessary!” If so, we just hope your inner crypto-pragmatist also appreciates the symbiotic nature of the crypto-IL relationship.
The body of rules that defines Place A, Place B, etc. on global territorial and jurisdictional planes is … international law. The body of rules that says it’s OK for a given crypto instrument to be illegal in Place A, and totally legal in Place B is … international law. Etc.
With the exception of the very last point about international law permitting radically different legal orders to coexist, it’s not clear how this intuition will be operationalized to advance some particular political agenda, but we’re pretty sure CryptoLawyers will be able to figure it out in no time.
Let’s get even more concrete.
6. IL > Crypto > IL
As much as this confounds and offends some crypto-anarchist or crypto-libertarian sensibilities, law (including international law) already governs the blockchain.
Law doesn’t just restrict crypto’s freedom of action; law is the same phenom that safeguards crypto freedom of action (IL > Crypto).
Every time anyone uses the word “jurisdiction” in the context of global blockchain governance, they affirm the legitimacy of “jurisdictional frameworks” as epistemic boxes and legal forms.
This is a straight-up application of legitimacy as “common knowledge” — Zamfir’s definition in BG101 — the idea that people are more likely to adopt a particular norm or decision-making process if they think others share that understanding of a norm or process.
Even if someone argues against X jurisdiction’s long arm reach, even if they argue against all “jurisdictional attempts to rein in [supposedly] a-legal crypto,” they are affirming existing jurisdictional logics.
The only way to escape jurisdiction (JDXN = any institution’s exercise of legal authority over something) is to deploy and control global jurisdiction-mapping technologies that are superior to anything in use today by the world’s most sophisticated state and non-state actors (Crypto > IL).
Blockchain is that technology, and the first blockchain crew that puts the world’s law “on-the-blockchain” will pull off a coup for the ages: crypto capture of law, instead of the other way around.
Zamfir is absolutely right that it’s challenging to govern the blockchain with the law; but that doesn’t stop “the Law” from trying.
It’s not clear whether this will be done through “Crypto v. IL” and/or “Crypto > IL” and/or “IL > Crypto” reasoning, but what’s clear is that we have to get ready.
As Zamfir poignantly argues, none of the blockchain governance outcomes discussed already (including “IL > Crypto > IL”) are a given —
Don’t let the multi-jurisdictional nature of blockchain governance lure you into thinking that what happens on the blockchain is not your responsibility.
Or, in the immortal words of Keyser Söze, “the greatest trick the devil ever pulled was to convince the world s/he didn’t exist.”
7. IL ≠ Rules; IL = Battlefields
Furthermore, when Zamfir writes about “state capture” as a phenomenon whereby “different ‘regional blockchains’ [are] captured by the regulators and courts of major jurisdictions[,]” we must be comfortable acknowledging that even seemingly settled concepts like “jurisdiction” are actually fiercely contested national and international legal norms.
There’s not one “international law,” but arguably many — which has even led to the emergence of a field known as “comparative international law” (Chinese approaches to IL; American approaches to IL; etc.)
- In the U.S., Russia, and most other legal systems, international law is expressly integrated into domestic legal systems.
- International lawyers in those legal traditions will quickly concede that doctrines like “sovereignty,” “jurisdiction,” and “non-intervention” are foundational —
- And yet, each day, those same international lawyers wage mortal combat for interpretative & institutional primacy over these “settled” legal norms.
The key lesson here is to be careful about ascribing a universal or unitary character to “international law” or “international legal institutions.” We do that here with the heuristic “IL” because it makes writing easier and less choppy, without the need to qualify IL each time we mention it.
In practice, “IL” stands for a complex web of international and domestic legal and quasi-legal forms, processes, and institutions — many of which are poorly understood even by the best international lawyers. No one person (& no single law firm) knows “all of IL,” just like no one person (& no single software collaboratory) knows “all of C++”—!
How’s this useful?
Concretely, it helps us question and attack artificial divides between supposedly discrete domestic and international legal spheres with much higher measures of confidence.
Internet Censorship as IL
Let’s recall an example from BG101 when Zamfir introduced Internet Censorship as Blockchain Governance:
In this scenario, rather than allowing their publics to be exposed to or to access public blockchains, major jurisdictions outlaw and censor access to the blockchain that do not comply with local regulations.
That act of “outlawing and censoring” may seem jurisdictionally-bound and localized, but the only way this seemingly unilateral act achieves legitimacy and on-the-ground effect is if the censoring state deploys domestic and international legal arguments in order to secure domestic and international legal rights (& potentially remedies).
