Does global blockchain governance necessarily mean “public” intervention into “private” legal relations — ?

CleanApp
CleanApp
Apr 28 · 13 min read

Today, more and more people are tackling the difficult questions of how to govern blockchain(s), as well as different metrics for determining governance success/failure.

Yet we do not have a comprehensive theory of the blockchain(ed) state as such, although some are moving in that direction.

Whatever the eventual outlines of this blockchained world of overlapping and partially-interoperable networks, it is reasonable to infer that our anxieties about the regulatory state — the Leviathan — are likely to grow.

“The Destruction of Leviathan” by Gustave Doré (1865)

By Leviathan, regulatory anxiety or “Law FUD,” we’re not just talking about superficial ideologically-tinged worry about “more public interference into private affairs.”

Crypto’s Law FUD continues to operate on many levels, from contract-level mistrust towards so-called “trusted third parties” all the way to protocol-level security measures against increasingly assertive & tech-savvy state actors.

Therefore, there’s a lot to be gained from deconstructing the potential scope of public/private/hybrid interference in nominally “private” blockchain relations.

A good start is to break down broad rights and duties into more discrete analytical chunks.

1. Scope of Non-Intervention

If one’s goal is to block state intervention into blockchain legal relations, we should start by asking if the blockchain space has something like a hoped-for ideal (and/or practice or custom) of non-intervention.

The “yes” argument is easy to make. One can point to blockchain buzzwords like decentralization, disintermediation, and supra-jurisdictionality to argue that the raison d’être of global public blockchains is to serve as data structures that are, by design, immune to state capture, control, and/or censorship.

“censorship resistance” ≈ non-intervention.

To some, censorship-resistance and capture-resistance are the chief competitive advantages of blockchains relative to other data structures. And concerns about censorship extend well beyond state actors.

Censorship and intervention anxiety also apply to BigTech and/or Wall Street operators eager to control blockchains. Public intervention is just one type of regulatory constraint; the “public” sphere also encapsulates and effectuates many private and hybrid regulatory regimes.

Analysis of blockchain slogans and memes like “law v. crypto; public v. private” is easy, but lazy.

We should also articulate non-intervention arguments in different formal governance logics. We can and should draw inspiration from political theory, the social sciences, as well as comparative corporate governance studies.

One of these tools is not like the others.

In this deep methodological toolbox, the legal tradition is especially useful — as it represents a veritable Swiss Army knife of solutions and vocabularies for talking about centralization v. decentralization, intervention v. non-intervention, liability v. immunity, and so forth.

In contrast to less secure universalizing logics, the abundance of legal frameworks against intervention (plural) helps us build much stronger non-intervention arguments.

2. Blockchain Sovereignty

Now that we’ve tapped into legal frameworks as heuristics for thinking about non-intervention, we should identify related concepts like sovereignty, and then isolate some oft-invoked first principles.

To start, we should acknowledge that, in legal terms, sovereignty is often the flip-side of non-intervention. Whether nation states or individual bodies, folks don’t like unwanted external intervention because it offends bedrock notions of autonomy and liberty — to wit, sovereignty. One cannot talk about sovereignty without intervention, and vice versa.

Legal definitions of sovereignty usually focus on Hobbesian conceptions of the Sovereign as ruler. Thus, Black’s Law Dictionary (2nd ed.) defines sovereignty in terms of ultimate political authority, “the self-sufficient source of political power, from which all specific political powers are derived.”

The frontispiece of Thomas HobbesLeviathan (source: Wikipedia). The Latin inscription is Job 41:24: “Non Est potestas Super Terram quæ Comparetur ei [There is no power on earth which can be compared to him].”

The standard legal definitions are capacious enough to cover blockchain uses of sovereignty, like the dream of self-sovereign identity or supra-sovereign law.

But there are simpler and more useful definitions:

Sovereignty is the full right and power of a governing body over itself, without any interference from outside sources or bodies. (Wikipedia)

The key point here is that sovereignty isn’t just an attribute of statehood. Individuals also have sovereign rights to, say, bodily integrity or freedom of contract. Many non-state groupings have sovereign rights over vast tracts of land and resources (e.g., indigenous rights, especially from a global comparative perspective).

Blockchain networks, operators, and stakeholders also have broad legal sovereignty rights. The scope of those rights is now up to us.

