destroyed, call attention to how conflict management is, can and should be
organised within the infrastructure. Some users demand conflict management
mechanisms and redress, while the supporters of the ‘code is law’ narrative argue
against any subsequent actions that would change previous events and thus pull
down the irreversibility of the code.
The blockchain-based networks are decentralised public ledgers, where trust is
allocated by the infrastructure to the infrastructure. Individual transactions are linked
to one another, forming a chain of blocks, each block containing a transaction or
some other change of status. The blockchain infrastructure was developed for the
purposes of digital money, cryptocurrencies, the most famous example being
Bitcoin, developed by the pseudonym Satoshi Nakamoto in 2008 and later on
released as open source software.
5 Originally, the structure was developed to overcome the shortcomings of traditional trust-based currencies, which out of necessity
always rely on the authority of central banks and on the possibility of reversing earlier
transactions in the case of fraud or court decision. Modern cryptocurrencies are
based on a cryptographically secure ledger, a blockchain of earlier transactions, which
provides information security and transparency. The ledger is maintained by all
participants of the decentralised and anonymous peer-to-peer network. The ledger
of past transactions is public,
6 and no transaction can be removed from the ledger.
The rules on how a transaction can be added to the blockchain safeguard the
system from external interference such as fraud or hacking. In order to be added
to the blockchain, a transaction needs to include a solution to a specific
mathematical problem, a so-called hash function, that is designed to be computationally difficult and time-consuming to solve but the validity of the solution
can easily be verified. This computation that validates the new block consumes
resources, which is the reason why users who lend their computational resources
to it are rewarded by new units of cryptocurrency in a process called ‘mining’.
Mining simultaneously enables the decentralised verification of transactions and
provides the means for creating new units of the currency.
7 The regulation-averse
quality of blockchains is seen as deriving from this decentralisation and complacency of the network in creating new value true mining.
Although much legal communication has evolved around qualifying cryptocurrencies as property and thus as regulatory and fiscal objects,
8 the potentially more
interesting blockchain applications relate to automation of transactions – and of
enforcement. The American law professor Frank Pasquale and systems engineer
Glyn Cashwell evaluate different automation scenarios depending on the high or
low level of regulation and high or low susceptibility to automation. In their
analysis, blockchain applications exemplify the scenario of high regulation and
high automation, where public functions are outsourced to computation. As
Pasquale and Cashwell point out, the infrastructure could be employed to take
over legally complicated functions, which is evident in the unconventional proposals on blockchain-based enforcement regimes that would replace the traditional
legal authorities.
9 Following a similar line of thought, Fairfield states, ‘it is time to
start looking past routine financial applications of such [trustless public] ledgers as
currencies’.
10
New bases for justification 183
organised within the infrastructure. Some users demand conflict management
mechanisms and redress, while the supporters of the ‘code is law’ narrative argue
against any subsequent actions that would change previous events and thus pull
down the irreversibility of the code.
The blockchain-based networks are decentralised public ledgers, where trust is
allocated by the infrastructure to the infrastructure. Individual transactions are linked
to one another, forming a chain of blocks, each block containing a transaction or
some other change of status. The blockchain infrastructure was developed for the
purposes of digital money, cryptocurrencies, the most famous example being
Bitcoin, developed by the pseudonym Satoshi Nakamoto in 2008 and later on
released as open source software.
5 Originally, the structure was developed to overcome the shortcomings of traditional trust-based currencies, which out of necessity
always rely on the authority of central banks and on the possibility of reversing earlier
transactions in the case of fraud or court decision. Modern cryptocurrencies are
based on a cryptographically secure ledger, a blockchain of earlier transactions, which
provides information security and transparency. The ledger is maintained by all
participants of the decentralised and anonymous peer-to-peer network. The ledger
of past transactions is public,
6 and no transaction can be removed from the ledger.
The rules on how a transaction can be added to the blockchain safeguard the
system from external interference such as fraud or hacking. In order to be added
to the blockchain, a transaction needs to include a solution to a specific
mathematical problem, a so-called hash function, that is designed to be computationally difficult and time-consuming to solve but the validity of the solution
can easily be verified. This computation that validates the new block consumes
resources, which is the reason why users who lend their computational resources
to it are rewarded by new units of cryptocurrency in a process called ‘mining’.
Mining simultaneously enables the decentralised verification of transactions and
provides the means for creating new units of the currency.
7 The regulation-averse
quality of blockchains is seen as deriving from this decentralisation and complacency of the network in creating new value true mining.
Although much legal communication has evolved around qualifying cryptocurrencies as property and thus as regulatory and fiscal objects,
8 the potentially more
interesting blockchain applications relate to automation of transactions – and of
enforcement. The American law professor Frank Pasquale and systems engineer
Glyn Cashwell evaluate different automation scenarios depending on the high or
low level of regulation and high or low susceptibility to automation. In their
analysis, blockchain applications exemplify the scenario of high regulation and
high automation, where public functions are outsourced to computation. As
Pasquale and Cashwell point out, the infrastructure could be employed to take
over legally complicated functions, which is evident in the unconventional proposals on blockchain-based enforcement regimes that would replace the traditional
legal authorities.
9 Following a similar line of thought, Fairfield states, ‘it is time to
start looking past routine financial applications of such [trustless public] ledgers as
currencies’.
10
New bases for justification 183