Enter the Crypto Legal Matrix

Crypto sees “Law” as the problem & “CryptoLaw” as a solution. Crypto should see law as a matrix, instead.

CleanApp
CleanApp
Sep 24, 2018 · 18 min read

1. Seeing the Legal Matrix

What CryptoLawyers should see once they start their self-directed law study is that “law in action” is often radically different from so-called “law on the books” — especially in emerging tech-law nexus areas like CryptoLaw.

Law School

But for lawyers all over the world, the messy gray areas between “law in action” and “law on the books” is … home turf. These gray areas are why the world needs lawyers, and why lawyers can never be replaced by code.

Gray areas are not bugs in the system; they are the system.

Sample Legal Gray Matter = Rule (containing Exception (that breaks & affirms Rule, simultaneously))

Instead of falling back on wildly inaccurate cliches about ‘lawsuits,’ ‘trials,’ impartial ‘all-law-knowing judges’ and mythical ‘triers of fact’ — crypto folks should understand that law people are just people.

Human law and human justice are imperfect, but they are not problems to be “solved” or coded around. The alternative — algorithmic justice — is far more inefficient, costly, and oppressive than the dizzying patchwork of legal regimes we have at present.

Law Library.

2. Legal Practice = Bending The Law

Now that we’ve plugged into the reality of law practice in the global Legal Matrix, we can see that legal practice is nothing more than skilled manipulation of the law and legal processes.

In a very real sense, day-to-day law practice is nothing more than a lawyer folding and bending “the law” to advance particular clients’ objectives.

Please note, we’re using the words “bending” and “manipulation” in their literal senses (bending ≠ breaking; manipulation = changing an object’s or phenomenon’s properties with one’s hands).

Legal Matrix
Law Practice
Good Lawyering
Erie Doctrine (aka, the blurred line between substantive & procedural law)
1L

3. “Smart Contract” Battlefield

To see how legal struggles for primacy play out in the Crypto Legal Matrix, we can look at the ongoing war over “smart contract.”

The CryptoLaw Bar

To help us understand what’s going on in these fights, we introduce some lawyers into the mix, including some smart ones, and some misguided ones. Please note that in talking about lawyers in the “smart contract” context, we’re not talking narrowly about only those people licensed to practice law in a particular jurisdiction.

Given the centrality of Legalese (and legal forms like ‘contract,’ ‘property,’ ‘legal personality,’ ‘jurisdiction,’ and other legal forms) to projects like Ethereum, EOS, etc., by this point it’s fair game to go ahead and classify people like Vitalik Buterin as full-fledged CryptoLawyers — even though they might not have studied law in any formal institutional sense.

This may sound outlandish to some, but many existing bar licensure rules around the world permit supervised independent study of law to satisfy the educational prerequisite for licensure.

Congratulations, Vitalik Buterin, Esq. (and the broader Crypto Law School Class of 2018) on your admission to the CryptoLaw Bar!

Now, as you may know, the first step following admission to any Bar association is paying your dues. The second step is acknowledging the full weight of shared legal responsibilities that you owe to the Bar, and to the public it serves.

Welcome!

In the high-stakes world of CryptoLaw, steps one and two above are one and the same. They basically require acknowledgement of the real-world costs of CryptoLaw malpractice.

Senator Smith; Judge Smith; General Smith; Esquire Smith — simultaneously.

Lawyers Are Brawlers

Now that we’ve expanded the CryptoLaw Bar, let’s see how lawyers fight.

SmartLawyer > SmartContract

These battles are already playing out in the “smart contract” space, and they will only increase once new “smart contract” legislation goes to court.

Trial

Smart contracts may exist in commerce. No contract relating to a transaction shall be denied legal effect, validity, or enforceability solely because that contract is executed through a smart contract.

But as any lawyer anywhere in the world will confirm, if they need to, lawyers can almost always argue that their particular “smart contract” creature also operates outside of the scope a particular statute or regulation.

SmartLawyers > SmartestLawyer

As with most things in life, whether you win or lose these argument will often depends on the strength of your legal crew.

“Be careful Neo, Esquire! You didn’t win. You just had a hell of a support network.” — CleanApp

Nine times out of ten, a crew of smart lawyers will demolish even the smartest lawyer working alone.

You can’t “smart contract” your way to a good reputation as a legal brawler; that reputation is earned over years of hard fights. You can’t just assert you have skilz unilaterally; smart lawyers know that they can be called on the carpet at any time, by any one.

SmartLawyers: Ready to Fight, Anywhere

Furthermore, for the most part, it doesn’t even matter where these battles will be waged. Functionally speaking, even the seemingly big ‘choice of law’/‘choice of forum’ decisions like whether to fight in a civil law jurisdiction or common law jurisdiction are secondary considerations.

“Choice of law” and “choice of forum” questions are of vital importance. But even they are secondary to the “lawyer selection” question — whether you trust the advice of the lawyer who is steering you towards this forum, or that body of substantive law.

With a strong enough crew and a clear legal objective, anything is possible (as long as you’re vigilant about every possible external and internal attack vector):

Morpheus, Trinity, Neo & Cypherpunk, LLP

Nobody can ever have 100% knowledge or control over the Legal Matrix. It’s the ultimate decentralized crypto platform.