3. Principles of Non-Intervention

So, if blockchain stakehodlers aspire to sovereignty, free from the intervention of other sovereigns, what are some principles that can help us get there?

  1. One common theme across different streams of blockchain theory on non-intervention is that exogenous third-parties should not stick their noses in disputes between blockchain actors. Accordingly, blockchain protocols should limit opportunities for third-party meddling. This is sometimes called minimization of involvement of trusted third parties.
  2. A normative corollary follows, if blockchain parties can resolve their disputes without involving third parties, they should. This is sometimes called minimization of reliance on trusted third parties.
  3. Building on #1 and #2 above, we can identify a broader trope in blockchain governance discourse — styled something like a principle of non-intervention in blockchain governance: third parties may not meddle in the affairs of sovereign blockchain parties.

Third party intervention in intra-blockchain governance (e.g., within the Ethereum “ecosystem” or “community”), inter-blockchain governance (e.g., relationship between Ethereum stakeholders and, say, Polkadot), and pan-blockchain governance (e.g., application of anti-money laundering regulations & best practices to the blockchain finance sector as a whole) may be sub-optimal for other ideological, tactical, or strategic reasons. It may introduce attack vectors, or just render blockchain relations less certain.

Principles drive policies. Thus, a lot of energy is spent working out governance mechanisms for regulating disputes between blockchain actors. In the so-called “smart contract” space, for instance, this includes work that minimizes reliance on trusted third parties for contract disputes. Other blockchain governance teams are working on dispute resolution mechanisms that seek to bypass existing legal systems altogether.

It goes without saying, but many of the development efforts above are bolstered by arguments for why intervention in blockchain affairs is inappropriate in specific cases and as a general regulatory posture.

The stronger the arguments, the better the policies.

4. Norm of Non-Intervention?

Now that we’ve identified several blockchain non-intervention principles, we can ask: is there something like an emerging norm of non-intervention in blockchain governance?

Many blockchain developers genuinely believe that it is possible to create entirely self-sustaining autonomous legal systems, and that we should do so.

Apart from arguments by those who stand to directly benefit from laissez-faire public + private + hybrid regulatory postures, there are more objective and effective ways to define non-intervention norms for digital spaces. We can and should connect blockchain sovereignty arguments to ongoing global debates over Net Neutrality, data privacy, digital extraterritoriality, and related currents.

Nobody knows what will emerge from a marriage of these strange bedfellows, but the potential synergies are undeniable.

For now, let us assume emerging norms of non-intervention in blockchain governance (or at least a stakeholder expectation of non-intervention/non-interference).

Even though the scope of these norms/expectations is hard to define, this will allow us to deconstruct non-intervention’s constituent parts.

5. Deconstructing Sovereignty

As we have seen above, the reason we can talk about something like an emerging norm of non-intervention in blockchain governance goes back to the idea of sovereignty.

Sovereignty is a perennial darling in crypto, and has been trending especially hard lately:

Crypto discourse is full of allusion to sovereignty, including individual sovereignty, self-sovereignty, monetary sovereignty, financial sovereignty, and [insert here] sovereignty.

But what does sovereignty really mean?

6. #CogitoErgoCheckSum

The basic idea behind sovereignty is that individuals, firms, and other legal persons enjoy certain fundamental rights to free existence.

Building on René Descartes’ famous cogito, ergo sum (“I think, therefore I am”), the sovereignty postulate is that every netizen is free to click “Yes” or “No” — and should take full responsibility for what happens next.

In reality, the blockchain sovereignty postulate is even more basic: sum, ergo sum.

I — Jessy Cryptovich — exist as a supra-jurisdictional sovereign legal person because, duh, I am a supra-jurisdictional sovereign legal person.

Everyone knows the argument is circular; but because it’s so foundational to how we think about ourselves as legal persons, we have no trouble buying into it.

Let’s explore further.

7. Sovereignty Circles

The reason sovereign legal personality “feels” and “seems” so natural is because we have been taught to believe that it reflects “natural law.”

It’s just the way it is, whether ordained by Nature, God, or, God’s Earth-bound surrogates, like Kings and Queens.

“You’re sovereign, I’m sovereign — we’re all sovereign!”

If this argument seems abstract, circular, and/or weak because it rests on made-up metaphysical constructs, you’re absolutely right.

Concepts like sovereignty are metaphysical arguments resting on made-up abstractions.

