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Is the code law? Rules applicable to blockchain networks
THE ‘the code is lawThe mantra has been largely debunked in recent years, but nonetheless it still makes for an interesting discussion. To the London Blockchain Conference 2024, Marcin Zarakowski hosted a panel on the topic.
Panelists included Jeffrey Golden KCCo-founder of ValueVerse Dimitrios Psarrakisand partner of Hogan Lovells International LLP John Salmone. As always with lawyers, the conversation was nuanced and with few direct answers, but it certainly provided a lot of food for thought!
Is the code law? Can algorithms and software alone create sufficient structures?
Salmon addresses this question first, saying the short answer is no. As a lawyer who has worked as a programmer, he knows that the law applies regardless of network rules, but code can automate many processes within the bounds of the law.
Psarrakis says that from an economist’s point of view it doesn’t matter. Businesses try to maximize their profits. The rules should be in place, and it doesn’t matter how they are followed as long as they are. Rules can be created by any entity, but laws can only be created by the authority in power. We have fought an uphill battle over the last 3,000 years to ensure this.
Golden KC jokes that the response is typical of lawyers: What would you like the response to be? She points out that we do not have a global parliament and we have the freedom to bargain in most countries. We must look at each situation on a case-by-case basis.
Why do we need rules for public and permissionless networks?
Salmon believes they are necessary to create a sense of certainty. We need rules so that people are willing to put their money on the line. We can’t eliminate all risks, but we can eliminate some, and the rules are designed to do that. Institutions and governments will not adopt the technology without them.
Psarrakis notices this blockchain they do not solve the fundamental problem of the incompleteness of contracts. There may be conflicts or necessary changes, and rules need to exist so they can be changed if necessary.
Golden KC points out that there are some things we cannot control by contract. These issues often depend on local laws. However, there has been an effort to harmonize laws in some areas, such as failure AND insolvency.
Which EU rules apply to tokens and other digital assets?
Psarrakis says it starts with the Data law. We must then consider the definition of smart contracts and other related issues. THE MiCA Regulation also apply. He jokes that EU regulators are lazy and prefer to use old regulations and insert new concepts into them.
There is always a debate between the more conservative and more liberal factions on these topics. For example, when it comes to DAOconservatives argue that they should be treated as legal entities with actionable management teams, etc., while the more liberal approach is to treat them as potential growth vehicles and regulate the activities they carry out.
In conclusion, Golden KC provides some general advice on how to set the rules. Never compromise on quality, consider processes carefully, keep the big picture in mind while paying attention to details, and make sure to educate people on how the new rules work and what they mean.
Look: Regulation leads to a nice raise for Web3 operators
New to blockchain? Check it out on CoinGeek Blockchain for Beginners section, the definitive resource guide to learn more about blockchain technology.