Conceptualizing Cryptolaw

• Publication year: 2021
• Citation: Vol. 96

96 Nebraska L. Rev. 384. Conceptualizing Cryptolaw

Conceptualizing Cryptolaw

Carla L. Reyes(fn*)

TABLE OF CONTENTS

I. Introduction .......................................... 385

II. A Distributed Ledger Technology Primer .............. 389
A. Distributed Ledger Technology: Bitcoin's Blockchain, Ethereum, and Beyond ............................ 390
B. A Brief Introduction to Smart Contracts ........... 396

III. Defining Cryptolaw ................................... 399
A. Distributed Ledger Technology Will Lead to Cryptolaw ......................................... 400
B. Three Possible Methods of Adopting Crypto-Legal Structures ........................................ 405
1. Government Adoption of Industry-Created Crypto-Legal Structures ....................... 405
2. Crypto-Legal Structures Directly Coded by Government ................................... 407
3. International Development of Crypto-Legal Structures ..................................... 408
C. More than Just Another "Law of the Horse" ........ 410

IV. Conceptualizing Cryptolaw as Disruptive Legal Discourse ............................................. 414
A. Disruption of Substantive Law ..................... 415
1. Simplification of Substantive Law .............. 416
2. Emergence of New Regulatory Actors .......... 421
B. Disruption of Legal Structure ...................... 427

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1. Disruption of Established Patterns of Enforcement and Related Regulatory Policy Choices ........................................ 428
2. Disruption of Choices in Legal Forms .......... 432
C. Disruption of Legal Culture ....................... 433
1. Cryptolaw Envisions a World Without Law Lag ........................................... 435
2. Cryptolaw Anticipates that Developers Writing Code May Determine Crypto-Legal Culture More than Lawyers .................................. 436

V. Challenges, Implications, and Consequences of Adopting Crypto-Legal Structures ............................... 437
A. Drawing Boundaries Around Cryptolaw's Scope . . . . 437
B. Expecting Unexpected Results ..................... 439
C. Cryptolaw Will Encourage Discourse Regarding Alternative Governance Models .................... 441

VI. Conclusion ............................................ 444

I. INTRODUCTION

At the COALA(fn1) Blockchain Workshop held in Sydney, Australia, in December 2015,(fn2) conference goers walk past a metal flower art installation as they enter the auditorium to attend a panel session at the Powerhouse Museum. The uncurious observer might think the metal flower a mere statue. A closer look, however, reveals the flower represents an autonomous life-form affectionately referred to as a "Plan-toid."(fn3) A Plantoid, not owned by any one benefactor, derives its existence from a specialized form of computer code called a decentralized autonomous organization (DAO).(fn4) If an onlooker passing by the Plantoid sufficiently appreciates the Plantoid's artistic qualities, the onlooker may send a donation to the Plantoid through the decentralized virtual currency called bitcoin.(fn5) The onlooker sends the bitcoin directly to a wallet owned by the Plantoid itself. As an expression of gratitude for the funds transfer, the Plantoid performs a dance for the onlooker.(fn6) Once the Plantoid raises sufficient funds, the Plantoid ad-

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vertises for, selects, and commissions an artist to create a new Plantoid.(fn7) In other words, all on its own, the Plantoid's computer code enables it to find ways to reproduce.

The advances in technology that enable art to autonomously own assets and reproduce have the potential to alter myriad traditional structures. Predicting that such changes include autonomously acting machines conducting businesses with other machines, one writer suggests that "[s]oon it's just the law in the way, not the technology any-more."(fn8) But what if the law was not in the way? What if, instead, the law equally experienced transformation induced by the very same advances in technology that propel the Plantoid to reproduce? Indeed, Sweden's current efforts to transfer its real-property recording system to the blockchain,(fn9) Cook County, Illinois,' efforts to test a similar system,(fn10) Delaware's efforts to allow corporations to issue shares on the blockchain,(fn11) Dubai's plans to issue blockchain-based government documents,(fn12) the U.S. Department of Health and Human Services' interest in using blockchain systems to manage health data,(fn13) and the European Union's research into blockchain-based regulation for finan-

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cial institutions(fn14) suggest that such legal transplants are already underway.

