Cryptocurrency: Decentralized Law and the Crypto Sovereign

grarpamp grarpamp at
Thu Oct 27 23:21:50 PDT 2022


In 2017, the world saw a dramatic increase in the use of
Crypto-Currencies.  Aside from their original use case for borderless
transactions, a number of “decentralized” projects emerged focusing on
the legal world. These projects can be divided into four main
categories: Smart Contracts, Decentralized Jurisdictions,
Decentralized Arbitration and Decentralized Companies. The main
observation in this Whitepaper is that almost all of these projects
lack a Legal Framework and therefore have little “force” in the real
world. To resolve this issue, this paper presents the Decentralized
Legal System, the first enforceable Legal Framework for Decentralized
Legal Applications. In addition, this paper proposes an open source
process for creating Decentralized Law, and envisions a world governed
by Decentralized Law.

Summary of Chapters

Chapter one explains that law and justice are somewhat fluid concepts
and that their meaning changes over time. Law was first thought to be
universal and imposed by a Creator. During the enlightenment era, the
idea that rulers/governments alone impose law became more dominant. A
number of developments however – both in theory and in practice –
demonstrate that law making isn’t the sole domain of governments. This
is especially apparent when we consider international and private law.
The conclusion is that the law allows for decentralized innovation.

Chapter two explains what Decentralized Systems are. The origins,
workings and use cases of Crypto-Currencies are described in detail,
as well as the process that resulted in the development of
Decentralized Legal Applications.

Chapter three discusses the legality of four specific categories of
Decentralized Legal Applications:

    Smart Contracts have a wide range of possible applications. Their
binary outcomes however restrict their use in the more fluid legal
world. They should firstly be considered as technological innovations
usable for relatively simple and repetitive tasks. Although they can
be used in more complex situations, they need to be supplemented by a
Human Language Contract and a Legal Framework.
    Decentralized Jurisdictions. Like many other aspects of our Legal
System, the concept of jurisdiction relies on physical locations in
the real world. By nature, a Decentralized System isn’t tied to a
physical location. The only option left is to create jurisdictions by
    Decentralized Arbitration, as currently proposed, lacks a Legal
Framework and force in the legal world. However, an enforceable
framework for International Arbitration already exists and can be used
for Decentralized Legal Applications.
    Decentralized Companies. Legal personality is essential to own
property, engage in contracts or limit liability. Decentralized
Corporations lack the Legal Framework needed to obtain legal
personality. Decentralized Autonomous Organizations (DOA’s) do not
remotely resemble legal persons. Both can therefore not be expected to
perform many of the functions regularly attributed to them.

Chapter four summarizes the differences between the Crypto-Space and
the Law. Legal Systems are based on ideas and best practices dating
back thousands of years. They are subject to changing opinions and
ideologies. Their definitions are debated and their outcomes are
uncertain. Decentralized Technologies on the other hand, are based on
hard sciences like mathematics and cryptography. These systems are
both transparent and open source, and result in predictable outcomes.
This discrepancy cannot be fixed by technological developments alone.

Furthermore, it is noted that many legal issues discussed in the
Crypto-Space are in fact not new and that the law already provides a
lot of room for innovation and bottom-up law creation. Moreover,
decentralization appears to be a logical continuation of a the
centuries-old process of dismantling power structures in favor of
individual rights.

Chapter five presents Decentralized Legal Frameworks for the four
categories of Decentralized Legal Applications mentioned in chapter
two. Firstly, it proposes the creation of jurisdictions by consensus:
so called Consensus Jurisdictions. It then explains a simple method
for merging Decentralized Arbitration with existing International
Arbitration frameworks. A Smart Contract Block is presented as a
simple solution for merging Smart Contracts, Human Language Contracts
and a Legal Framework. It continues by proposing two ways to register
Decentralized Corporations so they can be recognized as legal

