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Blockchain and the Law Blog

Jonathan Yovel, Haifa Law School.
Blockchain is here to stay. Even its greatest detractors admit, that this unique architecture that eschews any central control of data has only just scratched the surface of possibilities. Distributed ledgers promise not only iron-clad security and data integrity (is iron that clad, however?) but irrevocability as well; hence lays both their promise and a certain confusion regarding the proper legal mode of governing them.
But before I discuss law, I want to articulate a certain approach, or perspective, on blockchain as technology, that I think will be valuable going forward.

Blockchain is a wonderful example for what may be termed the “non-instrumental” approach to technology. This is a little counterintuitive. From as long as humans have created things, but in modernity in particular, technology is presented according to an instrumental model: there is a problem (sabertooth cats or hunger or slow communication); we devise technology to solve the problem; to the extent the technology produces value, it will survive the natural selection of social and economic processes. This has been especially true since the industrial revolution and its romantic detractors, when technology was seen mainly as a mode of controlling nature (humans were defined as the animal that transforms its habitat).

That is no longer a useful model. Going back to Satoshi Nakamoto's original paper that launched Bitcoin but really much earlier, a different modality emerges: a technological possibility offers itself, and we begin to search for uses and applications. We used to write algorithms to execute functions; we still do, but some algorithms are so complex, it takes the developer more time to figure out what the algorithm can do than it took to devise it. We begin to look at technology like social scientists, exploring its meaning as well as its application. This perspective was actually introduced in the mid-20th century in one of my favorite essays ever, Martin Heidegger’s The Question Concerning Technology, although Heidegger’s ironic, playful, sometimes cryptic and certainly idiosyncratic writing style managed to conceal several of its core meanings from technology theorists who were struggling with the setting on of the Cold War.

Following Heidegger, The non-instrumental model is what philosophers call “phenomenological,” since it focuses not on claims regarding the nature or essence or causes of technology or even its ethics, but on the encounter with it. It is interested less in what technology “is” or “does” and more in the interface: in what it means to experience technologically and operate in a technologically saturated world. It is an approach that is interested in what technology means to humans, to society, to politics; it is less about how we build and design technology and more about technology shaping the human experience (and close by, machine experience). But “more” does not mean “to the exclusion of,” and phenomenology, as well as other non-instrumental approaches, strives to interpret the entirety of the technological experience.
Blockchain almost calls for this approach, since although designed with some functions in mind, namely the production of cryptocurrencies, like fire its further applications and uses are mostly undiscovered. “Discovered:” isn’t that an interesting term to use in relation to something we invent? As far as asking what good blockchain is for, beyond cryptos, discovery is not far from capturing the relevant scientific method governing innovation.
This blog will explore many questions related to blockchain, but its primary interest is the governance of blockchain and in particular, what law can do for blockchain and its various stakeholders. Techies frequently see law as a nuisance, an old fashioned technology or repressive mode of control suited at best to a dated analog world. But like the internet, blockchain will require governance, and legal governance at that, for two simple reasons and a third less simple: vulnerabilities and externalities, to begin with.

By vulnerabilities I don’t mean just technological ones (and every technology creates its own vulnerabilities – you can call that “Yovel’s law” without risking breach of trademark), but risks to parties entailed by the transfer of value, licit and illicit. Law works best when it identifies the pertinent vulnerabilities of the given system or context it presumes to apply to.

While vulnerabilities destroy value when a system malfunctions, is breached or collapses (either internally or due to outside pressures, such as financial bubbles), externalities exist both when the system works wonderfully and when it isn’t. How about competition and restraint of trade? Privacy? The externalities of anonymity, of non-tagged untraceable transactions? Like any dominant technology, blockchain effects – or rather, would effect – multiple spheres of stakeholders; if is fulfills its vast potential, perhaps everyone. And those stakeholders need a form of agency to look after their interests. The potential, incidentally, is immense, since when we say that blockchain can offer secure transactions on a level not yet seen, we really discuss any storage, production, manipulation and dissemination of big data. Currencies are nice, but they are only one form of transferring or expressing value. Imagine blockchain protecting democratic elections from hacking, medical data from manipulation, navigation systems for autonomous vehicles that do not take you through routes preferred by advertisers. And we are only just beginning.
The third reason why law matters is that it can help in one of blockchain’s current major snugs: its relatively limited scope of current applications. This may sound strange – since when is law an engine of innovation? -- but it isn’t really; legal scholars are adept at risk analysis and evaluating vulnerabilities and externalities, in broader terms of social welfare beyond pure economic value. I will give some paradigmatic examples in future posts.
But it “blockchain law” even possible? Is it desirable? What kind of law would that be and what categories and concepts would it apply?
Stay tuned. BALB will return after these messages.

(Kidding. Only half kidding.)