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cryptocurrency August 2, 2018

It’s one of the biggest debates in cryptocurrency. Is code law? Or is the intent of code law? Should bugs on the blockchain be allowed to stand unchanged, or should they be fixed retroactively?

On Bitgenstein’s Table, we consider 2,500 years of the wisest human thought in philosophy, psychology, sociology, economics, and more to make better decisions. Some episodes will focus on investment decisions, but most will focus on product decisions: what kind of world we want to build with decentralized technologies, in particular cryptocurrency.

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This podcast is made up of narrative and music, so you might want to listen instead. But if you prefer pictures, read on.

The views expressed in this episode are my own, and not the views of ICO Alert or any other entity. Remember that none of this is specific financial advice. Don’t base your decisions on it. This podcast is informational and educational, and I hope it helps you learn and enjoy life.

Here’s the quick profile of a man named Jeremy.

Jeremy is an advocate for individual freedom and economic freedom and an advocate for separation of church and state and freedom of speech.

He fights for equal rights for women and the removal of penalties for homosexuality and divorce.

He fights to abolish the death penalty and to make the law equally accessible and clear for all, rich and poor alike. He’s opposed to physical punishment, and believes that all punishment should be geared toward restoration and reform.

He is also an advocate for animal rights.

He might sound like your old roommate, but Jeremy didn’t graduate college anytime recently. Nor is he a human rights activist from the ’70s. In his day, he stood up for the abolition of slavery, but he was dead decades before the American Civil War.

He is Jeremy Bentham, and he wrote in the late 1700s. His movement, “utilitarianism,” had a massive effect on the way society thinks and operates. It has been said that “the age of law reform and the age of Bentham are one and the same.”

Today, Jeremy would be upset that his main goal — making law clear, just, and accessible to all — has not yet been achieved.

We’ll return to Jeremy Bentham later. First, a story from cryptocurrency just two years ago.

The DAO’s logo.

In 2016, The DAO, a major ICO running on Ethereum, was hacked.

A recursive call bug was discovered and then taken advantage of. Ether’s priced plummeted by 50%.

The funds, about $50 million worth of ether at that time, were successfully locked down for one month using a mechanism of the DAO. 70% of the stolen funds were re-secured by white hat hackers, but in order for the remaining 30% to be recovered, a change had to be forced at the protocol level. A change in Ethereum itself.

A soft fork was attempted, but dangerous vulnerabilities discovered in the soft fork prevented miners from adopting it.

With the stakes so high, a “coin vote” was announced and a Hard Fork was pushed through in time. 80% of Ethereum nodes accepted the Hard Fork. As it proceeded, the community was relieved to see there were no obvious flaws with the update.

But then, some nodes continued running on the old network. This network became Ethereum Classic.

From the Robin Hood Group price dumps to a string of network attacks, Ethereum Classic has weathered a number of storms. Today, it’s not the most active currency in terms of transactions, marketing, or development, but it survives. And with it survives an evocative, powerful idea:

By the time it hits the blockchain, whatever the code says, goes. Code is law.

Ethereum Classic’s logo.

Ethereum Classic soon announced its independence from the Ethereum Foundation.

ETC doesn’t want off-chain interference threatening absolute immutability — the unchangeability — of the blockchain.

Code is law.

Thus the DAO attacker retained control of their funds, but as classic ethers.

Now this isn’t to say that the Ethereum Foundation itself is pro-mutability or pro-censorship. With the bug that froze millions of dollars using the Parity wallet in fall of 2017, no drastic fork action was taken, and it is unlikely that even a larger event would cause the Foundation to take such action again.

But one hole in the wall of immutability by definition turns it to mutability, to changeability. Activity on the Ethereum blockchain was retconned.

Ethereum Classic is against mutability, against retroactive changes, against retconning. Buggy contract code on the blockchain must be allowed to run once it is in place.

Xerxes. He looked cooler in 300.

It could be updated, of course, with a patch that doesn’t violate the laws before it. This method reminds me of the first soft fork that I know of in recorded history, almost 2500 years ago.