When the stakes are high enough, a good lawyer can effectively “re-interpret” statutory meaning in light of new technologies, new circumstances — in light of the common law of contract and/or another statutory scheme and/or X and/or Y and/or Z, and/or et al.

4. ‘Smart Contract’ Statutes Don’t Displace Cases

A common law argument for and/or against enforcement of a particular ‘smart contract’ could go along the following lines.

Parties can create contractual relationships in any form, by any means, and can call their contractual relationship by any name they desire. The legal tests for contract formation are some of the oldest rules of private law in global legal history. The majority of the world’s legal systems have flexible contract law doctrines that anticipate technological change.

So, in light of this, is a particular ‘smart contract’ structure enforceable and/or binding and/or legal in, say, Tennessee? To make it even more concrete, is an Ethereum-based contract to transfer, say, 200 Littercoin (see OpenLitterMap) between a Memphis-based seller and Nashville-based buyer legally binding?

Any smart 1L, studying law anywhere in the world, will tell you that the answer to that question is: “it depends.”

It matters little whether Ethereum or Littercoin thought or think their joint and/or discrete ‘platforms’ or ‘services’ or ‘smart contracts’ or ‘coins’ or ‘tokens’ were or are “self-contained” and/or “self-enforcing.” In the broader context of the Legal Matrix (encompassing the Crypto Legal Matrix), the best prediction or answer we can give to the question above is:

¯\_(ツ)_/¯

The only way to actually get answers to these questions is to wage fights in particular cases, which can give legally en-force-able authority for those types of cases.

Every case opinion that’s added to the growing body of global case law on crypto becomes just another tool in a long and growing library of other legal authorities. There will never be, and can never be, a Eureka! moment of complete clarity. There will never be a point of arrival. Legal struggle and contestation will always continue, in the Cryptosphere, as elsewhere.

No matter how clear, how binding, and how authoritative legal rules may seem, parties’ and third parties’ ability to open up new legal attack vectors means even the most settled rule is always of an interim nature.

Recall big stakes cases that seem to never end. Or, just watch ‘The Matrix Reloaded’ and ‘The Matrix Revolutions.’

Even super lawyers like Neo, who possess nearly limitless power to redesign the Legal Matrix as they see fit, can’t manage to create a “self-sustaining legal system” that provides equitable and sustainable distribution of material resources.

5. What Else Are “Smart Contract” Statutes Doing?

So, why are legislatures rushing to get in on ‘smart contracts’ if legislators should know that their interventions might actually make the legal regimes governing ‘smart contracts’ less clear, versus more clear?

First, we must remember that dedicated “smart contract” legislation can clarify legal relations in appropriate contexts (especially in terms of giving legislative guidance to regulatory agencies). So we’re not against legislation per se.

Just like a knife, legislation/regulation is not intrinsically bad; legislative/regulatory non-intervention is not intrinsically good.

The point thus far is that these are just select tools in a given lawyer’s toolkit. Lawyers can always invoke other sources of legal authority for and/or against particular legal positions.

Decrypting Legislative Agendas

What are other objects and purposes to “smart contract” legislation and regulatory intervention beyond clarifying legal status? The answer, of course, is “It depends!”

Even if it doesn’t clarify underlying legal forms in a material respect, legislation serves numerous other functions, such as educating, legitimating, and claiming jurisdictional reach.

For instance, today’s “smart contract” legislation serves as a very effective exercise of prescriptive jurisdiction and extraterritorial jurisdiction (pursuant to, say, the U.S. Constitution’s Full Faith & Credit clause, and various state & foreign analogues).

Increasing Regulatory Long-Arm Reach

Translating from Legalese, here’s one of the things that legislators are saying when they pass these types of statutes: “It’s cute that you thought you were creating ‘self-sustaining legal systems’ and ‘smart contracts.’ But so you don’t get ahead of yourself, simmer down, let us tell you what you’re actually creating.”

By continuing to take increasingly legalistic and legal-institutional turns, the DLT community is spurring these types of ad hoc legislative and regulatory interventions. With no apparent coordinated regulatory engagement strategy, the DLT community is ripe for age old “divide & conquer”/“define & tax” regulatory actions.

In a jurisdictional sense, the emphasis is less on what a given “smart contract” means, and more on who has the right to define.

As Warren G & Nate Dogg taught us, “we’re handy with the steel,” and we’re here to Regulate.

6. So, CryptoLawyers: Friends or Foes?

Here’s where it gets interesting.

Litigation
Morpheus, Trinity, Neo & Cypherpunk, LLP

Blind trust in lawyers, crypto or otherwise, is imprudent. Just ask Donald Trump.

Keeping CryptoLawyers Honest

The solution to the Cypherpunk, Esq. “trust problem” isn’t to eliminate trust by coding it out of contract and attorney-client relationships. As we and others have argued, eliminating trust altogether is not really possible.

For now, our suggestion is to keep much closer tabs on self-nominated CryptoLawyers to track the evolution of their understanding of the Crypto Legal Matrix — and their role in it.