But though sovereignty may seem weak, in practice it is a potent doctrine. As circular as the argument is from a logical standpoint, sovereignty has massive political purchase.

Even if you don’t believe in a “Creator” or in “Governments […] among Men,” documents like the American Declaration of Independence still resonate with people all around world, across the ideological and political spectrum:

Beyond declarative acts like assertions of statehood (see, e.g., Liberland), sovereignty has a number of other remarkably durable and concrete forms, like the doctrines of sovereign immunity or sovereign legal personality, and sovereign rights, to which we will turn shortly.

8. Sovereign Relations

Because sovereignty is a cornerstone of global legal and political thought, history offers a deep stack of sovereignty-based solutions & audits (manifestos & critiques). Many of these arguments are easily portable to the domain of blockchain governance.

For instance, alongside doctrines like Liberty, freedom of …, and so on, sovereign legal personality seems to embody a sort of ground norm — something like a fundamental human right — in modern rights discourse. Blockchain stakeholder participation arguments are increasingly framed in terms of these rights, and this shows no sign of trend reversal.

Seemingly atomistic concepts like sovereign legal personality can be split further into sovereign individual legal personality, sovereign legal DAO personalities, sovereign machine personality, autonomous sovereignty, and so forth.

Many basic civil/human rights, like the right to free speech, are arguably derivative of one’s sovereign individual rights.

As Vitalik Buterin has recently argued, free speech issues are tied to many broader ongoing blockchain debates, so it is imperative that we sharpen our understanding of rights-based argumentation.

The key point here is that sovereignty is not just a compelling (though abstract) political aim and value; sovereignty is also an umbrella category for numerous other discrete values, concrete formal legal regimes, and different emancipatory political programs.

9. Dynamic Sovereignty

Expansive visions of blockchain sovereignty attract many people in search of financial, and/or legal, and/or civic, et al, independence.

But do we improve the likelihood of success when we state our sovereignty claims in categorical and absolute terms, or do we weaken our overall postures?

I — Jessy Cryptovich — am a sovereign legal person with inalienable rights to enter into crypto legal relations!

It seems that, standing alone, sovereignty claims (e.g., pure rights-based argumentation) are ineffectual because they are often merely declarative and circular.

To strengthen our sovereignty arguments, we must juxtapose sovereignty against related and opposing doctrines in more dynamic and open-ended ways.

Our sovereignty circles should look more like this:

That is because like the notion of force in physics or in law, sovereignty only makes sense in relation to real and potential infringements on … sovereignty.

When sovereign claims confront competing sovereign claims, intervention usually follows. To minimize the likelihood and/or costs of intervention, we must frame sovereignty vis-a-vis intervention from the outset.

10. Sovereignty v. Intervention

The intrinsically bounded and contingent nature of doctrines like sovereignty is easier to see when we place sovereignty in relation to another foundational norm, like intervention/non-intervention.

When we introduce multiple classes of blockchain governance stakeholders, and add time, the tug-of-war between sovereignty and intervention arguments becomes much clearer, and much easier to operationalize.

The arguments flow in different streams from there.

10(A) Sovereign Postures

Sovereignty v. intervention arguments fall along a strong ← → weak spectrum.

  • Strong Sovereignty: the reason why intervention is so offensive is that it undermines the sovereignty of the blockchain parties. Sovereignty is/should be inviolable.
  • Weak Sovereignty: sovereignty is one value of many. Sovereignty rights are semi-permeable.

Crucially, strong conceptions of sovereignty can be deployed alongside weak versions in defensive and/or offensive postures. When that happens, the party invoking sovereignty must necessarily push the strongest collection of sovereignty arguments forward.

In its strong and/or compound forms, sovereignty can emerge as a super-norm (like jus cogens in international law).

10(B) Sovereign Supremacy

Whether we’re talking about on-chain contract rights or practices, or the in-or-out politics of “private” discussion forums, sovereignty often seems to stand normatively supreme to other doctrines.

More Intervention → Less Sovereignty

Non-intervention → Sovereignty

Sovereignty > Intervention

But appearances can be deceiving. Although it may seem normatively superior to other values, sovereignty is just like any other legal fiction, capable of being expanded and/or restricted by interested parties — via any number of other doctrines, principles, ground norms, and so on.

Sovereignty > Intervention > Sovereignty

More fundamentally, even if we attempt to reduce our analysis to just one basic legal form — sovereignty — competing sovereignty claims inevitably lead to intervention (in the form of enforcement actions against unwilling losing camps).

