#CodeIsLaw … Maybe

How ideology corrupts smart coders.

#CodeIsLaw is a popular meme in the crypto world to describe uber-formalistic visions of a particular crypto project or projects. The meme has a fascinating origin, tracing back to the split between Ethereum (ETH) and what is now known as Ethereum Classic (ETC). In the narrow sense of the continuing duel between ETH & ETC, usage of #CodeIsLaw is ok-ish.

However, a bigger problem is that the meme has been appropriated by many other crypto developers and propagandists to describe a vision of crypto communities that exist as (1) self-containing legal systems; (2) fully autonomous legal forms; (3) self-enforcing smart contracts; and (4) so on.

Beyond the ongoing ETC v. ETH spat, #CodeIsLaw has taken on a life of its own. #CodeIsLaw now seems like the battle cry of cryptonaires who genuinely, though mistakenly, believe they can extricate Blockchain transactional and relational processes from the flesh-and-blood world of materially manifested law.

As we argue elsewhere (here & here & here & here), continuing misunderstanding of how legal institutions actually structure, constrain and enable crypto projects seems to be one of the biggest obstacles to global crypto scaling today.

The point of this intervention is to pinch some sense into those who maintain naive and cartoonish visions of traditional “law” and “legal institutions” as things to be avoided, and “coded around.”

Traditional conceptions of “law” and “legal institutions” are impossible to code around. Any attempt to do so reflects an irrational projection of some anarchic or other ideological agenda. Ironically, of course, every attempt to code around law only invites more and more regulatory and legal scrutiny.
As with quicksand, the more you attempt to get free, the deeper you’re sucked in.

#CodeIsLaw Genesis

In the beginning Satoshi Nakamoto created Bitcoin.

Many know the story by now, but for present purposes, the gist is that Bitcoin popularized (and continues to popularize) the idea of secure cryptographic Proof-of-Work algorithms and data structures that can be used as a medium of exchange.

Bitcoin then begat Ethereum; Ethereum then begat a bunch of other coins and tokens, and so on and so forth. Then … suddenly … someone had the brilliant idea that crypto could “take the law into its own hands.” Crypto begat #CodeIsLaw.

In more concrete terms, #CodeIsLaw is typically traced back to the split between Ethereum and what’s now known as Ethereum Classic, following a disagreement regarding what to do in the wake of the infamous DAO affair in June 2016.

If you’re not familiar with what went down with The DAO, we strongly recommend any backgrounder like this (or Wikipedia).

Here’s the story in a nutshell:

Back when Ethereum was trading at around $20, The DAO launched an Ethereum-based ICO, raising about $150m (in Ether). Then, virtually all of the Ether that was raised (representing about 15% of then outstanding ETH supply) was plumbed by an anonymous coder who exploited a wrinkle in The DAO’s “smart contract” — making off with a nice 3.6 million ETH.
At today’s price of ~ $300 = 1 ETH, the smart contractor behind the gambit earned a cool $1 billion on The DAO’s supposedly “smart” contract.

The story continues.

#CodeIsLaw … For Dummies

Almost immediately, leading Ethereum developers characterized The DAO exploit above as an “attack,” a “hack,” a “theft,” and so on. From their perspective, that’s not how The DAO fundraising effort was supposed to play out. The DAO was planned to be an incubator for other Ethereum-based projects, and at the time of the supposed “hack,” more than 50 projects had submitted proposals for funding and support from The DAO.

So when almost all of the raised Ether swooshed over to a single unknown address, practically everybody cried foul. Concurrently, leading developers were at work searching for the least painful remedy (& shoring up their own code). Ultimately, a decision was made to revert the transactions, essentially undoing The DAO “hack” and refunding the lost funds.

This soft fork is what produced what’s now known as Ethereum (ETH) and Ethereum Classic (ETC).

And as far as forks in the road go, the fork that fell out of The DAO was insanely combative and controversial.

The reason the refund was so controversial goes back to the very essence of cryptocurrencies, “smart” contracts, and basic Blockchain conceptual architectures. “Smart” contracts were supposed to be self-sustaining, self-enforcing, and self-regulating.

Many felt that if The DAO wrote bad code, investors who lost their money due to the bad code were the ones who should bear the risk (a crypto version of the legal doctrine of caveat emptor or “buyer beware!”). Hence:

Proponents of #CodeIsLaw argued (and still argue) that if you suffered loss under a particular snippet of crypto code, then your remedies were limited to what the code allowed — not more and not less.

This seemed like such an obvious core tenet of the cryptocurrency world — that by and large, transactions were objectively verifiable, everyone had the freedom to inspect the code they were buying into prior to the transaction, etc.

To coders on both sides of the fork, #CodeWasLaw, in some idealized sense of law, disconnected from material reality. The ETH v. ETC split burst that illusion.
The new rule became: “#CodeIsLaw, except when it isn’t.”

Two years later, the controversy and fallout continue. Like Cain & Abel, many hardcore ETH & ETC troopers troll the web, the latter accusing the former of the ultimate form of institutional and intellectual violence—betrayal of the principle of algorithmic immutability.

Except both camps are wrong. Code was never law, in silo. Code is not law, in silo. And, sorry if we’re bursting some bubble, Code (with capital C, to give it the respect it properly deserves, in all seriousness) can never be law, in silo.