In the story of Esther in the Hebrew Bible, a law is passed by King Xerxes of Persia declaring that the Jews be killed with impunity.

According to Persian law at the time, no royal decree could ever be taken back once issued. No law could be retracted.

However, once the situation became clear, and with the reasoned persuasion of Queen Esther, a new law was instituted: the Jews were now allowed to band together and fight back and kill anyone who attempted to harm them, without legal consequence for themselves.

And so no one raised a hand against them.

This is exactly what a soft fork is: a law which fixes a problem without violating the laws that caused the problem.

This kind of legal ingenuity is one way around the problem of an unjust or flawed law posted to an immutable record. But I’m not sure we want to institute a system where whenever something goes wrong we have to finagle our way out of it with some kind of tricky technicality. Still, this does remain an option for Ethereum Classic contracts hurt by unforeseen bugs.

For many other products, this problem is met with increased vigilance against bugs.

Smart contract auditing like Quantstamp. Formal code verification like Cardano’s, and like that provided by some Ethereum tools. All of these designed to find bugs before code is deployed.

But other blockchains insist that smart contracts must be upgradeable and fixable even after they are deployed to the blockchain.

I won’t talk about EOS much — a couple of my colleagues at ICO Alert have a whole podcast on EOS news and chat — but EOS inventor Daniel Larimer explains the approach EOS takes to our problem in his article, “The Intent of Code is Law.” The article’s available on Medium.

There, Dan says, “The EOS community has embarked on a grand experiment to see if it can combine the best aspects of crypto-contracts, human contracts, and human dispute resolution. This makes EOS the first smart Ricardian contract blockchain.”

In short, on EOS, elected block producers can freeze contracts, update code, fix bugs, and so on.

In defense of this mutability, Dan continues, “This is nothing more than the formalization and acceleration of the same kind of process Ethereum used to resolve the DAO hack or that Bitcoin used to resolve the 0.7/0.8 fork.”

When a bug or failure happens on the EOS blockchain, the elected producers can reverse or mitigate the harmful consequences.

Now, to prevent bad actors from taking advantage of these capabilities to censor the blockchain, EOS institutes a voting system, a constitution, and a widespread geographical distribution among the nodes — though that distribution perhaps hasn’t quite become reality yet.

EOS also includes other innovations that are not incompatible with Code Is Law. Some measures allow users to prevent hackers from taking their funds or to recover keys if they lose them, all in a decentralized manner.

These are more compelling than the idea of a support line or a centralized party helping return your funds or recover your keys. Code is Law is attractive. It’s predictable. We would like to see a future where lawyers and disputes and arbitration are not necessary.

But as we apply decentralization innovation to an increasingly large number of fields and as we see Artificial Intelligence grow ever more important, as we look to the future, we should look to Futurama.

Matt Groenig’s Futurama is one of my favorite cartoons.

In one of the episodes from Futurama, a robotic Santa Claus is created by a corporation and given the task of bringing gifts to good children.

However, the machine’s code quickly goes extreme, and the Robot Santa adds everyone to the naughty list for the most minor of faults, and with the most intense punishments, usually death by Christmas-themed weapons.

Voiced by John Goodman, the Robot Santa rampages around the world, visiting death and devastation on his whole “naughty list.”

Besides spreading Christmas fear, he spends the rest of the year in his death fortress on Neptune, where he watches the humans doing their naughty things on an Orwellian set of huge monitors.

“You DARE bribe Santa?! I’m gonna shove coal so far up your stocking, you’ll be coughing up diamonds!”

Another favorite cartoon from my childhood was Dexter’s Laboratory. In one episode, Dexter builds a powerful robot to enforce the law and catch criminals. But within minutes, the robot is machine-gunning people for jaywalking and incinerating them for littering.

It’s difficult to envision a system where machine governance of any design has a sense of conscience, an understanding of circumstances and appropriateness, and especially a sense of compassion.

When we hear about a judge lacking any of these things, we usually call him a bad judge. At least for the foreseeable future, human situations demand human understanding.

