Blockchain, Law and Governance by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030527228
Publisher: Springer International Publishing

5 Regulatory Contract Law

Our point is that the rules governing blockchains have been adopted by private self-regulation and, specifically, by coordination among users. Additionally, it appears that the coordination is pursued by relying on a quite peculiar example of regulatory contract law.52

This situation inevitably leads to a subversion of the constant conception of the sources of law, which, from the original setting according to which the legal system finds its validity exclusively in compliance with the procedures for the formation of standards, comes to recognize its main factor of innovation. In such a context, the contract takes over the role traditionally reserved to the law in the direction of socio-economic phenomena by assuming a regulatory function.53

Private autonomy is the humus from which norms sprout: this is par excellence in the hypothesis of contractual norms, but this concerns customary norms, as ascribable to the same subjects who observe them. As an author observes with respect to the lex mercatoria, contract law is the medium for excellence for trading across borders.54 In particular, scholars have clearly recognised the role of contractual governance from an historical perspective.55

Here the point is that the reliance on contract and contracting in governing blockchains remains, in any case, a common and central element to the networks.56 Alongside the contract, which assume particular forms in blockchains, there are additional factors, such as conventions, customs, effectiveness.57 In the words of an author, in blockchains “the legal framework is essentially pushed down to the level of the contract”. The goal is “not lawlessness and anarchy, but that legal frameworks become more granular and personalized to the situation”.58

Specifically, blockchains grounds on the concept of rough consensus. In particular, Lessig notes “We reject kings, presidents and voting. We believe in rough consensus and running code”.59 Now, in blockchains, ‘consensus’ means that the nodes on the network agree on the same state of the chain, in a sense making it a self-auditing ecosystem. Specifically, consensus protocols allow a blockchain to be updated, while ensuring that every block in the chain is true as well as keeping participants incentivized.

Thus, nodes, developers and others govern blockchains by agreement. This ‘rough consensus’ is primarily used, for example, to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems, such as cryptocurrencies.

Interestingly, consensus decision-making is a creative and dynamic way of reaching agreement between all members of a group. Instead of simply voting for an item and having the majority of the group get their way, a group using consensus is committed to finding solutions that everyone actively supports, or at least can live with.

This consensus is algorithmic because it represents a process in computer science used to achieve agreement on a single data value among distributed processes or systems. Interestingly, users agree because they rely on the code itself, namely the technology.

In brief, consensus mechanisms are protocols that make sure all nodes (a device on the blockchain that maintains the blockchain and, sometimes, processes

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