Current strands of law-and-technology literature suggest that technology can both help regulators more efficiently tailor law to rapidly changing industries(fn15) and help citizens understand their obligations more clearly.(fn16) Meanwhile, others argue that applying these advances in technology to the law will only lead to new difficulties.(fn17) In particular, scholars voice concern over the potential for technology to spread and institutionalize the bias of its developers.(fn18) Taken together, then, the literature suggests that although technology has the potential to make law more efficient and precise, it also introduces new perils. But what if shifting attention to the Distributed Ledger Technology (DLT) that powers the Plantoid, which has not yet been systematically considered for its impact on lawmaking, could increase efficiency, precision, and clarity, and could do so in a transparent way that would help root out systemic bias? Herein lies the promise of "crypto-legal structures": the law of any subject matter implemented and delivered through smart-contracting, semi-autonomous cryptographic computer code.

This Article reveals the emergence of crypto-legal structures and examines their potential for generating new legal discourse around theories of legal process, lawmaking, adjudication, and academic inquiry. DLT offers an opportunity to construct new legal structures which will give rise to new substantive legal issues and cause shifts in legal culture and legal structures. As these new structures emerge, they will endogenously reorder inquiries into the nature of law generally. This Article aims to conceptualize cryptolaw as a disruptive legal discourse that anticipates the new issues arising from the emerging phenomena of crypto-legal structures.

This Article advances the literature in three primary ways. First, this Article turns the current academic discussion relating to DLT and crypto-currencies on its head. Most of the existing literature focuses

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on how to regulate the technology(fn19) and its various uses.(fn20) This Article instead considers whether and to what extent DLT will alter the way we think about law itself. While some scholars have considered whether and how DLT may disrupt specific subject areas,(fn21) this Article examines DLT's broader implications for lawmaking and regulation. Second, this Article builds on two strands of the law-and-technology literature. Specifically, this Article connects insights from one strand, which looks at the effects of predictive technology on regulation and consumer protection,(fn22) to the other strand, which looks at how the code that constitutes the basic building blocks of new technology can itself serve as a form of law,(fn23) and uses those connections to

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reveal the potential power of crypto-legal structures. Third, this Article uses comparative legal methodology to conceptualize the impact of crypto-legal structures on the foundations of the law itself. This Article demonstrates that by treating computer code as a foreign legal system, methodological tools from comparative law enables lawmakers and regulators to predict the broader ramifications of shifting existing legal rules to crypto-legal structures. In doing so, the Article reveals a legal world with more overlap between legal systems, simplified substantive law, new regulatory agents, legal culture heavily influenced by computer software developers, and an evaporating gap between the law-in-action and the law-in-the-books. By connecting the literature on DLT, law and technology, and comparative law, this Article offers a conceptual framework for a new legal discourse and jurisprudence of cryptolaw and argues that cryptolaw will fundamentally change the way law is implemented, updated, experienced by citizens, and adjudicated.

This Article proceeds in five Parts. Part I briefly describes DLT and smart contracts. Part II proposes the conceptual contours of crypto-legal structures, outlines two concrete examples of crypto-legal structures, and addresses the anticipated concern that crypto-legal structures and cryptolaw are just another "law of the horse."(fn24) Using comparative law as a methodological tool, Part III analyzes cryptolaw's potential to disrupt discourse regarding the fundamental elements of law: substantive law, legal structure, and legal culture. Part IV examines the feasibility of adopting crypto-legal structures and explores the implications and broader consequences of cryptolaw's emergence. A final Part concludes.

II. A DISTRIBUTED LEDGER TECHNOLOGY PRIMER

This Article begins by offering a brief introductory explanation of "distributed ledger technology" (DLT). This Article uses the term distributed ledger technology, or DLT, to refer broadly to distributed network technology that (1) enables users to upload programs and to leave the programs to self-execute; (2) maintains a public, tamper-resistant record (ledger) of the current and past states of every program; (3) is distributed; (4) uses public key cryptography for authentication; and (5) uses a consensus mechanism to ensure that the network maintains the technology.(fn25) This Article adopts this definition...