This leads to one of the most fascinating and enduring debates in political philosophy.

And we’re getting back to Jeremy Bentham.

Although many writers have agreed for centuries that general happiness and reduced suffering are the end or purpose of the law, a political debate still rages about the standard we use for the law.

  • Some say that the standard for the law should generally be moral principles.
  • Others say the standard for the law should be the same as its goal: whatever will maximize happiness and minimize suffering. That’s the standard the law should follow.

This latter thought was pioneered by Jeremy Bentham.

“The age of law reform and the age of Bentham are one and the same.”

“The question is not ‘can they reason,’ nor ‘can they feel,’ but ‘can they suffer?’” ~Jeremy Bentham

Jeremy Bentham was all in favor of codifying law. He would be upset that so much of legal practice still relies on case law today — on volumes and volumes of previous decisions, on legal precedent, on lawyers with many years of law school.

So in one sense, he might be happy at the attempt Code Is Law is making to make law predictable, accessible, and, well, simpler.

But Bentham’s entire standard of law, maximizing happiness and minimizing suffering, is not something that machines can yet understand. Perhaps it is something we will never quite manage to measure entirely, something we will never fully be able to teach the machines.

Like with the Thunderhead in the popular young adult book series Scythe, perhaps we will always believe that some things need human conscience and consciousness involved.

American pragmatism is similar. “Whatever works.”

Just as the American Constitution and Bill of Rights were strongly influenced by British empiricism, America’s pragmatism — the widespread philosophy of doing “whatever works” — was influenced by utilitarianism.

But here we run into a conflict: whatever works for the broader network might not be what works for the individual.

It’s the same conflict that Bentham’s opponents hurled at him.

Philosopher Robert Nozick has a great image for this: the metaphor of the Utility Monster, a humorous attack on utilitarianism.

The Utility Monster is a creature that lives in your basement and breaks your sewer pipes, spilling water and sewage all over the place. He hides or escapes, you repair the pipes, and he breaks them again.

Sadly, the law will do nothing to stop him, because the Utility Monster gains much more happiness, or pleasure, from breaking the pipes than the happiness you lose. He gains much more than the pain you experience. And so he will continue legally breaking your pipes, and you’ll just have to put up with it.

From Corey Mahler’s entertaining and education Existential Comics.

A more practical example is that of, say, a deluded arsonist or rapist. If the arson or rape perpetrated by this individual is for some reason held in a utilitarian court to cause more net pleasure than pain, their actions will be legal.

Now perhaps a utilitarian could argue that the pain of others taking the court‘s permission and committing more acts of arson and rape would tilt the scale the other way.

But we can all see the problem here. If we pursue nothing but the greatest happiness for the greatest number of people, minorities might suffer.

It’s a problem similar to the problem with pure direct democracy: We might create a situation where 10 wolves and 2 sheep are sitting around a table deciding what’s for dinner. Maximum happiness for the greatest number simply isn’t a good basis here.

We need something else. We need some system of human rights. Jeremy Bentham‘s opponents said this, and people in America and France were throwing revolutions for human rights, but Bentham opposed the very idea of natural rights for the duration of his life.

I think we can understand his situation. Jeremy Bentham was out to solve problems, not create them.

He was, of course, a man who did things for certain ends. Doing things for their ends was his philosophy, after all. He wasn’t a coward. He wanted legal reform, and I assume he did and said what he needed to with the goal of fixing England’s legal system.

England’s legal system certainly needed a lot of fixing during Bentham’s day.

I highly recommend you check out the TV show Garrow’s Law. It’s an interesting legal show by the BBC based on the true story of a courageous, principled defense lawyer, back in the days where innocent people were executed by the hundreds, for crimes based on scant evidence, when they were unable to prove themselves innocent or they were unable to call high-ranking character witnesses to their defense.

The show is based on a real person, with many cases drawn from records from Garrow’s real court cases. It’s fascinating.

It is William Garrow who coined the phrase “presumed innocent until proven guilty” and he helped create the adversarial law system that is used in most countries today. And William Garrow worked during the same era as Jeremy Bentham.