Good illustrations of this include European Commission antitrust prosecutions of BigTech, including a decade-long saga against Microsoft.
To the extent we recall these cases, we typically remember record-breaking $ billion+ settlements. Beyond that, the legal details are usually fuzzy.
But if we look closer, we realize each of these cases is also about re-adjusting the semi-permeable line between domestic and international law (please note: re-adjusting, not necessarily clarifying).
How do we operationalize this insight into blockchain governance? Let’s return to one of Zamfir’s arguments earlier and focus on the illustration he offers:
Yes and no.
- In the context of a U.S. court ordering a specific governance decision on, say, a U.S.-based blockchain operator that would have global on-chain effects for that blockchain (such as the IRS/DOJ “UBS-ing” the Ethereum Foundation) — Zamfir’s prediction seems spot on.
- On the other hand, if the U.S. Supreme Court issues a holding that curtails American extraterritorial legislative and/or law enforcement reach over the “global public blockchain,” this could be tantamount to a recognition of an emerging customary international law norm of non-intervention in public hyperutility blockchains.
While the U.S. Supreme Court is technically a domestic court that’s supposedly applying “domestic” constitutional law, the United States Constitution makes international law the supreme law of the land.
Good or bad, U.S. Supreme Court holdings on questions of international law carry great weight around the world. Like a snowball, the legitimacy of a U.S. court’s opinion in a blockchain governance matter only grows with every subsequent citation of that opinion by any legal institution around the world. This is so irrespective of whether the citation approves or disapproves of the holding — !
In law, this process even has a name — the “Americanization of international law.” In crypto, this process of legitimization-by-citation (irrespective of merits) also has a name — blockchain. Different names; similar logics.
International Private Cooperation as IL
The same argument applies to another potential governance outcome proposed by Zamfir: International Private Cooperation.
With the Internet Censorship outcome, we used IL to question and manipulate the artificial boundary between domestic & international law.
The same tool⁵ we used to probe the semi-permeable nature of “domestic v. international law” allows us to collapse the supposedly clear divide between discrete private & public legal spheres.
Here’s Zamfir’s intro to International Private Cooperation:
In this scenario, there is a global blockchain governance system that is open for participation by the public. That system could be driven by associations of private people, corporations and NGOs. This is arguably how we do internet governance today, through institutions like ICANN, IETF, WC3, IGF, etc.
Here’s one way to collapse the private-public divide:
- Yes, corporations are arguably “private legal people.”
- However, corporations are also public-facing orgs; there’s a reason we have terms like “public corporation” and “public company.”
- When terms like “public company” are used casually, they typically refer to a “publicly-traded corporation” — “a company whose shares are traded on ‘public’ stock exchanges; a company that permits its shares to be owned by members of the public.”
- In law, the ‘public’ nature of a corporation (or a blockchain) isn’t limited to whether members of the public can buy securities in that corporation or blockchain.
- There are many other ways a corporation can be ‘public,’ including government-owned corporations, govt-private hybrid corporations, public charter corporations, public utility corporations, etc. “Public corporate” legal forms exist in the great majority of the world’s legal systems, in “capitalist” states like the U.S., in “state capitalist” states like China, and variously-branded “socialist democracy” states.
- Irrespective of the corporate form (a hyper-private “Limited Liability Company” or a “public charter corporation” — whatever that even means in a given context), corporations wield enormous [public] global governance powers, even if the exercise of that power purports to be ‘domestic-only,’ or ‘strictly private.’
Bottom line: (a) international private cooperation is never fully private; (b) if the governance goal is a “global blockchain governance system that is open for participation by the public,” public v. private binaries may be less effective than other frameworks for incentivizing public participation, non-intervention by local legislatures, &/or other desired outcomes; (c) a governance posture that’s premised on broadly-dispersed hyperutility (e.g., order-of-magnitude efficiency gains in utilization of particular resources) may incentivize a would-be-intervening body to forego intervention rather than restrict “access to any benefits that could be acquired from the use of global public blockchains.” (Zamfir BG101).
To achieve good International [Private-Public] Cooperation outcomes (e.g., adoption of global blockchain interoperability standards; stronger & more flexible user-defined data privacy/security standards, etc.), blockchains need to incentivize maximum public participation (less analogy to Linux, more analogy to Wikipedia).
