Is Stanford’s Center for Blockchain Research Legal?
A week or so ago, a major bit of institutional and geopolitical news came out of the crypto world.
A consortium or cluster of six crypto/blockchain development organizations (including: (1) Ethereum Foundation, (2) Protocol Labs, the (3) Interchain Foundation, (4) OmiseGO, (5) DFINITY Stiftung, and (6) PolyChain Capital) decided to link up with Stanford University to create a Center for Blockchain Research (CBR).
If you didn’t hear about it, don’t worry, the news flew under most people’s radar. As is often the case with these things, the announcements that have the most potential to change the course of history seldom make big news.
At CleanApp Foundation, we think this is a hugely significant move and one that will continue to have ripple effects long beyond the initial 5-year charter.
Stanford & The E+5
There’s a lot to unpack about CBR, aka Stanford & the E+5. Here are some starting points.
Who Hatched This Gambit?
First, how it all came together is one of today’s juiciest blockchain development stories, and yet there’s mostly silence regarding this genesis block. Whose idea was this? What were the arguments for and against? Where and when did this alliance get hatched?
How Did It Happen?
Second, there’s a rich conceptual and legal backstory waiting to be written — in that it’s not clear precisely how Stanford was able to herd these six different breeds of CryptoKitties into one kitten box. Did these BigCrypto “fat cats” decide to self-organize, sensing that an alignment of interests at this juncture would make everyone (or them?) better off?
What’s The Score?
Third, what’s the logic and motivation behind this move? Is there something like “The Farm Dilemma” that someone proposed, propagandized, argued, and proved to the others?
Who’s The Mastermind?
Fourth, who is this mysterious shepherd who made this happen and what are her magical powers of persuasion?
Is It Legal?
Fifth, in light of the scale and audacity of the enterprise, it’s important to ask: is it all legal? Given that we’re in CBR’s (and also, arguably, crypto’s) infancy, it’s the ideal time to explore how BigCrypto is hooking up with existing institutions, and the precise legal mechanisms through which these linkages are effectuated. Please note:
By asking whether Stanford’s Center for Blockchain Research is “legal,” we’re not interested in the usual binary way that question is asked (legal v. illegal). Instead, we want to know “how legal?” & “how extra-legal?” these arrangements were, are, & will be.
Stanford Being Stanford…
The Stanford Daily story on the announcement largely restated the official CBR announcement talking points:
And here’s how the new CBR framed its mission:
CleanApp’s Agenda
We suspect that some of the insights that we develop here might be useful to different institutional and crypto communities, and we offer them as a gesture of good will and good faith.
The broader crypto community can benefit from some of the macro- and micro-level legal frameworks and critiques that we’ve developed and have started deploying. For our part, we need the crypto community to rally around what we’ve identified as crypto’s killer app in the current stage of blockchain development and adoption. Our hope is that both can complement one another.
Beyond that, there’s no agenda to this piece — no ICOs, no tricks, no tomfoolery. We’re a small nonprofit just trying to make the world a better place. Cliché, but true.
Disclaimers
We need to make the disclaimers above and below because the crypto space is incredibly combative, tribal, and Hobbesian at the moment, and we need to be clear about our Swiss credentials. We’re not here to take anyone down, to impugn anyone’s motivations, or to “pump & dump” anyone or anything.
We’re outside observers, for the most part, with no implicit bias against or preference towards any of the actors or institutions we’re analyzing.
We’re mindful that asking questions like “Is CBR legal?” might itself be seen as an aggressive act, suggestive of adversarial or ulterior motives. Others may view the question as nothing more than click-bait —fuming at these lines because they’ve “wasted” five minutes “reading junk” without getting an answer, “Yes” or “No.”
We know your time is precious, so please know, if you’re one of those people who expected a “Yes” or “No” answer, you will benefit the most from this story; if you have patience and intellectual curiosity, that is.
A further disclaimer is necessary. This is a complex read, written in a dialect of American English called American English Legalese. It’s the first part of a much longer piece inspired by this development, called Crypto Needs Better Lawyers, ASAP.
