Skip to main content

Lex Cryptographia

The Blockchain revolution is poised to change the manner in which the world as it exists today would operate. The technology which is increasingly being used to create decentralized autonomous organizations can function completely without any human intervention. Basic transactions such as the exchange of trade resources, the interaction between individuals and government agencies, etc may soon get replaced by artificial intelligence of computers based on blockchain technology[1]. The rise in the self-execution of smart contracts and decentralized autonomous organizations result in the laws surrounding the individual, the state, and the market being rendered inapplicable at best unless the very crux of the law is rethought in light of the new advancement in technology. The very rule of law itself is threatened with a replacement by the rule of code.
The benefits of the blockchain-powered rule of code are twofold: First at a primary infrastructural or protocol level of the technology, the decentralized, autonomous nature of the blockchain which is immune to any form of tampering by external agents results in the technology itself acting as a neutral and incorruptible arbiter and enforcer of the rules that are coded into the system.[2] Secondly, the layer of the smart contracts in addition to the infrastructure gives the possibility to private participants of the network to implement and abide by their own private regime of rules and regulations, which again like the infrastructure level are completely neutral and tamperproof and incorruptible[3].
Additionally, the advantages of this code-based legal system that blockchain seeks to implement include high levels of efficiency; high levels of consistency and predictability; a reduction in the levels of uncertainty and ambiguity that exists in the interpretation of the law and rules and regulations of the conventional legal system; and finally as mentioned earlier, the complete customizability of the rules which is the law for each person individually.  Further legal compliance and enforcement of the rules are able to be monitored, automated, and uniformized in a completely non-discriminatory manner. The appeal of smart contracts which are based on the computer code of the blockchain is very similar to the Bitcoin bubble appeal that radicalized the world in the twenty-first century.  This appeal is due to the aspects like a decentralized consensus, instantaneous exchange, and complex computational states.[4] A smart contract is immutable and unmodifiable once created since its logic is seeded into a blockchain spread across multiple points.[5]
Just as a cryptocurrency need not identify a central banker who maintains transaction records, a cryptocurrency also need not identify specific people responsible for making a decision. In other words, cryptocurrencies can crowdsource decision-making.[6]. therefore with the increasing implementation of blockchain technology and smart contracts in multiple instances of governance, it can lead to a situation wherein a majority of intermediaries such as notaries, registrars, etc who perform the function of granting approvals in various facets of the law being replaced by automatic contracts which execute and grant approval provided the underlying conditions are being satisfied through the blockchain mechanism.
The appropriation of tech-savvy contracts likewise makes it simpler for residents to make custom lawful frameworks where individuals are allowed to pick and execute their own guidelines inside their own specialized lawful system. As such, the blockchain could support and facilitate the deployment of a decentralized alternative to the current legal system—a new digital common law[7]—consisting of an interconnected system of rules interacting with one another in a reliable and predictable way, without the need of any third party institution to enforce these rules. Unlike a conventional legal system wherein the participants of the system have to adhere to the rules and regulations of the system regardless of whether they consent to do so or not, the new system of lex cryptographia lays down a possibility that the participants may be free to choose a legal system of their own liking based on the circumstances and nuances that best suit them. What this does is that there will be tailor-made laws for each individual based on the activities that particular individual is undertaking and nothing further. For example, a tax assessment in the blockchain era will have his tax deducted via the smart contract and cryptocurrency database as per the standing of that assessed alone. There will not be any other tax laws that are not applicable to him, governing the assessee. 
The ‘extreme’ utility of smart contracts is based on the fact that they are an algorithm and it is this algorithm that presents itself as a computer code or computer language that drives the blockchain and makes up the substantive aspect of the legal norms that would otherwise govern a particular subject matter. What this translates to is also that the code underlying the blockchain network must be flawless in all aspects. This is due to the fact that if the code contains an error it mirrors an error in the legal norms and substance. Therefore one has to be exceptionally careful in ensuring that there are no errors on the blockchain network. A blockchain that is corrupted in the manner described will not only cease to be beneficial to the users and will slowly start invoking hostile abuses. [8] The integrity of data on the blockchain is guaranteed by the cryptographic technology underlying it; costs of monitoring the performance of the contract as well as the requirement for litigation are all reduced due to the consequence of smart contracts wherein they are immediately and irrevocably performed.
Smart contracts "eliminate the need for legal enforcement;"[9] they represent "a technological alternative" to the legal system itself[10]. Technology promises to replace slow and imprecise paper institutions with efficient, digitized counterparts.[11] Contract law is a frequent target of these hopes[12]. Smart contracts threaten "thousands of legal jobs"[13] in the short term. As a result, commentators even predict that contract law is about to die. The reason behind this is that with the help of smart contracts, the non-performance of the contract will be greatly reduced because all transactions will be based on the underlying blockchain code, which will run on its own and only if all the conditions specified in the contract are met will they execute. For example, a flat having a password door lock will provide access only if that month's rent has been deposited in the landlord's bank. Since the blockchain network is a distributed ledger system, the very instant that the rent is paid by the tenant to the landlord, that very instant itself the lock on the door will be notified, and therefore there will be no delay nor a miscommunication to occur between the two systems. This is a rudimentary example that depicts the application of this technology if applied to far more complex transactions such as trade, stock markets, insurance, loans, etc.
Thus by the inclusion of such automated smart contract mechanisms in the near future, the possibility of defaulting contracts will reduce to almost a zero chance possibility. In the legal sphere, the rule of law will have to adapt to the new rule of code or the lex cryptographia which will amount to the infallibility of various legal constructs such as government approvals, financial transactions, escrows, contractual agreements, etc due to the underlying code of the blockchain technology. 
Switching away from the conventional topics of blockchain which are cryptocurrency and smart contracts, the concept of governance of society is one aspect that may be impacted by the rule of code in unprecedented proportions. The governance of a society is one of the prerequisites of forming a State. The basis of governance of any society in any part of the world is establishing a social contract that ensures the best manner of survival of the human race.[14] This social contract wherein the society surrender a part of their rights in order to ensure the smooth functioning of the State was primarily done by the surrender of such rights to a ruler or government, facilitated by a legal system of rules and regulation. Lex cryptographia is the substitution of this ruler/ government and the law by a technology that will perform the same function of regulation and governance over a majority of the activities of the human race in the present age. With blockchain technology, citizens can move beyond a tacit social contract, and make an explicit contract based on the blockchain, called a “Smart Social Contract.[15]
‘The inherent characteristics of blockchain technology can change governance in several specific areas. First, it will allow individuals to have more power over their identifying information and data and gain more privacy from the government. Second, as individuals use smart contracts with each other to eliminate the need for government oversight, the “digital common law” will evolve. Third, any government power that can be digitally connected can be strictly restricted, and unless the citizens agree, these powers are inviolable.’[16]
Blockchain technology is currently extensively being used the world over in multiple capacities across multiple sectors and industries. As more and more people start using the blockchain network for contractual purposes ad transactional purposes, the code that is written to eventuate these activities start getting more and more complex and begin to be stored on the blockchain network. This code can be applied to parties apart from the party that initially constituted the code. Regular usage will improve smart contracts and blockchain computing, develop standards of practice, and create a common law of smart contracts.[17] Thus just as how the conventional common law comprises the evolution of the law over time, the digital common law will come to be a consolidation of all the codes and rules written on the blockchain and evolved over time. Just as how lex mercatoria has evolved based on the trade laws that developed over time, a digital common law will constitute the lex cryptographia that has evolved over time. Most advocates see blockchain computing, and the related lex cryptographia, as an ultimate replacement for most types of governance and law enforcement[18].
The digital common law concept will be based on a smart social contract as discussed above wherein all actors such as the government and the individuals could participate and establish a codified constitution itself on the blockchain. The difference between the digital common law system and the common law system is the same as the difference between the civil law system and the common law system. Both are fundamentally different in their work but yield the same outcome which is the governance and regulation of society. Thus the digital common law is a system that over a period of time will develop into a full-fledged legal system completely capable of governing society in all aspects on par with the legal system as it exists today and is poised to come into play in the near future and structure the lex cryptographia system of governance.[19]
The dawn of cryptocurrency-based law is not near. There are serious obstacles to its emergence, including the need for experimentation with tacit coordination games to establish that participants will seek to address the normative questions, posed[20] Cryptocurrencies cannot solve the problem of incomplete contracts[21], and as long as contracts are incomplete, humans will need to resolve ambiguities. Therefore with the gradual evolution of blockchain technology, the gradual evolution of lex cryptographia as a competitor to the rule of law at an equal footing can be envisioned.

