stack of gold bitcoins

Tulip Trading Ltd blossoms in digital currency desert

Dr. Craig Wright has all the attention of the digital asset space right now. The recent ruling concerning the Tulip Trading Ltd. case against blockchain developers stirred up emotions in the so-called ‘crypto market.’

Introduction of the ruling:

The question in this appeal is whether the developers who look after bitcoin may arguably owe fiduciary duties or duties in tort to an owner of that cryptocurrency.

Conclusion of the ruling:

If the decentralised governance of bitcoin really is a myth, then in my judgment there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property.

What is so controversial about that? Nothing, if you are a normal person. However, the ones that for years promoted an anarchist and unlawful way of dealing with digital assets fear liabilities.

The defendants disagreed with Tulip Trading Ltd.’s position and argued that—for example—the BTC developers are “part of a very large, and shifting, group of contributors without an organization or structure.”

Shifting group of contributors without an organization or structure? Really?

Not really. When developers “loosely” work together on a project which has financial implications for themselves or others, or a combination of both, we are talking about partnerships by civil law. That applies between the developers of the specific blockchain, and fiduciary duties may come into play concerning their actions that affect other people’s property.

From the ruling:

The fact there may not be a consensus amongst owners does not of itself undermine the conclusion that the duty of developers is fiduciary in nature. If anything it serves to underline the fact that the owners really do place trust in the developers to make good decisions on their behalf.

(…) but as I have explained above, the developers are already arguably entrusted with decision-making for the benefit of the owners as a class, even if some owners object.

I would like to draw attention to the fact that this matter has been discussed in academics at least since 2018:

academic paper: in code(rs) we trust
Source: In Code(rs) We Trust: Software Developers as Fiduciaries in Public Blockchains

Tulip Trading and Dr. Craig Wright—implications for all blockchains

The Tulip Trading case has implications for all blockchains out there. Such seems to be the reason why Ripple CTO David Schwartz had to comment on the judgment, probably trying to influence the public perception before people investigate the details for themselves.

Schwartz called the lawsuit “nonsensical.” Well, all the three judges seem to disagree with that assessment. The three judges literally stated:

(…) that the case advanced raises a serious issue to be tried. (…). If the decentralised governance of bitcoin really is a myth, then in my judgment there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property.

Now reread the Ripple CTO’s tweet—”nonsensical”? It is the opposite. The judges ruled that it was a “serious issue to be tried.” All blockchains are bound by law.

BitMEX Research tweeted that the judgment is “bad news” and “pretty unfortunate.” Why though? Why is it bad news and pretty unfortunate if blockchain developers that seem to manage a billion-dollar market project may have legal duties to the token holders?

Tulip Trading Ltd. case is helpful for all token holders

All token holders—no matter what blockchain—should be thankful to hear that there is indeed room for discussion on who is responsible and in what ways. Imagine you lose your Bitcoin or other tokens due to theft. One can check in any blockchain explorer which address current has these stolen coins in real time, but “nothing can be done”? Wrong!

Reuters published an article concerning the Tulip Trading case. The article fails to understand the importance of what is going on here. However, one part is worth mentioning though. According to lawyer James Ramsden, who represented parts of the developers in this case, the developers are “incredibly nervous”—especially for the massive sums of money they know to owe to Tulip Trading Ltd.

Why are developers “incredibly nervous”? Someone is responsible. That is how a civil law society works.

Blockchain developers that simply change code concerning a digital asset may or may not have exercised control over it by doing so. That depends on what has been changed through changing the code. If it is “just an update,” it may not be “exercising control.”

However, if by changing the code, a change concerning the protocol—as in changing the rules—is exercised, the developers have evidently exercised control. That has happened in BTC several times; see the SegWit and Taproot implementations. With exercising control, legal obligations occur.

An article published by Bloomberg seems to understand all of this way better than Reuters. It is comforting to see that there are still people out there capable of thinking.

Dr. Wright is not done with “crypto” yet—and they know it.

Dr. Wright publicly stated that there is a considerable sum in legal costs now owed to Tulip Trading Ltd. by the developers:

The list of defendants is a long one in this case. I wonder how they will “team up” to cover the costs. We know they have a lot to discuss within their exquisite circles. Since they claim to be a “shifting group without organization or structure,” they may very well be all on their own with covering the costs now.

It is not the first time Dr. Wright has faced these people publicly on Twitter or in court. Dr. Wright even stated that he knows about certain hidden Telegram groups and urges caution:

Litigation hold? Deleting chat messages? I cannot comment on the specifics of the tweet above. However, I guess the ones spoken to know the details and consequences.

Conclusion to this crypto mess—Thank you, Tulip Trading!

Crypto, the way we know it, will die. Do people really think Dr. Wright is only protecting his personal property rights in all of this? What Tulip Trading Ltd. is doing strengthens:

  1. all property rights
  2. of all token holders
  3. on all blockchains.

Yes, it works this way. One goes first, and the rest follow up. Thank you, Tulip Trading Ltd., for going through this hell of crypto nonsense, basically for the rest of us.

Crypto has been promoted as a law-free zone, “decentralized” when it fits the ones making money with it at the expense of the average Joe that was lured into this crazy market.

The reality is: there is nothing new under the sun. Property rights and legal obligations apply to digital assets and blockchain projects precisely the way they apply to all other forms of human interactions.

Watch: Craig Wright “Bitcoin is not a cryptocurrency”

YouTube video

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.