8. IL Governs in Manifold Ways
There are many other direct and indirect ways that international law governs the blockchain and brackets intra-, inter- & supra-blockchain legal relations.
For example, subfields of international law like fundamental human rights, international trade law (GATT/WTO & regional equivalents), and even international criminal law outline sets of rights & obligations that are binding on blockchain operators & participants — today.
- When someone launches a blockchain that allows global users to circumvent Digital [Property] Rights Management (DRM) protections, it’s not just “the FBI” that’s coming to shut the service down.
- When America’s FBI, French Gendarmerie, and other national counterparts operate abroad, they’re not just doing rogue “extraordinary rendition” and “extra-judicial seizure”
- Quite the opposite, the more controversial the enforcement action, the more elaborate the domestic and international legal argument that’s offered in support of that action.
Zamfir’s examples of state capture illustrate this nicely:
For example one day “Ethereum USA” might enforce US economic sanctions, “Ethereum Europe” might enforce GDPR, while “Ethereum China” might enforce capital control policies.
We’d add one constructive critique. Even though large blockchains like Ethereum have not fragmented into national/regional forks, in terms of functional enforcement, what Zamfir describes is less distant potential outcome and more today’s observed reality.
This is especially pronounced in enforcement regimes at the intersection of domestic and international law, in spheres like international enforcement of (“private”) arbitral awards, criminal & civil asset forfeiture, and so on.
In December 2016, France enacted an anti-corruption law known as Sapin II. The law was named after Michel Sapin, the…www.fcpablog.com
We can keep giving examples of “how” international law already governs the blockchain, but we think we’ve given plenty already.
Thank you for still reading! Now comes the naughty part of the analysis — where we examine “how” the IL governance process plays out at much deeper, structural levels.
9. Crypto & IL: Structural Similarities
In order to understand what goes on “under the hood,” we must define “international law” alongside crypto.
Traditionally, international law describes the body of (1) rules, (2) processes, and (3) institutions that govern inter-state legal relations.
For example, the United Nations Charter is a treaty containing (1) rules that govern legal relations between states who have ascribed to the UN Charter. Along with international legal rules, the UN Charter also creates (2) processes and (3) institutions (plural) through which UN member-states can exercise their participatory governance rights as members of the “international community.”
Already, there are striking parallels to blockchain (crypto/DLT/etc.²):
A given blockchain’s source code (and/or Dapp/DAO source code) contains (1) rules that govern legal relations (distribution of, say, block mining rewards as property) between node operators / blockchain participants who have ascribed to a particular version of blockchain code by running that code. Along with rules, blockchain code also creates (2) processes and (3) institutions (plural) through which blockchain participants can exercise their participatory governance rights as members of the given “blockchain community.”
10. Crypto & IL: Functional Enforcement
CryptoLaw & international law share another striking commonality: both operate in legal environments without a single identifiable source of sovereign en-force-ment authority.
We spent a lot of time going through the many ways that international law governs, but we never stopped to remark on international law’s lack of a single harmonized law en-force-ment mechanism. That’s because there isn’t a single law en-force-ment mechanism.
- In legal theory, the absence of an identifiable supra-national enforcement body has led some observers to claim that international law is not law at all, but rather represents an aspirational set of political commitments by and between different state actors.
- In crypto theory, the absence of an identifiable supra-national enforcement body has led some observers to claim that CryptoLaw is not law at all, but rather represents an a-legal set of political commitments by and between different blockchain stakeholders.
The lack of a clearly identifiable enforcement mechanism seems like a bug in the system; but it’s actually a neat feature of these legal systems.
Even without a single source of express sovereign en-force-ment authority, international law and CryptoLaw operate as functionally equivalent legal systems in their respective domains, with what appear to be highly effective non-legal “self-en-force-ment” mechanisms.
Appearances of “self-enforcement” can be deceiving, however.
What’s actually doing the en-force-ment for CryptoLaw?
A: use of force or threat of the use of force?
B: peer en-force-ment?
C: voluntary compliance?
D: all of the above?
The answer is D.
Please note, the notion of self-enforcement is not on the list because it’s an oxymoron with a high propensity to mislead.
Hard law enforcement mechanisms may not be readily apparent, but they are certainly there.
It’s not “law” unless there’s an effective en-force-ment mechanism, and we wouldn’t have bought into Gav Wood’s characterization of CryptoLaw as “law” if there weren’t effective off-chain en-force-ment mechanisms behind crypto legal rights. See above.