[1] Chris Dixon et al., Beyond Bitcoin: The Blockchain, A16Z ACADEMIC ROUNDTABLE 2014 (2014), available at
[2] Michael Abramaowicz, Cryptocurrency- Based Law, 58 ARIZ. L. REV. 359, 420 (2016)
[3] Id.
[4] Jeremy M. Sklaroff, Smart Contracts and the Cost of Inflexibility, 166 U. PA. L. REV. 263 (2017)
[5] Diedrich, Henning,  ethereum : blockchains, digital assets, smart contracts, decentralized autonomous organizations. (Erscheinungsort nicht ermittelbar Wrocław: Wildfire Publishing,Amazon Fulfillment, 2016)
[6] Jeff Howe, crowdsourcing: why the power of the crowd is driving the future of business, (New York: Three Rivers Press, 2009)
[7] John Henry Clippinger & David Bollier, The Rise of Digital Common Law An Argument for Trust Frameworks: Digital Common Law and Digital Forms of Governance, ID3 (2012), available at
[8] G. PETERS & P. EFSTATHIOS, understanding modern banking ledgers through blockchain technologies: future of transaction processing and smart contracts on the internet of money, banking beyond banks and money 246- 247 (Springer 2016)
[9]K Werbach, Contracts Ex Machina, 67 DUKE L.J. 313-382, (2017), available at id=2936294
[10] Alexander Savelyev, Contract law 2.0: ‘Smart’ contracts as the beginning of the end of classic contract law, 26 INFORMATION & COMMUNICATIONS TECHNOLOGY LAW 2, 116-134 (2017)
[11] Richard Barbrook & Andy Cameron, The Californian Ideology, 6 SC. AS CULTURE 44, 44 (1996)
[12] Harry Surden, Computable Contract, 46 U.C. DAVIS L. REV 629, 631-35 (2012)
[13] Rebecca Campbell, New York City Law Firm Experiments with Blockchain Smart Contracts, CRYPTOCOINS NEWS (Feb. 2, 2017), [ 7-BRCZ]
[14] Celeste Friend, Social Contract Theory, INT’L ENCYCLOPEDIA OF PHIL., (2004), available at
[15] Karen E. C. Levy, Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and The Social Workings of Law, Engaging Science, Technology, and Society, 3 CORNELL UNIVERSITY, 1-15, (2017).
[16] Steve Young, Enforcing Constitutional Rights Through Computer Code, 26 CATH. U. J. L. & TECH (2017), available at:
[17] Max Raskin, The Law and Legality of Smart Contract, 1 GEO. L. TECH. REV. 305, 328 (2017) (exemplifying how torts could emerge for negligent coding and how existing common law would have to adapt).
[18] Fiammetta S. Piazza, Bitcoin and the Blockchain as Possible Corporate Governance Tools: Strengths and Weaknesses, 5 PENN. ST. J.L. & INT’L AFF. 262, 301 (2017)
[19] Steve Young, Enforcing Constitutional Rights Through Computer Code, 26 CATH. U. J. L. & TECH (2017), available at:
[20] Michael Abramaowicz, Cryptocurrency- Based Law, 58 ARIZ. L. REV. 359 (2016)
[21] Contracts are incomplete in part because some contingencies are not anticipated, and also because parties leave them deliberately incomplete, either because the contracts are self-enforcing or because people believe that norms of fairness will help resolve disputes. A cryptocurrency that can exercise normative judgment can be seen as a mechanism that makes a contract self-enforcing or as a mechanism that avoids judicial enforcement through peer-to-peer decision-making
Robert E. Scott, A Theory of Self-Enforcing Indefinite Agreements, 103 COLUM. L. REV. 1641, (2003).