Bentham shared a similar desire to help people who were suffering, so I suggest it might be because of political circumstances that Bentham entirely rejected the idea of natural human rights.

Think about the countries that England was dealing with at the time.

“Create all the happiness you are able to create; remove all the misery you are able to remove.” ~Jeremy Bentham

Across the English Channel, the French Revolution had morphed into horrendous violence, so the call of “Freedom, Liberty, Equality” sounded like something Robespierre would say as he loosed the guillotine blade into yet another countryman’s neck. Across the Atlantic Ocean, the American colonies had just rebelled on similar grounds, though thankfully without turning to the guillotine.

So Bentham was already socially at risk for his views on animal rights and holding that divorce should be legal and that homosexual acts should be decriminalized, and he was making no small number of enemies in the legal system. He would have probably been a fool to pay any lip service to the “natural rights” associated with revolutions at the time.

But even if we grant him that, there are other complications with Bentham’s core idea, too, besides natural human rights.

First, how do we measure happiness and suffering objectively? That’s difficult for humans, not to mention machines. Bentham came up with a system, but it was still sort of subjective, and not adopted anywhere.

Also, what about when an individual doesn’t know what will bring them happiness? If the state knows better how people can obtain long-term happiness, say by avoiding crystal meth and driving under two hundred MPH and brushing their teeth, should those government insights overrule the wishes of more short-sighted individuals, people who are setting themselves up for suffering?

These problems are part of why Bentham’s philosophy didn’t usher in a new era of maximal happiness.

They’re also part of why most libertarians, and more so anarchists — both large chunks of cryptocurrency enthusiasts — believe in Code Is Law. Most believe in law based on principle, not in more flexible laws written for maximal happiness. After all, Code is Law, and a system that relies on Code without the need for human action is a great enabler of anarchy: a system where there are rules, but no rulers.

So there are many more questions with Bentham’s viewpoint — the need for natural rights, how to quantify happiness and suffering, and the problem of self-destructive people and groups. But Bentham’s main point still bears careful thought as we consider a way forward.

After all, what good is a utopia if it doesn’t maximize happiness and minimize suffering?

The Way Forward?

Of course, following a flexible system with room for human consideration and arbitration does in fact potentially reopen the door to censorship.

This crack in immutability is a confidence-booster for people afraid of getting rekt by a big system failure or a big hack, but it also reduces confidence of another kind: the confidence that no powerful entity will use the system to seize your funds.

  • So some have suggested that immutable “Code is Law” systems will have a strong place. Maybe they will be the basis for some applications — while other applications will have more flexible systems.
  • Or maybe “Code is Law” will apply to the lowest layer, while more flexible systems are built on top. Bitcoin and many others seem to be taking a layered development path like this, with an immutable base layer under more flexible layers, and Ethereum may end up heading this direction, too.
  • Or perhaps the centralized corrections we’ve seen once in Ethereum and once in Bitcoin, will fade over time as formal verification and well-tested code templates and practices are implemented, and immutable Code-Is-Law blockchains will ultimately win the day in the smart contract space.
  • Or maybe we’ll end up figuring out a more just, more flexible, yet censorship-resistant blockchain governance model.

But whatever wins, Jeremy Bentham would hope it results in greater happiness and less suffering for all, and in a clearer, more accessible system of law.

And as long it doesn’t trod down all kinds of minorities on that way, I share that hope.

Thanks for reading.

If you enjoyed this episode, please follow and rate Bitgenstein’s Table on SoundCloud or iTunes.

I’m on Twitter and Medium as bitgenstein, and I want to hear from you, especially if you would like to join the podcast as a guest and discuss cryptophilosophy.

Next week will be a summary and response to a great little book on economics I’ve been reading, and how we’ve been creating money out of thin air for thousands of years, and for most of that time, letting banks of various kinds build and crash the system again and again.

Will cryptocurrency finally break the cycle? We’ll discuss this next week, on Bitgenstein’s Table: the Crypto Philosophy Podcast.

Source: ICO Alert