Moreover, in both CryptoLaw & IL, these hard law en-force-ment mechanisms are bolstered by myriad unilateral & multilateral “sanctions mechanisms,” “compliance pulls,” “spotlight effects” — including the ultimate enforcement mechanism: expulsion.³
The latter category is typically described in international relations & IL circles as “soft law” or as “soft” enforcement mechanisms.
But if you look at the sanction of expulsion, there’s nothing soft about that CryptoKitty.
11. Crypto & IL: Legal Fiat
How does one get legal capacity under international law as a state or non-state actor? In other words, how does one get governance rights (& lose governance rights) under international law? How does one get the crypto legal right to dole out on-chain and off-chain crypto legal remedies?
International law often follows the same operational logic as the Ethereum Yellowpaper: fiat assertions of legality are the norm, rather than the exception — claim legal rights now; develop legal arguments later.
The best illustration of this is the very notion of legal personality in international law.
Under the so-called declarative theory of statehood, wholly unilateral declarations of independence may be legally sufficient to create Statehood, the fundamental unit of international legal relations!
On July 4, 1776, the United States of America came into international legal existence because the U.S.A. declared that it came into international legal existence.
On October 31, 2008, Bitcoin came into international legal existence because Bitcoin declared that it came into international legal existence.
Claiming and exercising fiat rights means taking big risks, but it also means huge potential rewards.
12. IL = Competing Legalities
Whether we focus on statehood, or look at non-state actors with different consultative & informal rule-making powers, or examine how different political bodies pursue remedies under international law, here’s what we learn:
IL is not only open to different declarative theories of statehood & law-making; IL also accommodates radically competing legalities.
This logic should be instantly recognizable to crypto theorists. It’s identical to blockchain design principles that seek to engineer resistance to potential future threats even before those threats materialize (the Tangle’s quantum-resistance properties; Zamfir, Buterin & collaborators’ work on different Ethereum sharding approaches; etc.).
IL’s largely permissive attitude towards inter-state rivalry and intra-state “internal” affairs parallels blockchain decisions to accomodate competing dapps, and forcing users to comply with dapp internal governance processes.
- Example A: Might Makes Right (UN Security Council P5 ≈ Stanford & E+5)
- Example B: Cold War International Law (Western honest nodes v. Soviet attacker nodes) ⇔ (Soviet honest nodes v. Western attacker nodes)
- Example C: “Outlaw” States Under International Law (Great Powers typically define “Outlaw States;” but Great Powers themselves can become “Outlaw States” if, say, they get carried away branding other states “Outlaw States”).
- Example D: […]
All of this looks like great news for crypto operators who want to exploit gray areas, ambiguities, and legal blind spots.
But if it seems too good to be true, it probably is. The higher the reward, the higher the risk.
Let’s not forget that Crypto and International Law are both “war orphans” in a very literal sense — forged in cataclysmic political battles.
The Cold War may seem like a great illustration of “international law” and “rational self-interest” keeping a fragile peace between hostile powers — the international legal blockchain operating as designed. After all, weren’t all governance participants allowed to slowly build consensus, block-by-block?
But appearances and foggy memories can be deceiving. The Cold War was called “war” for a reason, and the block-by-block consensus wasn’t just freedom fighters clicking away on typewriters to push out Solidarity Whitepapers.
The block-by-block “consensus building” process was also the construction of the Berlin Wall, block-by-block; and block-by-block guerrilla “activist cleansing” campaigns, block-by-block.
It’s easy to let the purr-like sound of crypto “hashing” drown out the real-world “hushing” of political dissent.
International law enabled & enables this too.
13. Threat of Expulsion ≒ Force
Ultimately, “governance” is the set of rules that determine who’s inside looking out, and who’s outside looking in.
This may seem like an obvious point, but we need to say it in order to appreciate the governance mechanics that make both CryptoLaw & IL tick (& fail).
From Roman times to medieval Catholic orders, from John Wick’s Continental to the august halls of the United Nations, the sanction of expulsion is one of the most effective law en-force-ment mechanisms ever conceived.
In the end, it doesn’t matter how much coin you have if you can’t enjoy it in the company of friends who helped you earn it.
This is why in CryptoLaw & IL, the only [social] “Law” that matters is the law of gravitas.
13. Legitimacy Key: Community is Everything
With so much apparent subjectivity and indeterminacy, how does international law avoid all out war? How does IL balance the needs of so many actors advancing so many different political agendas?
