Just as decentralization communication systems lead to the creation of the Internet, today a new technology—the blockchain—has the potential to decentralize the way we store data and manage information, potentially leading to a reduced role for one of the most important regulatory actors in our society: the middleman.
Blockchain technology enables the creation of decentralized currencies, self-executing digital contracts (smart contracts) and intelligent assets that can be controlled over the Internet (smart property). The blockchain also enables the development of new governance systems with more democratic or participatory decision-making, and decentralized (autonomous) organizations that can operate over a network of computers without any human intervention. These applications have lead many to compare the blockchain to the Internet, with accompanying predictions that this technology will shift the balance of power away from centralized authorities in the field of communications, business, and even politics or law.
In this Article, we explore the benefits and drawbacks of this emerging decentralized technology and argue that its widespread deployment will lead to expansion of a new subset of law, which we term Lex Cryptographia: rules administered through self-executing smart contracts and decentralized (autonomous) organizations. As blockchain technology becomes widely adopted, centralized authorities, such as governmental agencies and large multinational corporations, could lose the ability to control and shape the activities of disparate people through existing means. As a result, there will be an increasing need to focus on how to regulate blockchain technology and how to shape the creation and deployment of these emerging decentralized organizations in ways that have yet to be explored under current legal theory.
INTRODUCTION :
We stand at the edge of a new digital revolution. The Internet is beginning a new phase of decentralization.1 After over twenty years of scientific research, there have been dramatic advances in the fields of cryptography and decentralized computer networks, resulting in the emergence of a profound new technology—known as the blockchain— which has the potential to fundamentally shift the way in which society operates.2 The blockchain is a distributed, shared, encrypted database that serves as an irreversible and incorruptible public repository of information. It enables, for the first time, unrelated people to reach consensus on the occurrence of a particular transaction or event without the need for a controlling authority.3 Blockchain technology has the potential to reduce the role of one of the most important economic and regulatory actors in our society—the middleman. By allowing people to transfer a unique piece of digital property or data to others, in a safe, secure, and immutable way, the technology can create: digital currencies that are not backed by any governmental body; self-enforcing digital contracts (called smart contracts), whose execution does not require any human intervention; decentralized marketplaces that aim to operate free from the reach of regulation; 4 decentralized communications platforms that will be increasingly hard to wiretap; and Internet-enabled assets that can be controlled just like digital property (called smart property).
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