[Q] My youngest brother, he is a professor in law. He teaches his students to read the word of the law,
write the word of the law, but judge according to the spirit of the law. When we look at these...
.. new technologies, like distributed ledgers and Ethereum smart contracts, suddenly we're [faced]
with the dilemma where you have to decide who is judging the spirit of a piece of code.
So if you look at it from that perspective... maybe national, maybe regional, maybe global...
Is a legal framework necessary, preemptively? If so, how urgent is that?
[A] As a system that overrides the consensus algorithm? No. Not only is it not necessary,
it is odious, it is contrary to the very concept we're trying to build. We already have plenty...
.. of institutions that allow you the flexibility to try and see if your problem will be adjudicated...
.. based on the spirit of law, in front of an impartial judge or jury of your peers.
We already have all of that. Everything we have is all of that. Your [brother's] students will...
.. leave law school believing in the spirit of law and be gradually ground down through the system of...
.. prosecution and courts until eventually they don't believe in anything -- other than winning the case.
That's usually what happens. The reason we have a consensus algorithm is because...
.. we're trying to build an alternative system where the outcome is known based on the...
.. formulation of a contract, and it is completely neutral and impartial. Will that always work?
Hell no, it won't! Sometimes it will backfire badly, and we will have a DAO-saster. [LAUGHTER]
But then the question is: how can law create a safety net? The worst case you can have,
if you have a system where the smart contract has failed, is that every participant in the smart...
.. contract finds anyone they can specifically identify (jurisdictionally, geographically, individually)
sue them in whichever court they choose, or find themselves at the time. Then you have...
.. to deal with this morass. I'm not suggesting that's a good outcome, I'm suggesting that...
.. it's an inevitable outcome. If you have disputes that arise in this system and you don't have the...
.. means of resolving them other than a consensus mechanism, people will start firing lawsuits...
.. at each other. There's this really interesting framework called the New York Convention On Arbitration,
which is an international treaty that allows you -- in 156 countries -- to claim independence,
legal arbitration, through a private system of law that you can pre-define: the duration, discovery,
who the judges are going to be, how it's going to be adjudicated, etc. Perhaps we should be...
.. building systems that say, 'If there is a failure in this consensus system, we agree to waive our...
.. rights under the New York Convention to local courts, and instead subject ourselves...
.. arbitration under a crowd-jury, selected by smart contract 0XABCDEF, to provide the final solution.'
Maybe you do that. I don't know if it's a good solution; I know it's better than trying to defend...
.. yourself in a hundred local courts. [Q] What if it's not the consensus algorithm,
but in the use, or rather abuse, of the system? For example, TheDAO... but I can imagine much worse.
[A] The trick is distinguishing between what is 'use' and what is 'abuse' of the system.
In a system that has no spirit of law, but only has rule of consensus, there is no such...
.. thing as a distinction between 'use' and 'abuse' of the system. If you can use the system,
it is 'use' of the system. If the consensus algorithm allowed it, it is 'use.' The distinction you're putting,
which is a normative judgement of the spirit, doesn't apply. It simply doesn't. Quite honestly,
I think TheDAO was a great lesson in that. The lesson wasn't "should we fork or...
.. should we not fork?" The leson is: don't put $150 million in an untested contract, you idiots!
[LAUGHTER] But that is a lesson that is self-correcting. People got hurt by that.
They're going to learn, and we're going to get better. We have to realise that what...
.. we're building here, these systems... Their defining characteristic is caveat emptor:
they are free market systems. They are free, collaborative, voluntary participation systems.
Caveat emptor - buyer beware. That is not a warning, that is a fact.
You take it as it is. If you don't like it, you can use the other systems. We have plenty...
.. of them. But we're not going to change this one and make it into one of the others.
In fact, we're going to fiercely resist that change.