If you find the message insufferably vague, this may be our fault — or it may be a function of the vagueness and indeterminacy built into the legal constructs we’re exploring.
Audience
If this article is so jargonistic that it may be fully accessible only to a small number of lawyers, why should you read this?
We have several answers: (1) if you’re a self-proclaimed or peer-acknowledged CryptoLawyer, a crypto investor, or a crypto enthusiast, this is mandatory reading — period; (2) if you’re a crypto developer who is starting to think about “regulatory issues” because your project is scaling or because you’re not getting the answers you want from your current lawyer or legal team — this will be helpful; (3) if you’re a casual reader who just stumbled upon this page randomly, there’s quite a bit of palace intrigue, so it might make for a fun read — if you’re into that sort of thing.
Goals
Our job in this piece is to get everyone comfortable asking the important seemingly “obvious” questions about the many different ways that crypto institutions are integrating with more established institutions.
As nothing is arguably more Establishment than Stanford, CBR presents us with an ideal prism through which to observe cryptos’ delivery of different viral loads to larger more robust host organis-ations.
Now, to the argument.
CryptoLawyers, Rejoice! But Not So Fast.
The Stanford announcement should make every lawyer and legal theorist happy because it expressly foregrounds the myriad legal aspects of blockchain technology in the new center’s research agenda.
The announcement is a big deal not only because it acknowledges the centrality of socio-legal implications and challenges, but also because this research center received significant funding from the Ethereum Foundation and several other Blockchain/crypto development groups.
CBR Will Make Law
Stanford’s global reputation and serious external funding practically assure that the work product produced by Stanford’s CBR will be highly influential in current and future socio-legal debates.
For “bread-and-butter” CryptoLawyers (folks who do volume work for clients wondering if their crypto will be viewed as a “security”) this is very good news. It opens the door to the CBR as a potential regulatory interlocutor between formal regulatory authorities and the globally dispersed crypto community.
It allows us to imagine Stanford’s CBR fulfilling informal “notice & comment” functions, translating the needs of the crypto community into legalese, and translating the concerns of regulators into crypto.
CBR’s publications will go on to be cited by regulators, legislators, judges, academics, and by “bread-and-butter” CryptoLawyers, even though the CBR doesn’t have any formal powers or any governmental authority.
Every lawyer reading this knows that, despite a lack of formal powers, CBR will have de facto law-making authority. This is why it’s so important that the CBR take as many viable stances as possible (remembering our 1L lessons in the power of alternative pleading) vis-a-vis various constituencies. The same is true for every donor and institutions behind CBR. Investment in flexible governance now is a good way of protecting core interests in a high-risk near-term future.
CBR Will Push Legal Theory Forward
Theory-minded law folks should also welcome this announcement, as it comes with lots of funding, a concept that’s not usually seen as going hand-in-hand with legal theory, especially theory of a critical, eclectic, or unorthodox bent. Because they will be studying legal processes and legal forms at the leading edge of technological change, the law people at CBR will invariably push our current socio-legal theoretical frameworks forward.
All lawyers and analysts all over the world should be excited by this news coming out of Palo Alto. As a nonprofit that’s urging the BigTech & crypto communities to start offering much more social utility in the CivicTech realm, along some established and some totally novel legal lines, we certainly welcomed the news.
Anytime anyone invests resources to ask big questions about the place of law vis-a-vis particular social/technological processes, we’re better off because it raises the likelihood of better legal thought.
But because lawyers also know that legal institutions exist to serve particular interests, we must also acknowledge the possibility that — despite impressive resumes, stellar institutional support, and abundant funding — some bad, and potentially even dangerous, legal thought can emerge as well.
This is why it’s so important, in moments like this, to pause, to reflect, … to reexamine core assumptions and background institutional practices — in a word, to turn a new page, but with a critical recollection of what came before.
