For Cryptocurrency, the Challenge Is to Balance Code and Law – The New York Times
This article is part of our latest DealBook special report on the trends that will shape the coming decades.
The first time the Harvard law professor Lawrence Lessig told computer scientists they were the unwitting regulators of the digital age — about 20 years ago — he made a coder cry. “I am not a politician. I’m a programmer,” Mr. Lessig recalls her protesting, horrified by the idea.
Now, the notion that “code is law”— from Mr. Lessig’s 1999 book “Code and Other Laws of Cyberspace” — does not shock young engineers or lawyers, the professor says. To digital natives it is “obvious” that technology dictates behavior with rules that are not value neutral.
Big tech companies have reluctantly admitted the same, with Meta, the social media company formerly known as Facebook, going as far as establishing a courtlike board of experts to evaluate decisions dictated in part by programming. And one relatively young sector of tech — the cryptocurrency industry — has embraced the concept of “code as law” wholeheartedly, with some companies explicitly arguing that code can be a better arbitrator than traditional regulators.
Many crypto fans are betting on a future where we bank, create, play, work and trade on platforms with code running the show, and in the booming decentralized finance (DeFi) sector, automated “smart contracts” that are programmed in advance to respond to specific sets of conditions already handle billions of dollars in transactions daily, with no need for human intervention, at least theoretically.
Users put their full faith in programming. No one shares personal information. Code does it all and is supposed to be the whole of the law. “There’s no human judgment. There’s no human error. There’s no processes. Everything works instantly and autonomously,” said Robert Leshner, who founded the DeFi money market protocol Compound, in an interview in August.
But while the idea of a perfectly neutral, self-patrolling system is appealing, high-profile mishaps have cast doubt on the idea that code is a sufficient form of regulation on its own — or that it is immune to human mistakes and manipulation.
A smart contract executes automatically when certain conditions are met. So if there is a bug in the system, a user might be able to trigger an unearned transfer all while technically following the “law” of code. This is what allowed a $600 million theft this summer from the Poly Network, which …….
Source: https://www.nytimes.com/2021/11/23/business/dealbook/cryptocurrency-code-law-technology.html