But that isnt even true. If two people enter into a contract they are governed by law, regardless of whether it is a paper contract or computer code. I highly doubt there is any legal language in the computer code saying that the agreeing parties waive any US legal rights.
The code is not the contract, but rather a vehicle to effect the contract. You can have the exact same setup without the code.
On top of that, there is some legal questions as to what the DAO stuff actually is as a legal matter.
In some contexts, ‘smart contract’ is a misnomer: it’s just a computer program that resembles a legal contract but does not interact with the government in any way. It just moves money according to agreed-upon rules. I don’t think it’s common to use both a legal contract and a ‘smart contract’ to enforce the same agreement.
In the specific case of the project known as ‘TheDAO’, the terms of service does indeed waive all legal rights and says that whatever the computer program says supersedes all human-world stuff. (https://daohub.org/explainer.html)
All of this stuff is so experimental that there’s an exception to everything at this point.
In some contexts, ‘smart contract’ is a misnomer: it’s just a computer program that resembles a legal contract but does not interact with the government in any way.
Typically speaking, a legal contract does not interact with the government—only a very small percentage of contracts are adjudicated by a court or reviewed by any government body.
In other words, moving around money, tangible objects, services, and intangible rights is a reasonable shorthand for > 80 % of the things the law would call a contract.
In the specific case of the project known as ‘TheDAO’, the terms of service does indeed waive all legal rights and says that whatever the computer program says supersedes all human-world stuff.
I may have missed it, but that is not at all what the link you posted says. It has a waiver of liability against 3rd parties (basically the DAO operation). It does not say that you cannot have liability between to parties subject to a contract, or even seem to mention anything about dispute resolution.
Also, I would like to point out that you CANNOT have a contract that requires an illegal act. For instance, you cannot create a contract that says “Person A waives all legal recourse against Person B if Person B murders them.” The act of murder is still illegal even if both parties agree to it.
Finally, the TOS for DAO is not the contract, it is merely the TOS for using the service. So the individual contracts between two people are going to override that.
You’re still conflating the term “smart contract” and the idea of a legal contract.
That’s like conflating “observer” in physics with a human staring at you or hearing someone talking about a Daemon on their server and talking as if it’s a red skinned monster from hell perched on the server.
Imagine someone says
“This is a river, if you throw your money in it will end up somewhere, we call the currents a ‘water contract’, the only difference to a normal river is that we’ve got the paperwork signed such that this doesn’t count as littering”
It does indeed end up somewhere and you’re really really unhappy about where it ends up.
Who do you think you’re going to take to court and for what contract?
Finally, the TOS for DAO is not the contract, it is merely the TOS for using the service. So the individual contracts between two people are going to override that.
Which two people do you mean? The creators of the the DAO don’t have control over it. When people who brought tokens sue them, they can’t give them the money back.
The law cannot compell you not to murder either, but does that mean you can go out an do it freely? No.
The law doesnt need to compell the computer code, it can force people to do things, it can force the code to be rewritten, it can shut down servers that run the code, it can confiscate the money used in the processes.
These are not some magical anonymous items that are above the law and inviolate. While it is true that they have not been litigated yet, that time is quickly coming, and they still rely on outside individuals to complete the contracts, and are still governed by all the same laws that everything else is.
The law doesnt need to compell the computer code, it can force people to do things, it can force the code to be rewritten, it can shut down servers that run the code, it can confiscate the money used in the processes.
The idea of the blockchain is that there no single server that runs the code and that could be attacked that way.
A lot of de jure illegal transactions happened on the bitcoin blockchain without a court confiscating the transactions.
When MtGox was hacked they couldn’t simply ask a court to confiscate the Bitcoins that the hacker stole.
There are a lot of drugs sold via Bitcoin and the courts also don’t confiscate those.
If people make a bet in Augur that the US government doesn’t like, the US government can’t shut down Augur. At least that’s the idea on which Ethereum and Augur are build.
Augur can trade a market about whether a certain drug will get FDA approval and the market participants are anonymous. That means they can use insider information. It’s impossible to backup that anonymous transaction with standard contracts but smart contracts can.
I hate this so much, and it happens so often with Tech stuff. Just because something is brand new, and does not have laws or regulations relating to it right now does not mean that people can simply do whatever they want.