Chapter six presents the Decentralized Legal System; a system not
enforced by an individual or elite group of powerful individuals
organized in a government, but accepted by a public and open source
process. A system that exists in cyberspace, but has force in the real
world. This framework can govern all four types of Legal Applications.
Next, an open source process for developing decentralized governing
laws is presented that is similar to Bitcoin Improvement Proposals.
Four methods for publication and acceptance of Decentralized Law are
then discussed after that. A Legal Wiki is presented as the ideal
technology for publishing Decentralized Law, along with a rule-based
algorithm for making amendments and keeping laws simple and

Chapter seven explains how Decentralized Law could govern the
interaction of large groups people. The concept of Legal Reflexivity
is introduced to explain how Decentralized Law could become an
important foundation for Centralized Law. Finally, the idea of a world
run by Decentralized Law is explored.

The Decentralized Legal System merges revolutionary Decentralized
Technologies with the tried and tested Legal System developed by trial
and error over the last two millennia. It is in fact a workable new
system grounded in the best of both worlds. This paper explains
important concepts of law, and what Decentralized Systems and
Decentralized Legal Applications are. The Decentralized Legal System
is just a logical conclusion.

The Decentralized Legal System allows people to freely collaborate
with the backing of an enforceable Legal Framework. This system is
completely private and voluntary. It is the hope of the author that
the theories discussed in this paper will be used as a framework for
decentralized projects in the near future, and progress into other
realms of governance as well. After the decentralization of money, the
world is now ready for decentralizing law.

A number of important observations are included on the shortcomings of
current Decentralized Legal Applications. Frameworks are suggested for
their improvement. This should provide guidance for those working on
the hundreds of projects in this area.

This Whitepaper is purely theoretical. The goal is to help the
Crypto-Community. This is not an ICO. The ideas set forth in this
paper will hopefully result in practical solutions and real-world

Included are observations that could be considered critical towards
current developments and beliefs in the Crypto-Community. This paper
is not in any way a call to restrict decentralized developments by
clinging on to what is “legal.” New technological developments will
always be trailed by governing laws for the same reason that the car
was created before a driver’s license was needed. This paper thus aims
to explore the areas were Decentralized Law could flourish in short

Many in the Crypto-Community are somewhat anarchistic in nature and
reject the current Legal System with the idea of building something
new. But when you reject the Legal System, you also reject its
protection. This Whitepaper acknowledges the existing legal structure
and its dependence on both governments and physical locations.
However, like all other Decentralized Systems, it has the potential
for innovation and disruption.

This paper is extensive, in some cases elaborating on basic concepts
of either the law or Blockchain. This ensures that people with a legal
background and those coming from the Crypto-Community, as well as the
general public, are able to understand this paper.

What is Decentralized Law?

This article answers the question: what is Decentralized Law. This is
a summary of twelve lessons on Decentralized Law.

By the time you finished this article, you have a deep understanding
of our legal system, where most current projects go wrong, and how
private decentralized legal systems can be created with power in the
real world.

This is not just theory. This system is practical, and can be
implemented right away. This project is unique because it merges the
current legal world with the decentralized one. This has not been done
before in this way.

Keep reading if you are interested in how private law systems can be
created—it is actually simple.

This article summarizes the main relevant building blocks. For more
details and footnotes, there is a link to each individual lesson.

This article is divided into three parts:

    Part I – The Existing Legal System
    Part II – Decentralized Legal Applications
    Part III – Decentralized Legal Frameworks and Governing Laws

Part I – The Existing Legal System
Who Creates Our Laws?

Most people would answer: the government. Obviously, this answer is
true. But this is not the entire picture…

There are four sources for the laws governing our lives. These are the

    Natural Law
    Governments (Positive Law)
    International Organizations (International Law)
    Private Law

Once we understand how these four sources create law, we understand
what Decentralized Law can and can’t do.