Code can never be law, in silo.

There’s no such thing as a self-sustained virtual code-based legal system; there’s no such thing as a self-enforcing “smart” contract; there’s no escaping the amorphous, complex, and deeply structural role of law in our time.

(#CodeIsLaw) + Law = #CodeIsLaw

As is usually the case with founding myths like this, the most fascinating aspect of #CodeIsLaw was a critical paradox in the way The DAO exploiter understood “law” and legal levers of influence.

When the Ethereum community was searching for a fix to the missing ~3,600,000 ETH in The DAO’s coffers, one of the suggested fixes was to essentially freeze the 3.6m ETH, deploying a code patch to block the funds.

Here was the attacker’s response to that suggestion.

Please note the deft deployment of law and legal institutions: “Right,” “theft,” “tort,” “crime,” “contract,” “express terms,” “legal action,” “Cease and Desist notices in the mail.”

The cherry on top, of course, was that “The Attacker” was “actively working with [a] law firm,” — unnamed so as to heighten the suspense unleashed by this classic legal demand letter.

(#CodeIsLaw) + Law = #CodeIsLaw

We don’t know if any “Cease & Desist” letters ever went out in the “mail” or if “The Attacker” actually had a “law firm” that s/he was working with. That’s not the point.

As every law student learns in the first weeks of law school, what matters is that “The Attacker” deployed potential traditional legal process as an effective lever of influence. “The Attacker” went so far as to invoke a jurisdiction — the United States — with whose “laws” there was “full compliance.”

Again, it doesn’t matter if the United States was, or would have been, or could have been an appropriate forum for a formal legal dispute arising out of these facts, or even if “U.S. law” would have governed.

Instead, what matters is when push came to shove, “The Attacker” — who we can rightly describe as the very embodiment of #CodeIsLaw (and, arguably, the world’s most notorious legal formalist) — did something so conventionally legalistic that it exposed #CodeIsLaw for the empty shell that it is.

Here was the key lesson the crypto community should have learned from “The Attacker’s” usage of Legalese and invocation of legal process:

As a meme, a mantra, … as a catchy hashtag, #CodeIsLaw has a certain appeal. But when a billion bucks of Ethereum is at stake, you call in your “law firm” and you hope that your flesh and blood lawyers can strike the fear of Code into your adversaries. And no, not the 101010101 Code this time, but the law code.

When everything is on the line, you don’t want your lawyer shooting with digits; you want your lawyer shooting with statutes & pointed discovery requests.

The #CodeIsLaw tag regains internal coherence only when we add some necessary layers of legal process, or, at a minimum, acknowledge the potentiality of formal and informal, but flesh & blood, legal process:

It’s OK to say that “Code + law = #CodeIsLaw.” But an attempt to extrapolate crypto code from law, followed by a fiat assertion that code can autonomously become “legally binding” shows an utter misunderstanding of law.

Anyone who actually maintains that #CodeIsLaw in the sense of a “self-sustaining legal system” that can “self-regulate” and “self-enforce” is on a collision course with law enforcement. There’s, ummm … a reason why the word “force” is at the root of every legal form, in … ummm … every legal system.

By itself, #CodeIsLaw = #CodeIsFlaw.

#CodeIsLaw as Ideology

Everyone can see that our argument is nonpartisan. We’re not on the “side” of Ethereum, or Ethereum Classic, or “The Attacker” or anyone else. Our commitment is to intellectual rigor and to the realization of Blockchain’s material hyperutility potential.

We dislike this meme, just like we dislike the term “smart contract,” because it is gets in the way of progress, it stifles innovation, and it needlessly invites legal scrutiny.

What’s worse, the #CodeIsLaw meme has long outgrown its genesis block — the ETC v. ETH duel. It is now far more akin to an ideological battle cry and an expression of different political visions united by what can be styled something like “crypto sovereignty” — the belief that cryptonaires can really create their own world, on their own terms, governed by their own rules.

If you think we’re going too far, read Nellie Bowles’ terrific write up on cryptonaires’ attempts to build a Crypto Utopia in Puerto Rico.

Here’s how Charles Hoskinson, one of the coders who spun off ETC from ETH, describes the legacy of The DAO:

Hardcore immutability and trustlessness are still crypto’s hot objects of desire. Except for many coders (& cryptonaires, cryptonauts, cryptonatics — whatever term goes on to stick) it seems that #CodeIsLaw is morphing into a sort of religious creed.

As Hoskinson wrote a few months ago:

Law, of course, is the premier institution of power.

So if crypto folks view “law” or “courts” or “the SEC” or “The [DAO] Attacker’s law firm” (… and so on) as immoral or even dangerous, then … and this should be no surprise … “the law” begins to feel the same way about crypto.

Conclusion

Attempts to “code around law” or to insulate code by appropriating “law” into code ( → #CodeIsLaw) are ill-fated.

It doesn’t matter who started the chant, who’s fanning the flames of conflict, or who stands to benefit from a massive global showdown — CryptoCode v. LawCode.

It doesn’t matter how many regressions, logic games, or permutations your run.

In the end, these arguments are just the pointy tips of much larger socio-legal icebergs. In those frigid seas, as elsewhere, the only law that matters is the law of gravitas.