Source-linked AI summary
Blockchain Technology as a Regulatory Technology: From Code is Law to Law is Code
Primavera De Filippi, Samer Hassan
TL;DR
The paper addresses the shift from code enforcing legal rules toward law being defined through code, especially as blockchain smart contracts transpose contractual transactions into executable systems. It analyzes this development through examples of code complementing, bypassing, and replacing legal rules, and identifies tensions involving flexibility, legitimacy, and democratic oversight.
Problem
Existing legal rules are difficult to formalize because they rely on ambiguity, flexibility, and context, while blockchain proponents focus mainly on smart-contract efficiency and self-enforcement.
Method
The paper conceptualizes blockchain as a regulatory technology and examines smart contracts alongside prior forms of regulation by code, including DRM and peer-to-peer systems.
Results
Blockchain and smart contracts reinforce reliance on code to regulate actions and encourage legal and contractual rules to be drafted in forms closer to technical rules.
Takeaways & Limitations
The shift toward law is code requires attention to how technical rules can extend beyond legal protections and affect users through automatic enforcement.
Takeaways & Limitations
Technical rules cannot fully replace democratic lawmaking, and smart contracts remain subject to legal safeguards and real-world enforceability.
Abstract
from arXiv · showhide
"Code is law" refers to the idea that, with the advent of digital technology, code has progressively established itself as the predominant way to regulate the behavior of Internet users. Yet, while computer code can enforce rules more efficiently than legal code, it also comes with a series of limitations, mostly because it is difficult to transpose the ambiguity and flexibility of legal rules into a formalized language which can be interpreted by a machine. With the advent of blockchain technology and associated smart contracts, code is assuming an even stronger role in regulating people's interactions over the Internet, as many contractual transactions get transposed into smart contract code. In this paper, we describe the shift from the traditional notion of "code is law" (i.e. code having the effect of law) to the new conception of "law is code" (i.e. law being defined as code).
I. Code is Law
Technological artifacts and Internet code regulate behavior by embedding constraints and values into the environments where people act. Because these designs can be created and manipulated by private actors, their effects depend partly on adoption and social context.
- Technological artifacts are not neutral: their designs can support political structures or facilitate some actions over others.Examples include urban features that discourage sleeping and energy systems that favor centralized or distributed organization.
- Lessig identifies law, social norms, markets, and architecture as forces that shape individual actions, often beyond any one person’s control.Architecture constrains behavior through features of the world, while technical artifacts reflect deliberate human choices.
- Internet code functions as the architecture of online platforms, constraining actions through design choices made by platform developers.These choices can promote or prevent particular actions, although their effects are not always predictable.
- Technological designs may produce unintended effects because people reuse technologies for different purposes and their implications depend on social and historical context.A design intended to promote or prevent behavior is not guaranteed to have its desired effect.
- Digital environments enable private actors to embed their values in technological artifacts that may affect large numbers of people when widely adopted.The scale of impact depends on whether and how people subsequently adopt the technologies.
I. The Specificity of Code
Code is inexpensive to reproduce, rapidly distributed, adaptable, and capable of enforcing rules before users act. Its efficiency and reach also create mismatches with flexible legal norms, while code can reinforce, bypass, or independently create rules.
- Software code can be copied, modified, forked, and distributed globally at very low marginal cost, giving it high adaptability and reach.Digital networks allow code to move rapidly across national boundaries, complicating jurisdictional control.
- Regulation by code can impose ex-ante constraints, preventing many users from breaching technical rules before they act.Technical experts may find workarounds, but users without the relevant knowledge or resources generally must comply.
- DRM demonstrates that formalizing legal rules in code can ignore exceptions and produce restrictions exceeding the intended legal scope.Systems may fail to distinguish among users and uses, impairing legitimate access and distribution of information.
- Code can complement law, enforce legal provisions, and be reinforced by law, as illustrated by DRM and anti-circumvention rules.Anti-circumvention laws prohibit unauthorized bypassing of technological protection measures.
- Code can also bypass law: decentralized peer-to-peer protocols were designed to avoid a central point that could be legally prosecuted or shut down.The paper presents failed legal attempts to shut down BitTorrent as an illustration of code circumventing law-originated rules.
- Code may introduce rules unrelated to existing law, such as requiring peer-to-peer users to share content before downloading more.Graphical interfaces and platform algorithms can also shape user behavior and social experience.
I. C Law regulating Code
Code increasingly regulates behavior directly through technical rules, while blockchain and smart contracts intensify the incorporation of contractual and legal provisions into code. This shift from “code is law” toward “law is code” raises concerns about flexibility, legitimacy, and democratic oversight.
- Code is Law: Technical regulation increasingly enforces rules ex ante through code rather than relying solely on post-breach state intervention.The paper contrasts code-based constraints with legal rules enforced after violations through courts or other state mechanisms.
- Code is Law: Legal rules are difficult to transpose into code because natural-language law is ambiguous, general, and designed for case-by-case flexibility.Formal algorithms and mathematical models make regulation by code more specific and less flexible than the legal provisions they implement.
- Blockchain and Smart Contracts: Blockchain reinforces regulation by code by enabling smart contracts and transactions that rely on technical infrastructure instead of traditional contract law.The paper describes this development as making it increasingly appealing to bypass the traditional legal framework of contract law.
- Blockchain and Smart Contracts: Smart contracts can automatically exchange micro-transactions for licenses that unlock digital-work functionalities, including uses not necessarily protected by copyright.These transactions may provide rights to access, reproduce, or remix digital copies.
- Law is Code: Defining law through code risks replacing publicly debated and transparent rules with technical rules unilaterally imposed by private software builders or device producers.The paper emphasizes that legal safeguards and democratic procedures are not necessarily incorporated directly into coded contractual rules.