Decentralized Law Source Overview
Natural Law – Laws of Nature and God

Natural law (Latin: ius naturale, lex naturalis) is a philosophy
asserting that certain rights are inherent to human nature. These laws
are endowed by nature (or God) and can be understood and observed
through human reason.

Natural law is implied to be universal—the same for everyone on earth.
It exists independently of government, legislature or society at
large. In a sense, natural law is fully decentralized.

In the Middle Ages, the Catholic philosopher Thomas Aquinas revived
natural law, and over the years this led to an increasing popularity
of the idea of natural laws and natural (human) rights. This let to
widely influential legal documents. The most famous examples? The
United States’ Declaration of Independence and Bill of Rights, and the
Universal Declaration of Human Rights.

Although the study and influence of natural law are interesting, it
doesn’t offer a simple or practical roadmap to Decentralized Law.
Positive Law – Law by Government

During the era of enlightenment, natural law was challenged. Some
argued that humans alone constructed laws and that they were enforced
by the government. This became known as Legal Positivism.

Early Legal Positivists in the 19th century argued that law merely
reflects relations of power and obedience between a sovereign and its
subjects. As of today, the idea that national governments make laws is
hardly ever challenged.

It is unlikely that governments will give up their law-making powers.
Nor is there need for this. The following two sections reveal that an
erosion of the power of governments is already underway, and that
there is still enough freedom for individuals to start creating their
own laws.

If you want to know more about the four sources of law, make sure to
visit Lesson 1 – Who can Create Law.
International Law

Early forms of international law were mainly to regulate the
interactions between nations at war. Over the years, developments like
international trade, economic cooperation, wars and subsequent peace
treaties, and many multinational governing bodies have led to what is
known as international law.

International law describes the body of rules and principles that
determine the rights and duties of states, primarily in respect of
their dealings with other states and the citizens of other states. It
also determines what a state is and within what geographical territory
they exist.
How is International Law created?

No central authority exists to enforce international law. There is no
constitution and no world government that creates it. There are three
ways of creating international law:

A) International conventions and Agreements.
B) International custom, as evidence of a general practice accepted as law.
C) The general principles of law recognized by civilized nations.

The first method is straightforward; States sign treaties with one or
multiple other states. This creates a body of law that governs their
interactions. However, the second and third methods involve the words
“accepted” and “recognized” respectively. This implies that
international law is accepted over time due to consensus.

There are a lot of famous organizations that create international law,
such as the United Nations and the European Union. And there are other
organizations that focus on specific areas of economic cooperation,
including the World Trade Organization and the International Maritime
Hard Laws vs Soft Laws

The majority of international organizations, such as the OECD,
generally only create rules that are qualified as “soft laws.” Soft
laws are rules that do not have any legally binding force, or whose
binding force is weaker than the binding force of traditional national
laws. The latter are often referred to as “hard laws.”

In order for soft laws to have effect, States must implement them in
domestic laws or treaties to become hard laws. They usually do so
without delay.
International Law vs Private Affairs

The influence of international law is increasing with every treaty.
And there are developments in the creation, enforcement and reach of
international law that influence the crypto-space. This becomes clear
when we look at the actions of the OECD and FATF. These organizations
are responsible for legislation known as KYC (Know Your Customer) and
AML (Anti Money Laundering).

Their policies are implemented around the world almost universally. As
a result, multinational organizations now regulate (and in many cases
restrict) the interaction between individuals and private

These developments alter the basic concept of international law
because they are neither based on treaties, nor acceptance. No, they
are enforced in a top-down fashion. Moreover, they expand the scope of
international law by getting involved in the rights and duties of
private parties.
International law = Decentralized

One could argue that international law is already decentralized. It
requires no central authority to be effective. This also means that
it, for the most part, is followed voluntarily. This leads to an
important conclusion:

There is no need for the involvement of national governments to create
law. Once a piece of legislation or a practice becomes accepted and
recognized, it eventually becomes part of international law, one of
the highest and most influential forms of law in existence.

