“A world where ‘the market’ runs free and the ‘evil’ of government is defeated would be, for them, a world of perfect freedom.” — Lawrence Lessig, Code: Version 2.0
Recently, I got the chance to watch a preview of James Craig’s upcoming documentary “Code is Law.” The film, which debuts on Oct. 21 on Apple TV+, Amazon Prime Video, and YouTube Movies, tells two distinct but related stories of crypto hacks: the people involved and the ethos of the perpetrators.
Its position is clear, but the question deserves a deeper investigation. If code is not law, should it be?
After the 2014 Mt. Gox hack, the first hack explored in “Code is Law,” the DAO hack is probably the most famous in crypto’s history. The DAO was the first decentralized autonomous organization, becoming an eponym in the process. In 2016, when Ethereum was still young, it was one of the first decentralized applications to gain traction.
The story follows founder Griff Green’s perspective as the early instantiation of decentralized governance rises, raises $160 million and then, at once, falls victim to a devastating hack.
The film uses the human angle to frame a debate that was prevalent at the time. When an attacker takes money from a smart contract, relying on the contract’s internal logic to obtain tokens outside of the creator’s intention, is that wrong? Should the attacker be censured, legally or otherwise, or is this simply fair play?
The cycle repeats in the early 2020s, with an examination of a lesser-known hack of Indexed Finance. The exploit was allegedly perpetrated by an attacker alternatively named Umbril Upsilon and Zeta Zeros, who would eventually be identified as the teenager Andean Medjedovic.
Related: Who is Andean Medjedovic, the alleged $48M KyberSwap hacker?
The film uses Medjedovic as a cipher for the idea that code is law. His worldview, portrayed as puerile, is anarchistic and brutal. “If I could take it, I had the right to.”
In the film, this is an argument based on moral intuition alone, without a principled basis and defended only by tautology. None of the ideas’ advocates make the normative case for why code should be law, but there must be an instrumental basis for this philosophy beyond moralism.
A century ends and code is law
The phrase “code is law” is generally attributed to the academic Lawrence Lessig. The first chapter in his 1999 book “Code: And Other Laws of Cyberspace” is titled “Code is Law” and draws an analogy between the power vacuums percolating in Eastern Europe at the time (someone should check in on that) and the internet.
People have always looked to frontiers for freedom. That is because societies are, fundamentally, structures that organize violence to contain the desires of individuals in favor of the priorities of those in power. Generally, this has at least some pro-social qualities: Police have a privileged role as monopolists of violence so that we can buy deodorant at Walgreens without ringing a bell for an attendant. But that does not change what it is.
At the frontier, where these structures haven’t been established yet, strong individuals can maximally exploit that strength to dominate others. That is freedom to those who want that or otherwise possess heterodox views and wish to exercise them away from propriety’s watchful eyes.
And in this, the moral origin of freedom is revealed. Freedom is not a positive quality that can be gained in a vacuum; it is the absence of a negative. The removal of a restraint of any kind is an increase in freedom. And so, for oddballs and sociopaths, a complete absence of government authority, like that which existed in cyberspace in 1999 or decentralized finance in 2016, may be desirable.
These are the advocates now of a code-is-law ethos, those who think freedom from restraint will advantage them precisely because it is asymmetric. They disproportionately wish to pursue activities that society censures, so a less powerful social conscience disproportionately benefits them.
But Lessig’s point was the opposite:
“We can build, or architect, or code cyberspace to protect values that we believe are fundamental. Or we can build, or architect, or code cyberspace to allow those values to disappear. There is no middle ground. There is no choice that does not include some kind of building. Code is never found; it is only ever made, and only ever made by us.”
Code, in this construction, is not necessarily a removal of negative restraint but is instead just another instance of regulation, broadly construed. A restraint, manifested differently, that poses the same questions as any other form of restraint.
The problem
There are two core problems, though, that prevent code from being effective law in even the generous Lessig form.
The first, as is highlighted in Craig’s film, is that it is incredibly difficult to build code that is robust enough to regulate human behavior in the range of circumstances it is likely to encounter. This issue comes from a mismatch between the rigid logical nature of code and the fluidity of human behavior.
If a developer deploys an immutable contract, then the moment an exploit is discovered, without a legal superstructure to support participants, the entire system will become unusable. And it is unrealistic to expect developers to develop perfect code. It is far easier and more effective to implement flexible rules that can be administered by humans (i.e., laws) than it is to imagine, beforehand, every possible risk scenario that could ever arise.
Such flexible authority chafes libertarians because discretion is power. Laws create arbiters who necessarily have the authority to impose or remove costs from other humans.
If you’ve ever been pulled over by a bad cop, you know exactly how this can go wrong, but the truth is, there is today no rigid system that is as effective as a flexible one. Maybe someday computers, building out large language models or other artificial intelligence, will be capable of equally effective discretion, but for now, code as law is simply worse.
But the second problem with the code-is-law idea is more damning. While the model of regulation suggested here so far has been of a reactive system that arises to fill the need for authority, some political scientists — realists — view it the other way.
Authority is the emergent product of differing capacities for violence among individuals and groups. This gradient of violence gives rise to coercion, where the possessors of violence impose rules on subjects. And code, while dictating internal rules within its own logic, has no monopoly on violence in the world writ large.
Admit it or not, software is deployed by developers and used by communities for certain purposes. And when hackers at cross purposes exploit the software to take things from those communities, some of the victims will appeal to the government for help. And sometimes those governments will respond by sending men with guns to restrain the hackers and imprison them.
While we abstract it away in our discussions, this final step, the violence, is the basic quantum of all regulation. And as long as governments have armies, and developers and hackers do not, those who believe code is law will be unable to enforce their priors on the rest of us.
At least for now, that is a good thing.
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