Is Bitcoin money? A security? Can scripts be smart contracts? Are smart contracts even a real thing? What do “identity”, “intellectual property” and “fungibility” mean in Bitcoin? What’s the legal status of crowdfunding and ICOs? Dr. Craig Wright and Money Button founder Ryan X. Charles discuss these questions and more in this week’s “Theory of Bitcoin” episode.
Dr. Wright is back from vacation in Italy and ready to continue the topic the pair started in the third episode: Bitcoin and the law. The previous edition gave a historical background on why laws are necessary and who should decide them—episode four looks more specifically at how certain laws may apply to Bitcoin.
The innovation of Bitcoin is to bring law to digital assets. Monetary law, property law, contract law, and all other aspects of law apply unchanged to Bitcoin. Furthermore, the power of law can now be used for digital assets.
4. Legal Aspects of Bitcoinhttps://t.co/89mgHv6s2W
— Theory of Bitcoin (@theoryofbitcoin) July 14, 2020
As Charles discovers, the answer to many legal questions is “yes and no,” or “it depends.” That’s because, as Dr. Wright points out, laws and how they are applied are determined by humans in certain jurisdictions—Bitcoin itself, apart from its base protocol, does not create any new laws or invent ways around existing ones.
The legal notion of “sui generis” is important here. That’s the term used to explain how legal status may be conferred upon something previously ambiguous or undefined—such as a new technology, or something not specifically mentioned in the original law. What this means is, Bitcoin’s legal status (including the status of concepts deriving from its use) depends on the jurisdictions in which it exists.
Is Bitcoin a security? If a regulatory authority (like the SEC) says it is, then it is. Is crowdfunding legal? Yes and no, depending on the amount raised and the purpose—again, defined by legislators or courts deciding on a case. The sui generis principle applies to nearly anything you can do with Bitcoin and, as Dr. Wright points out, “miners” (aka “nodes”) neither create new laws nor vote on them.
Those who’ve followed Dr. Wright’s work know well that he takes strong issue with the notion that “code is law”, and Silicon Valley’s efforts to divest humans of responsibility for the actions of algorithms and machines. Only humans have agency and machines can’t, Wright says.
The same principle applies to Bitcoin: its rules are defined by humans, humans use it to build and innovate, and ultimately humans will decide on the legal status of various use cases and the humans who perform the actions will be the ones responsible. There’s no way around it.
That does raise the interesting question of what could happen in some hypothetical future time should human lawmakers decide that machines do have sui generis agency. That question isn’t discussed here, but Dr. Wright would definitely be making the case against it—whether as himself, or the post-2140 “CyberCraig” he says could be around to see what happens once all Bitcoins are awarded.
Satoshi’s unilateral contract
“Awarded” is another interesting term. Dr. Wright also clarifies some misconceptions about how Bitcoin should be defined in law. Nodes do not create Bitcoins, nor bring them into existence. All 21 million Bitcoins were created in January 2009 when he started running the first Bitcoin protocol software, via a unilateral contract under which he (as Satoshi) is obligated to deliver.
This also affects Bitcoin’s status as intellectual property, which Dr. Wright claims and could be enforced by court order should he obtain a judgment stating that he is Bitcoin’s sole creator. Variations on Bitcoin, or at least those claiming the name “Bitcoin” and requiring use of the Bitcoin database, could be engaging in fraudulent activity.
Charles and Wright also engage in some interesting discussions about digital contracts and how the law has evolved, whether Ethereum developers acted as fiduciaries, “Web IPOs” of the ’90s vs. ICOs, and how the expression “democratizing finance” has been used to justify various scams since the 1920s.
As with any conversation involving Dr. Wright, expect quite a few tangents that clarify “what people don’t understand about” a whole range of topics, and historical explanations from a person who’s probably bothered to read more primary source material than most commentators. From Plato to Yap stones, it’s all there.
The two also talk about the topics they’d like to cover next, so stand by for some schooling on computer science and more economics. Whoever you are, unless you’re Satoshi Nakamoto you’re guaranteed to learn something new. And, as Dr. Wright notes, there’s a big difference between training and education. Consider this series a vital primer in your ongoing education.
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