Given that a group of unelected bureaucrats can create
worldwide-accepted regulations why can’t the crypto-community do the
same? This question is answered in the next section.

If you want to learn more about international law, and how it works,
make sure to visit Lesson 2 0 – How is International Law Created?
How Private Parties Can Create Law

The Romans first created the distinction between Public Law—governing
the relationship between individuals and the State—and Private
Law—governing relationships between individuals.

Private law deals with such aspects of relationships between
individuals that are of no direct concern to the state. There is a
variety of areas where private individuals and organizations create
their own laws to govern their actions. Examples are copy-right laws,
Lex Mercatoria (a private legal system for international trade), and
globally active sports organizations such as the FIFA.
Private Law by Contract

Besides these broad forms of widely followed laws, there is a more
exclusive form of private law: law by contract. There is a lot of
freedom to engage in contracts, they offer flexibility in determining
the governing laws, and they are enforceable around the world,
especially when subjected to arbitration.
International arbitration

Arbitration is a private court system for resolving disputes. Parties
who arbitrate have decided to resolve their disputes outside any
traditional judicial system. In most instances, arbitration delivers a
final and binding decision, producing an award that is enforceable in
a national court.

An arbitration agreement creates a unique body of private law. Those
involved consent to be subjected to this body of law by signing the
agreement. They can choose those who rules on any dispute, and they
can even choose their own governing laws. And thanks to the New York
Convention (1958), arbitration awards are enforceable in almost any
country in the world.
Building block of Decentralized Law

There is absolutely no reasons why the community should wait for the
government to come up with legislation. Private law already
streamlines the interactions of (large) groups of individuals around
the world. Moreover, forms of private governing laws already exist,
and private court systems are created by contract.

The use of decentralized private law is limited to what isn’t
regulated, but this still leaves massive areas open to disruption and
innovation. Private law (by contract) forms the ideal building block
for Decentralized Law.

If you are interested in Private Law, make sure to visit Lesson 3 –
How Private Parties can Create Law.

Part II – Decentralized Legal Applications
Decentralized Legal Applications

The invention of Bitcoin revolutionized the idea of digital money. But
innovation didn’t stop there. A number of people saw use for these
technologies in other areas―including in the area of law.
Not Just Money

Bitcoin is not a like a traditional currency that is sent from one
account to another. In fact, Bitcoins always “sit” on the blockchain.
What changes hands is the ability to spend them based on their unique
access keys. Moreover, the execution of a Bitcoin payment happens
based on a script. This script can be programmed.

Due to this fact, systems can be created that spend currency not based
on human actions, but on computer code. This allows for systems to be
built that can make transactions automatically without a central
server, system supervisors, or security systems.

There are endless applications for this; self executing (smart)
contracts, token systems used for crowd-funding, arbitration systems,
financial contracts, and even new systems of governance.
Four Main Decentralized Legal Apps

As far as legal projects are concerned, they can be divided into four
main categories:

    Decentralized jurisdictions
    Decentralized arbitration
    Smart contracts
    Decentralized companies

Below, each development is covered in detail.
Problems when Merging Decentralized Systems and Law

Two categories of thinking errors persists with those creating applications:

    Differences between law and technology aren’t understood
    Absence of a legal framework

Differences between Law and Technology

Legal systems are based on ideas and best practices dating thousands
of years. They are subject to ever-changing opinions and ideologies.
Their outcomes and definitions are uncertain. Legal systems evolve
slowly in a non-linear fashion over time and their development and
workings are not transparent.

Decentralized technologies are based on hard science, mathematics and
cryptography. They are formed by peer-to-peer networks and run by
consensus. They provide a cryptographically secure framework that can
be trusted to provide a predictable binary outcome. The systems and
their development are transparent, open source and can be inspected by

We must acknowledge that the development of a legal system is not the
same as the development of a technology. One cannot just create a
piece of code an expect the legal world to adjust to it. Bridges have
to be built.
A Legal Framework

One essential question for any legal system is: which laws govern the
interactions with the system. As fundamental a question as it is,
research for this projects showed that most projects simply ignore it.