We offer three inter-related answers, mindful that there are many more —
(1) without an over-arching enforcement authority, IL governance is largely a function of network effects (good news);
(2) a very “effective” short-term governance tactic for balancing the needs of different actors with many unpalatable political agendas is to simply deny those actors governance rights through clever legal doctrines like “standing,” “elision,” “traceability,” etc. (bad news);
(3) IL & CryptoLaw dampen the costs of insider and outsider attacks by continuously broadcasting the strength of the “community,” and opening many formal re-admission and advancement opportunities, even to those who faced temporary eviction or momentary self-exile (good/bad news).
Network effect (applied to CryptoLaw & IL): A network effect is the positive effect that every additional network participant adds to the overall value & efficiency of a given network.
Compliance is not just about many sticks coming at actors from many different unexpected quarters. It’s also about sizable benefits that accrue to actors who contribute to the well-being of the “international community.”
Next, while different “compliance pulls,” “reputational costs,” “spotlight effects,” “identity values” are important, we should also realize that they’re simply different ways of talking about proximity to power — one’s insider v. outsider status.
Remember that neat party trick called the declarative theory of statehood (where anyone can unilaterally declare independence and claim legal statehood; just like anyone can unilaterally fork Bitcoin and Ethereum & claim to be the “real Bitcoin” or “New Ethereum”)?
- It turns out that, while declarative statehood is a thing, it’s complemented by many different related doctrines, principal of which is the constitutive theory of statehood, which says that you acquire legal personality only when other members of the international community start recognizing you as a State.
- Being a member of the “international community” is just like being a member of the “Bitcoin community” or “Ethereum community” or some broader “crypto/DLT community.” Membership has its perks; being an outsider has costs.
The key lesson here? IL has a worst case scenario that’s even worse than banishment — a life laboring under the false promise of admission or re-admission into a given governance community.
The only thing worse than lack of governance rights, and even expulsion, is the promise of formal governance rights that never seem to fully materialize.
Crypto should avoid this governance scenario like the plague: it’s a recipe for war.
Need proof? Ask yourself how Palestine’s statehood bid is coming along “at the United Nations” or within the “community of nations” — how Native American “tribal sovereignty” and global “indigenous rights” are working out under IL —et al?
14. Taking Stock
We just drank from a firehose, so let’s pause and draw some key takeaways about international law as a blockchain governance mechanism.
This will be the wind in our sails that will make the last moments of our Odyssey smoother. Here’s a table with some of the big themes we’ve covered:
We hope this has helped demystify “public international law” vis-a-vis crypto in some small respect.
15. Wrapping Up
While nominally we’ve been talking about the “Public International Law & Diplomacy” outcome articulated by Zamfir, our analysis also addressed the Internet Censorship and International Private Cooperation governance outcomes.
This leaves Blockchain Governance Capture and Autonomous Blockchains for a later date.
We can’t wait to turn our analytical gaze to these two outcomes as well, but not before educating ourselves more on the most recent technical advances in “global public blockchains” — and taking a stab at defining this fascinating term.
We invite you to do the same. The issues here are far too important to relegate to someone else. Please don’t succumb to the tragedy of the (intellectual) commons and assume that someone else will figure this out.
In the words of Dan Hon,
“Assume no one else is coming; it’s up to us.”
¹ There are several great bibliographies on the field of blockchain governance (aka “distributed governance,” “crypto governance” and so on), including this one by Max Semenchuk. We’ve not had time for in-depth analysis of every response to each of these views, so we apologize for omitting others from the list. The point above isn’t to summarize the unfolding conversation. The above is just an imperfect capture of a complex and rapidly-evolving conversation.
² Mindful of the rich pluralism of tech and governance approaches between different distributed ledger technologies (“DLT”), we use DLT terminology interchangeably with the terms “blockchain” (s/p) and “crypto” to capture broad commonalities and shared challenges between platforms, instead of accentuating a given platform’s unique needs.
³ Putting aside several empirical case studies that have not stood the test of time, the theoretical arguments for why nations follow international law remain, by and large, intact. Harold Hongju Koh, Why Do Nations Obey International Law?, 106 Yale L.J. 2599 (1997).
⁴ Al Gore: “I created the Internet” is a famous meme that grew out of Al Gore’s statement that he helped create the legal regime that fueled the growth of the Internet in the 1990s.
⁵ This tool we’ve been using, by the way, has a name — it’s called “Legal Realism” — the widely-shared observation that in order to understand “Law on the books” one must also understand “Law in action.”