Courts are still going to litigate this stuff, and people are definately going to sue if they start losing huge amounts of money, and it is just worse that the creators are basically not planning for these issues, but just going off the basis that it is all going to work out.
Just because something is brand new, and does not have laws or regulations relating to it right now does not mean that people can simply do whatever they want.
Well, it’s a bit more complicated than that.
When people say that some things (like the blockchain) are outside of the law, they don’t usually mean that no one can be sued or that the courts won’t try to enforce judgements. What they mean is that those things are hard for the law to reach. A court might issue a judgement but it won’t be able to enforce it. The general idea is that enforcement is so difficult and expensive so that it’s not worth it.
For a simple example, consider piracy (of the IP kind). It is very much illegal and… so what? I can still go online and download the latest movie in a few minutes. It’s not that the FBI can’t bust me if it really wants to. It can. But it’s inefficient and cost-prohibitive.
As to smart contracts, that’s just a misnomer. They are not contracts. They are determistic mechanisms, set up for a particular purpose. Bespoke machines, if you wish. A contract in law implies a meeting of the minds which these algorithms cannot provide. Instead, they offer a guarantee that if you do A, B happens.
They are more akin to vending machines: you feed in some money and you get the item. It’s not a contract between you and the vendor—it’s just a machine which you used.
Lum has the right of it. Thanks for writing that. I was trying to phrase it right and kept ending up with “Physics doesn’t care if you hate it so much”.
Court can order computers dismantled. And I think there are methods for state to aquire property if it can be shown to be a “vechicle of crime”. It is afterall the state that controls the monopoly on violence needed to enforce private property in the first place.
This is basically the idea that the state could decide to try to outlaw bitcoin mining and fight it.
Secondly you are wrong that any state has a monopoly on violence these days. There are multiple states and not none of them have a monopoly on violence. If you want to fight crypto-currencies you have to enforce laws in every country.
Yes, and therefore no state has a monopoly on violence for the purpose of this discussion. To control Bitcoin or Ethereum an entity would need to make mining illegal in all jurisdictions.
But that isnt even true. If two people enter into a contract they are governed by law, regardless of whether it is a paper contract or computer code. I highly doubt there is any legal language in the computer code saying that the agreeing parties waive any US legal rights.
The code is not the contract, but rather a vehicle to effect the contract. You can have the exact same setup without the code.
On top of that, there is some legal questions as to what the DAO stuff actually is as a legal matter.
Just to clear some things up:
In some contexts, ‘smart contract’ is a misnomer: it’s just a computer program that resembles a legal contract but does not interact with the government in any way. It just moves money according to agreed-upon rules. I don’t think it’s common to use both a legal contract and a ‘smart contract’ to enforce the same agreement.
In the specific case of the project known as ‘TheDAO’, the terms of service does indeed waive all legal rights and says that whatever the computer program says supersedes all human-world stuff. (https://daohub.org/explainer.html)
All of this stuff is so experimental that there’s an exception to everything at this point.
Typically speaking, a legal contract does not interact with the government—only a very small percentage of contracts are adjudicated by a court or reviewed by any government body.
In other words, moving around money, tangible objects, services, and intangible rights is a reasonable shorthand for > 80 % of the things the law would call a contract.
I may have missed it, but that is not at all what the link you posted says. It has a waiver of liability against 3rd parties (basically the DAO operation). It does not say that you cannot have liability between to parties subject to a contract, or even seem to mention anything about dispute resolution.
Also, I would like to point out that you CANNOT have a contract that requires an illegal act. For instance, you cannot create a contract that says “Person A waives all legal recourse against Person B if Person B murders them.” The act of murder is still illegal even if both parties agree to it.
Finally, the TOS for DAO is not the contract, it is merely the TOS for using the service. So the individual contracts between two people are going to override that.
You’re still conflating the term “smart contract” and the idea of a legal contract.
That’s like conflating “observer” in physics with a human staring at you or hearing someone talking about a Daemon on their server and talking as if it’s a red skinned monster from hell perched on the server.