As a result, certain projects aim at creating new countries without
defining what a country is. Others wish to create a new type of
corporation but fail to understand that it is the establishment of a
new person. Arbitration systems arise without governing laws or means
to enforce rulings. Smart contracts are signed that aren’t binding or

In short, the vast majority of these projects lack a legal framework.

What is a Legal Framework?

A legal framework is a broad system of rules that governs and
regulates decision making, agreements, and laws. It acts as a
top-level umbrella, governing all beneath it.

A more specific example would be the laws applicable when starting a
business in Dubai. The main applicable legal framework is the UAE
federal law no.2 on Commercial Companies. However, this law delegates
some of it’s control to specific free zones. Free zones in Dubai are
free to create their own laws regarding companies acting within the
free zone (outside the free zones the federal law applies). The
individual free zone companies in turn then sign a memorandum and
articles of association (M&A) that govern the company.

This framework looks like this:

What is a Decentralized Legal Framework

If you wish to learn about the different decentralized apps, and how
they differ from the law, check out Lesson 4 on Decentralized Legal
Consensus Jurisdictions

The concept of jurisdiction is important. After all, how does a system
that only exists in cyberspace relate to the real world?

“Jurisdiction” can have two meanings: the authority of a court to rule
on a specific case, and the territory in which this authority is
limited. Nowadays, it is States that have the right to enforce their
laws and punish for non-compliance.

The usual concept of jurisdiction in our legal system is tied to
physical locations. This must be acknowledged when we want
Decentralized Law to have any meaning in the real world. Luckily,
there is a third form of jurisdiction that does not involve a
territory; a court can have jurisdiction by consent (or contract).
Consensus Jurisdictions

We already saw in the section on arbitration that contracts can create
a private body of law that binds the contracting parties. The question
now is, why should there be a limit to the amount of people that sign
a contract?

Technology exists for a collective to sign a contract as if accepting
the terms and conditions page of any website. This way, a jurisdiction
by consensus can be created, where the participants have agreed to
cooperate under a certain set of rules.

Consensus Jurisdiction Enforcement

If needed, such a system could even be enforced in the real world.
After all, a framework for enforcing private contracts already exists:
the New York Convention. Subjecting a Consensus Jurisdiction to this
framework is surprisingly simple; it is just a matter of adding a
clause to the Consensus Contract explaining that any disputes arising
under it are subject to arbitration and said framework.

The jurisdiction that arbitrators would have is restricted to whatever
has been agreed upon. In addition, there are significant areas of
public law that private contracts cannot “breach,” including family,
criminal or tax law.

Therefore, initial use cases are likely to be industry-specific
collaborations with a set of guiding principles for relatively
standardized recurring transactions. Examples could be found in areas
such as decentralized organizations, ICO’s, international trading,
e-commerce and international freelancing.

A more detailed explanation of jurisdiction, the concept of the State,
and how real world jurisdictions and cyberspace are linked can be
found in Lesson 5 – Consensus Jurisdictions.
Decentralized Arbitration Enforcement Framework

One important question has to be answered: what if a dispute arises?
After all, Decentralized Law only has value if it can be enforced.

As discussed, international arbitration provides the ideal framework
for the enforcement of private Decentralized Law:

What is the decentralized law enforcement framework

Important! The New York Convention requires contracting States to
recognize and enforce arbitration awards made in other contracting
States. This refers to a physical location. For this to work, a “Seat
of Arbitration” is required in one of the participating States.

Luckily, online arbitration already exist. An example is the service
offered by the Hong Kong International Arbitration Centre, which
offers a completely online arbitration procedure.
Other Ideas on Enforcement of Rulings

Some of those working on decentralized arbitration are of the opinion
that governing laws and enforcement through existing legal systems are
not needed. Those engaged in small transactions might not need the
backing of a legacy legal system. But those performing large
transactions or listed multinationals do.