In Against “Smart Contracts,” and Crypto Needs Better Lawyers ASAP, we offer several express benchmarks for measuring the sophistication of a given lawyer’s understanding of the Crypto Legal Matrix: these suggestions range from the concrete (e.g., watch how your lawyer is billing “researching state-by-state ‘smart contract’ legislation/regulation”), to the more abstract (ask your self-proclaimed CryptoLawyer to define “global governance,” “political economy & law” and your crypto project’s place in relation to these spheres).

  • Keeping Them Honest #2: SmartLawyers should realize that the only folks who benefit from each subsequent wave of ‘smart contract’ legislation/regulation are lawyers. SmartLawyers doing a legal threat scan over a 5–10–20 year time span should realize that the best risk mitigation strategy that DLT/crypto can pursue right now is wholesale abolition of the use of unnecessary Legalese, such as the ill-fated term “smart contract.”
  • Keeping The Honest #3: Given their role in popularizing and evangelizing “smart contract” terminology, we hope folks like Nick Szabo, Dan Larimer, Charles Hoskinson, and Vitalik Buterin, Esq. lead the remedial effort to cleanse their respective projects and global crypto discourse this unnecessary, costly, and counter-productive term.

Who Are You To Keep Us Honest?

If you’re Cypherpunk, Esq. or Cypherpunk’s client(s), you should see that none of this is meant as an attack. Quite the opposite, we’re just urging conceptual rigor, comprehensive legal risk mitigation, and heightened vigilance.

We’ve done this (1) pro bono, (2) without conflict of interest, (3) without the Foundation’s or principals’ financial investment in any crypto platform (or any crypto instrument, for that matter), and (4) with no agenda other than honest critique.

Although our actions may defy conventional game theoretical self-interested rational logics, we’ve done this because it’s the right thing to do, and we don’t see many other people doing this much needed work. For us to realize our vision of global hyperutility and efficient resource use, we need the crypto community to see the Crypto Legal Matrix. That’s all.

We’re not urging heightened diligence because the Sentinels are “coming.” They’re already here and cutting away.

“Knock, knock: I’m the on-chain autonomous enforcement mechanism for the self-en-force-ing ‘smart contract’ mess that you got yourself into. Let me in!”

Keeping You Honest

As you can see, you are a central actor in this story. Little ol’ CleanApp isn’t tagging you in to the CryptoLaw Bar just to poke fun of your misuse of Legalese.

Ethereum opened the CryptoLaw Bar and threw you in it. We’re just reminding you to pay your dues.

If crypto developers insist on building their projects on hyper-legalistic foundations, despite the clearly articulated dangers of doing so, they should assume the shared responsibilities of CryptoLawyering, not just the perks.


7. Law = Oppression & Emancipation

Once you see the world for the legal 1s, and 0s, and infinite ∞ number of phases between 1 and 0 that it is — you begin to see just how easy it can be for different crews to operate within the box, outside the box, and against the box.

But as we start seeing how easy it is to change the operating parameters of the Legal Matrix, we shouldn’t forget why the box is there to begin with.

It’s not there just because it’s really good at adaptation and self-replication. The existing Legal Matrix is cozy, flexible, and broadly accommodating because its operators know to keep friends close, and enemies closer.

“I know this ‘smart contract’ is not really self-enforcing, but I’m tired of thinking about the messy material world of actual contract law en-force-ment. Plug me in to Legal Matrix 2.0, and make sure I don’t remember anything I learned about the law and legal struggle in Legal Matrix 1.0.” — CleanApp

In the end, it all boils down to control over scarce material resources.

We have the Legal Matrix because of material scarcity and violent contests between different actors for how to best allocate scarce material resources. Law exists to manage these contests, to structure the application of force. CryptoLaw is doing the same thing, but under a crypto-phrenic belief that “smart contract,” “Liberal Radicalism,” “smart dispute resolution,” “Capitalistic Socialism,” “SmartLaw,” and so on are possible through Reason, sans force or coercion. That’s not awakening; it’s morphine for the masses.

8. Taking the Lexit

If, after reading this, you’re still believe in rigid ultra-formalist conception of “the Law,” or still believe in the potential of this version of law (SmartLaw!) — then you’re stuck in the Legal Matrix.

Crypto Law Review is trying to open up multiple exits, but we have to be brave enough to take the call.

If you insist on clinging to some version of #CodeIsLaw / #CodeAsLaw / “self-enforcement” immutability for ideological or other reasons, at a minimum, we just hope you’ll be prudent enough to reject CryptoSmiths who’ll offer you an apparent exit from one Legal Matrix by a simple switch to another —

…an improved, secure, ‘future-proof & quantum proof,’ fool-proof & human-proof, streamlined & optimized … Crypto Legal Matrix 2.0.

There’s nothing smart about opening yourself, your crew, and your community to unnecessary legal risk. That’s not smart lawyering, that’s not smart contracting, and it’s definitely not smart economic behavior.

Continued exposure to known risks is just irrational faith in one’s own luck.

Copyright Lawyer

Crypto Law Review

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

CleanApp

Written by

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.