Imagine someone says
“This is a river, if you throw your money in it will end up somewhere, we call the currents a ‘water contract’, the only difference to a normal river is that we’ve got the paperwork signed such that this doesn’t count as littering”
It does indeed end up somewhere and you’re really really unhappy about where it ends up.
Who do you think you’re going to take to court and for what contract?
Which two people do you mean? The creators of the the DAO don’t have control over it. When people who brought tokens sue them, they can’t give them the money back.
You might be correct. I suspect you know more about the law side of this than i do.
Law might want to govern them, but the power of the state is limited. A court can’t compel a computer that executes code to do anything.
The law cannot compell you not to murder either, but does that mean you can go out an do it freely? No.
The law doesnt need to compell the computer code, it can force people to do things, it can force the code to be rewritten, it can shut down servers that run the code, it can confiscate the money used in the processes.
These are not some magical anonymous items that are above the law and inviolate. While it is true that they have not been litigated yet, that time is quickly coming, and they still rely on outside individuals to complete the contracts, and are still governed by all the same laws that everything else is.
The idea of the blockchain is that there no single server that runs the code and that could be attacked that way.
A lot of de jure illegal transactions happened on the bitcoin blockchain without a court confiscating the transactions. When MtGox was hacked they couldn’t simply ask a court to confiscate the Bitcoins that the hacker stole.
There are a lot of drugs sold via Bitcoin and the courts also don’t confiscate those.
If people make a bet in Augur that the US government doesn’t like, the US government can’t shut down Augur. At least that’s the idea on which Ethereum and Augur are build.
Augur can trade a market about whether a certain drug will get FDA approval and the market participants are anonymous. That means they can use insider information. It’s impossible to backup that anonymous transaction with standard contracts but smart contracts can.
It is an article of faith is some circles that the blockchain is exactly this kind of magic :-/
I hate this so much, and it happens so often with Tech stuff. Just because something is brand new, and does not have laws or regulations relating to it right now does not mean that people can simply do whatever they want.
Courts are still going to litigate this stuff, and people are definately going to sue if they start losing huge amounts of money, and it is just worse that the creators are basically not planning for these issues, but just going off the basis that it is all going to work out.
Well, it’s a bit more complicated than that.
When people say that some things (like the blockchain) are outside of the law, they don’t usually mean that no one can be sued or that the courts won’t try to enforce judgements. What they mean is that those things are hard for the law to reach. A court might issue a judgement but it won’t be able to enforce it. The general idea is that enforcement is so difficult and expensive so that it’s not worth it.
For a simple example, consider piracy (of the IP kind). It is very much illegal and… so what? I can still go online and download the latest movie in a few minutes. It’s not that the FBI can’t bust me if it really wants to. It can. But it’s inefficient and cost-prohibitive.
As to smart contracts, that’s just a misnomer. They are not contracts. They are determistic mechanisms, set up for a particular purpose. Bespoke machines, if you wish. A contract in law implies a meeting of the minds which these algorithms cannot provide. Instead, they offer a guarantee that if you do A, B happens.
They are more akin to vending machines: you feed in some money and you get the item. It’s not a contract between you and the vendor—it’s just a machine which you used.
Lum has the right of it. Thanks for writing that. I was trying to phrase it right and kept ending up with “Physics doesn’t care if you hate it so much”.
Of course the creators do plan for the issue. They make sure that there no central point of failure that can easily be attacked.
Which of those people who lost bitcoin when MtGox has hacked sued the miners to transfer the stolen money back to their accounts?
Court can order computers dismantled. And I think there are methods for state to aquire property if it can be shown to be a “vechicle of crime”. It is afterall the state that controls the monopoly on violence needed to enforce private property in the first place.
Note however that in this case the code is being run on thousands or millions of anonymous machines; physical dismantling would be very difficult.
This is basically the idea that the state could decide to try to outlaw bitcoin mining and fight it.
Secondly you are wrong that any state has a monopoly on violence these days. There are multiple states and not none of them have a monopoly on violence. If you want to fight crypto-currencies you have to enforce laws in every country.
Its usually seen as very rude to go exercise violence on another states soil.
Doesn’t bother the United States in the least.
Yes, and therefore no state has a monopoly on violence for the purpose of this discussion. To control Bitcoin or Ethereum an entity would need to make mining illegal in all jurisdictions.