A logical solution would be a two step system, with fully
decentralized arbitration first, and international arbitration only
when the first step has not resulted in a favorable outcome.

More on this discussion in Lesson 6 – Decentralized Arbitration
Enforcement Framework.
Smart Contract Considerations

A primitive ancestor of a smart contract is a vending machine. It
works by detecting the insertion of a quarter and then executes a
sale. Smart contracts take this principle to the next level. They can
handle complex transfers of property as long as they are controlled by
a digital means.

With the transfer of property, there are legal implications.
Unfortunately, a smart contract cannot be considered a legal contract.
Moreover, real world projects rarely result in binary outcomes. For
example, the Ethereum whitepaper talks about a crop insurance that
automatically pays out in case of a storm. But the harvest might only
partially be ruined, or the crops might already be harvested once the
storm hits. Smart contracts are to rigid to govern reality. They need
to be merged with a normal contract.
The Smart Contract Block

A simple and way to create a bond between a legal contract and a smart
contract is often overlooked; at the start of a human language
contract―in the clause identifying the parties―a hash or link could be
included corresponding with the appropriate smart contract.

To simplify the human language contract, existing terms and conditions
can act as a legal framework for the human language contract, which in
turn is linked to a smart contract. This could be called a Smart
Contract Block.

what is a decentralized smart contract block

One main benefit of this approach is standardization. Smart Contract
Blocks could become reliable after being used and tested over time.
With them, users can simply pick the “Block” most suitable for their
transaction and fill in the details relevant for their
transactions―like selecting an App in the Appstore!

Widely used Blocks that contain a proven enforcement framework could
become valuable assets when licensed by their creators. At the same
time, they are much cheaper to use than uniquely drafted contracts for
each transaction.

More on Smart Contract Blocks and some practical examples are found in
Lesson 7 – Smart Contract Blocks.
Decentralized Companies

There are two types of decentralized companies. A first example would
be the decentralized corporation. A second example is the
Decentralized Autonomous Organization (DAO).
The Decentralized Corporation

A few characteristics make the “corporation” unique. First of all, it
is the creation of a fictional legal person, separate from its owners.
As a result, a corporation has the right to own property, hire people,
take on loans and engage in contracts. It can sue and be sued. A
second important aspect of a corporation is that it limits the
liability of the owners. It is thus a great way for investors to
invest capital without risking bankruptcy and without the need to be
part of day-to-day management. This division of roles and
responsibilities is another important characteristic of corporations.

The work done so far on decentralized corporations completely ignores
all this. Moreover, it doesn’t address what is needed in order for a
decentralized corporation to be recognized as one by the law. And in
order for it to be recognized, it needs a physical place of
Decentralized Corporation Nexus

Existing laws allows for two different kinds of registration for
decentralized corporations:

    PE (Permanent Establishment) Registration
    Nexus Registration

what is the decentralized corporation
The Decentralized Autonomous Organization

When looking at a Decentralized Autonomous Organization (DAO) from a
legal perspective, it is clear that it is neither a corporation, nor
any other type of existing legal personality. It doesn’t have a
registered office and has no physical place of business or
registration. There are no shareholders or managers.

As a result, it cannot perform many of the tasks commonly attributed
to it, like owning property or engaging in contracts. Moreover,
participants in a DAO should take precautions if they want to be
shielded from liability or taxes. For example, by accessing the DAO
through a corporation.

More details on the challenges and opportunities of decentralized
organizations is found in Lesson 8 – Decentralized Corporations and
the DAO

Part III – Legal Frameworks and Governing Laws
Definition Decentralized Law

We have covered all the components that make up decentralized law.
Before we continue, we must come up with a definition.