We must welcome initiatives like the Center for Blockchain Research, and centers like CBR must welcome our questions and critiques. In a space as mercurial as the Crypto/BigTech/BlockTech nexus, we must be supportive of all efforts to infuse the conversation with more analytical rigor.
Mining Crypto Legal Forms
Big picture, this is a small part of a bigger attempt to continue a public conversation about the way that the “crypto community” (which is still vocally committed to “decentralization,” individual & institutional autonomy, “self-sustaining legal regimes”) is also now doing conventional legalistic alliances through, presumably, conventional legal forms like contract.
With our good faith bona fides established, we can speak even more bluntly:
Everyone in the crypto space should be curious to know whether the EF-Stanford contract is a “smart contract,” and if so, just how smart. Everyone should be curious to know the contours of the E+5 “CBR alliance.” If there is no formal/informal “consortium,” why not?
If what comes to mind is (1) whether the Ethereum Foundation gave “Ether” to Stanford, and/or (2) whether the EF-Stanford relationship will be managed through a “dapp,” and/or (3) [?], then we’ve started to move in the right direction. There is no specific point of arrival, and we don’t have to immediately start looking for answers to the narrow questions above. Rather,
We should consider how our earlier assumptions constrained our imaginations regarding the optimal legal form of the CBR. We should question our assumptions. In this sense, the questions themselves can become answers.
If you go back to the original announcements and recall that other blockchain development teams are also involved, we can add the following questions:
(4) when they pooled their respective sources of funding to “underwrite” Stanford’s CBR, did the Ethereum Foundation, Protocol Labs, the Interchain Foundation, OmiseGO, DFINITY Stiftung and PolyChain Capital create a “dapp” or “smart contract” between themselves, to keep one another honest over the course of these of these next five years, to provide transparency/oversight mechanisms, to involve their respective communities in the decision-making processes of the CBR?
(5) did the teams do their “underwriting” in “fiat” or “crypto” — on what terms?
(6) did other teams (e.g., IOTA Foundation, Holo, etc.) have opportunities to “underwrite” this project? will they?
(7) what were/are the criteria for inclusion/exclusion?
(8) what governance rights in CBR did the contributors receive in exchange for their contributions?
(9) if there are governance rights, how will they be exercised?
(10) what are the incentive structures applied to the founding blockchain contributors for assuring their continued best efforts towards the overall success of CBR?
(11) […]
All of these questions should be familiar because these are the questions everyone says they care about when doing due diligence on “dapps,” “DAOs,” and “ICOs.” And yet the Reddit threads (here & here) and Twitter feeds on this announcement show very little of this due diligence when it comes to inter-crypto collaboration on major initiatives like CBR.
What’s up with that?
In Law, Questions Can Be Answers
We understand there’s a lot of jargon here, but there’s a ton of jargon in the crypto space too. Crypto’s position to newcomers is, welcome, now get ready to drink from a fire hose as you get caught up to speed on the conceptual, linguistic, and institutional nuances of “the New Internet.” (example)
By the same token, if you’re a cryptonaire without any legal background, welcome, and now you too must drink from a fire hose if you want to get caught up to speed on the conceptual, linguistic, and institutional nuances of “the Law of the New Internet.” (example)
As mutually constitutive phenomena, one cannot exist without the other. If Stanford says we have to coexist, we might as well start getting to know each other.
If you’re a crypto person with no previous exposure to American law (with a global governance twist), we applaud your intellectual resolve in working through these questions with us.
The reward of efforts like this is that once we do our due diligence, we can return to the questions at the very top of the story and re-read with a smile and a wink, like the start of a suspenseful but totally non-threatening story. The questions at the top then have the potential of growing into a founding myth, like “CERN in the 80s” or “WiFi in the 90s.” Everyone can look back at “Stanford’18” as a key moment in the history of the New Internet.
Failure to go through the hard work of a good “legal audit” & institutional compatibility review heightens the chance that questions above become jumping off points for future requests for admission and interrogatories.
With legal analysis, melius abundare quam deficere.