(Sovereignty v. Sovereignty) → Intervention

This emphasizes the need for more clarity on basic legal forms, structures, and arguments. But as important, it highlights the importance of viewing legal arguments from multiple adversarial perspectives.

10(C) Bounded Sovereignty

Sovereignty — and especially sovereignty as it pertains to individual legal personality and/or capacity to enter into contract — is not a manifestation of some higher self-evident “natural” order.

Sovereignty, like individual legal personality, or Mitt Romneyan “corporations are people,” are socially-constituted norms, mores, practices, and laws.

Like the very notion of legal personality, sovereignty is a historical artifact, not more, and not less:

Deconstructing sovereignty-as-history pays immediate dividends in terms of understanding micro-economic socio-legal incentives.

Broader and more critical views of sovereignty are also key to understanding global macro-economic currents:

11. To Sovereignty, And Beyond!

When we recall that things like “sovereignty,” “individual legal personality,” “non-intervention” are socially-constituted thought bubbles, we can greatly expand our fields of political vision for blockchain governance.

To begin, we can loosen (& potentially transcend) the overly-restrictive contractarian, formalistic, and legalistic straitjackets that crypto slipped into — voluntarily — for early adoption advantages.

A concerning trend in blockchain, however, is more legalism, not less, which invariably preferences those actors with privileged access to expert legal support.

Just because many crypto folks choose to apply legal straitjackets voluntarily (or accept them, consciously or subconsciously, as unavoidable) does not mean that legalistic straitjackets are the best way to accomplish many of the beautiful design objectives we observe in the global crypto space.

Alas, the only way to get out of any legal straitjacket is to get comfortable in it first so as to understand exactly how it works.

12. Sovereignty v. Intervention = Peace v. War

We started with Hobbes, so it’s only appropriate to close with Hobbes, but not before returning to the question that has been framing the analysis all along.

So, does global blockchain governance necessarily mean “public” intervention into “private” legal relations — ?

It depends.

As we have seen, there are many different ways of thinking about sovereignty and intervention in the blockchain space. The key thrust of the argument has been that as constraining as they may seem, dynamic and sophisticated legal frameworks give significant freedom of maneuver to blockchain stakeholders. They allow us to move beyond simplistic public v. private binaries with a much broader range of legal strategies.

There is also a broader lesson here about Law as a weapon against Leviathan. Leviathan is Law and works through Law, but even Leviathan swims in dark seas with many formidable competing crypto legal networks.

Leviathan is very conscious of its own limitations. Leviathan lives because it preempts or quashes every attempt at exploit. But like crypto, Leviathan lives in perpetual Law FUD. This can be operationalized in different ways by different actors, so let us remember to #CogitoErgoChecksum.

13. Blockchain State of Nature

The blockchain industry’s state of nature is remarkably Hobbesian, with daily escalation of cutthroat competition, fraud, sabotage and intrigue.

Amidst this socio-economic plague and still gripped by crypto winter, small groups of developers gather to feast on their visions of blockchained futures. In this veritable feast amidst the plague, some developer groups are so confident in the transformative potential of their tech, that they court unicorns and party like they are self-sovereign social bubbles.

To navigate this sea of monsters, shapeshifters, and Leviathans, reason guides everyone towards peace. But, as Hobbes teaches:

[I]n sedition, men being always in the precincts of battle, to hold together and use all advantages of force is a better stratagem than any that can proceed from subtlety of wit.

It turns out, the solution to the Sovereignty > Intervention > Sovereignty … riddle isn’t to be found in more iterations or a deeper search in the conceptual haystack.

It lies in our individual decisions to either acquiesce to some State of Nature, or to question it. Si vis pacem, para bellum.


This article builds on several earlier pieces spurred by Vlad Zamfir’s Blockchain Governance 101, now a part of a bigger blockchain governance bibliography. It is available here:

Crypto Law Review

A journal pushing the bounds of our legal imaginaries, on-chain, off-chain, and against the chain.

CleanApp

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CleanApp

Small NGO with a big patent urging BigTech & Crypto to enable trash/hazard reporting & open source data. "The Wi-Fi & Bluetooth of TrashTech" - cleanapp.io.

Crypto Law Review

A journal pushing the bounds of our legal imaginaries, on-chain, off-chain, and against the chain.

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