We have to accept law in the broadest sense of the word. Having said
that, only private law allows for practical decentralization. As a
result, decentralized laws must be recognized by the participants
since there is no central authority to enforce it. And finally, we
learned that it has to be build on decentralized infrastructure and be
controlled by distributed political structures.
The definition of Decentralized Law is as follows:

A set of voluntarily accepted private law systems of which the control
is distributed both politically and technologically.

For a detailed explanation of how this definition was reached please
visit Lesson 9 – Decentralized Law Definition
The Decentralized Legal System

This section introduces the Decentralized Legal System (DLS), the
first complete framework for Decentralized Law.

It is a system not enforced by an individual or elite group of
powerful individuals organized in a government, but accepted and
created by a public and open source process. A system that exists in
cyberspace, but has force in the real world. This framework can govern
all four types of decentralized legal applications.

>From a technology standpoint it can best be compared to WordPress. In
this case the DLS works as the open source framework, the themes as
the different jurisdictions and arbitration systems, and the plugins
as the different smart contract blocks. And just as WordPress uses the
existing infrastructure of the internet, the DLS can use the existing
law enforcement infrastructure. And while the overall structure is
similar for each WordPress website, each end product is unique.
The DLS Framework

what is the decentralized law framework
The DLS consists of an:

    Enforcement Framework (green)
    A set of Governing Laws (blue)
    A set of Decentralized Legal Applications (orange)

It is worth repeating that most of the components of the DLS already
exist today. First of all, the enforcement and governing frameworks
(blue and green layers) are already in place.

Work on decentralized jurisdictions is currently being done, and it
would be easy to transform them into consensus jurisdictions (as
simple as it is to accept the terms and conditions of companies such
as Google or Facebook). And finally, creating a contract to govern the
use of a technology (smart contract) is also a piece of cake.

The only challenge (and main benefit) comes from combining all of this
in an easy to use (open source) system that any group of like-minded
individuals can use to create bottom-up fair and transparent rules to
govern their interactions.

A more detailed explanation and a practical example are provided in
Lesson 10 – The Decentralized Legal System.
How to Create Decentralized Law

In previous lessons, we saw the common practice of using English Law
as governing law. However, these governing laws could be replaced
(partially) by Decentralized Law.

Decentralized Law would have to be proposed, created, codified, and
accepted/implemented. Existing technologies could help with this.
Using a BIP to Propose Law

In order to create Decentralized Law, we must overcome two hurdles.
The first is a model for the creation of laws and regulations. The
second is a model to publish and accept these laws. A way to create
laws could be taken from the best practices in decentralized open
source software development proven effective by Bitcoin: the Bitcoin
Improvement Proposal (BIP).

Bitcoin is a fully decentralized system. As a result, no one developer
is responsible for its mechanisms. Adjustments to the protocol start
when someone makes a proposal for an amendment to its code, known as a
BIP. The BIP is scrutinized and either accepted of rejected by the
community. This process has worked well, and can be applied to law
creation as well.

what is decentralized law creation process
Using Github to Create Law

Github is an interesting tool that is used for open source processes,
including BIPs. It is a website that allows software developers from
around the world to cooperate on open source software development
projects. It is based on software known as “Git.”

Git is a version control system for tracking changes in computer files
and coordinating work on those files by multiple people. It is
primarily used for source code management in software development, but
can be used to keep track of changes in any set of files. Given its
success in the software community, this process could also be adapted
to create law.
Using a “Legal Wiki” to Codify Law

The public Wiki is another existing technology that lends itself
perfectly to the codification and publication of Decentralized Law.
Wikis are extremely applicable here as they are both lightweight and
easy to use, and familiar to the general public. They are perfect for
hosting large bodies of text. In addition, it is easy to hyper-link to
relevant clauses within the law, to important rulings or to higher
laws. This makes them more accessible and usable compared to the
current system consisting of random selections of constitutions,
books, rulings and separate laws created over time.
Publishing and Accepting Decentralized Law

Next, the proposed legislation must become law. This can simply be
achieved by publication and subsequent acceptance. Ideally, its
publication is subject to acceptance. This way, only widely supported
legislation may become a part of law as we saw in the BIP process.
Some ideas on how to publish and accept Decentralized Law are:

1) Static Publication
2) Voting
3) On a Blockchain
4) Prediction Markets
Amending Decentralized Law

Laws change. Although they are written with the best intentions, they
may become outdated as time passes. Decentralized Law could address
this via the introduction of an amendment process guided by
mathematical restrictions, called a Rule Based Legal Wiki.

The rules could allow for periodical amendments to be made. A
restriction could be placed on the amount characters or words that can
be changed, such as the total amount of words is only allowed to
increase by 10%. This stimulates writing clearly and removing
unnecessary and difficult words. Such a process leads to orderly,
accessible and simple legislation that can be understood by anyone. It
also prevents out of control legislation by limiting what can be

For more details on how Decentralized Law can be proposed, created and
amended, view Lesson 11 – How to Create Decentralized Law.
The Future Governed by Centralized Law

As is clear, the ideas so far presented are based upon private law.
The private arbitration framework based on private contracts is a good
example of this as well as the creation of frameworks for specific
industries and private Consensus Jurisdictions. Some may ask however,
how does this relate to the world of law making at large?
Public Law

The creation of public law is the domain of governments. In most
countries, this is subject to a democratic process. This process is
generally founded on the principle of separation of powers.

An alternative system could be an executive branch that manages the
government, a judiciary branch that enforces justice, and a
decentralized process for the creation of law.

This process could be completely decentralized, or managed by
legislators and involving the public at large. For some, this sounds
radical. But remember that this is already happening.
Legal Reflexivity

Not only do public policies affect private affairs; private affairs
also affect public policy. This process can be observed in the real
world too. An example is the refugee crisis in Europe, where judges
determine the cases of asylum seekers based on reports from NGOs;
reports written in support of the plight of the asylum seekers.

Once large groups of people create standards for their interaction it
will influence the legal world. It doesn’t exist in a bubble.
The Benefits of Decentralized Law

Legislation created in this matter will be fair and readily followed
as participants create it in a bottom-up fashion. There are lots of
areas where Decentralized Law could step in and regulate the
interaction of large groups of people. In fact, there is no use in
waiting for government legislators to act.

Politician simply don’t understand the crypto-spcae and just impose
Anti Money Laundering legislation to pretend they are useful. The time
is now for others to start working on functional frameworks of
Decentralized Law.

Once a new standard emerges, it is a safe and popular bet for
governments to incorporate this in their legislation. As far as
enforcement goes, judges are supposed to be independent and base their
judgment on the law. For them, there should be no difference in how
the law is created. They might even feel more comfortable in ruling
based upon widely supported and accepted Decentralized Law than
top-down enforced public law.
The Future of Law?

We have endured a long and hard battle for power with our rulers for
the establishment of individual freedoms under laws that equally apply
to everybody. However, as the creation of law still sits in the hands
of government and is applied in a top-down manner, we are still
subjected to centralized law.

Using the Decentralized Legal System, we can immediately start
creating bodies of private law based on consensus with force in the
real world. In addition, these laws can supplement centralized law in
areas where it falls short, and perhaps gradually start replacing some
of its processes.

These developments are in fact a very logical next step in the
continuing trend of decentralizing power structures that has been
going on for centuries. From gods to kings and from kings to States.
The next target for decentralization might well be the State and their
multinational organizations. It requires a shift in thinking, and will
not happen overnight. But it is coming, and cannot be stopped.

It can be assumed that not everybody in the government will welcome this idea.
But neither did the king…

Vires in Numeris!

More details on legal reflexivity and how decentralized law can
replace public law, visit Lesson 12 – The Future of Decentralized Law.

Cite this article

Thysse W., “What is Decentralized Law,” (Decentralized Law Lessons,
December 28, 2019), available on:

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