Your subscription could not be saved. Please try again.
Your subscription has been successful.


Subscribe our web Equa.Law and get latest update of Mediation.

Popular Posts

ADR: The legal necessity for Post Covid India

Name – Garvit Bhardwaj College - Faculty of Law, University of Delhi "Discourage litigation, persuade your neighbors to compromise whenever you can. Point Out to them how the normal winner is often a loser in fees, expenses, cost and time"- These words of Abraham Lincon have passed the test of time as to how reduced litigation can be beneficial for society. But a highly commercialized and developing society like ours is bound to face disputes which shift the emphasis from avoiding litigation to providing faster means to resolve unavoidable conflicts. The unprecedented COVID-19 crisis is likely to lead to an upsurge in the number of cases before the judiciary. For instance, consumer, tenancy, and labor disputes are likely to see a rise soon and our judicial system stands incapable of handling them effectively. The Indian Judicial system, even after 75 years of independence, is still facing crippling backlogs and delays. Approximately 73,000 cases are pending before the Supreme

‘Negotiation’ vs ‘Mediation’ vs ‘Arbitration’

An alternate dispute resolution (ADR) is a method used to resolve issues without resorting to a court case. The different methods of doing so under the ADR umbrella include negotiation, mediation, and arbitration. This article explores the different methods and tries to explain to the readers the pros and cons of the same.  Starting with Mediation, the term "mediation" refers to the procedure wherein parties to a dispute are helped to resolve their differences by a neutral third party that does not favour one side).  The neutral third person is known as the 'mediator', and the mediator helps the parties communicate by acting as the communicator between the two parties. The mediator controls the flow of information between the parties in a reasonable, transparent, and unbiased manner.  The mediators don't take sides, offer counsel, or offer legal advice to any parties. They do not serve in either of these capacities. They help by outlining the points of contention

Scope & Importance of ADR

The mechanism of ADR System and its techniques are an extra-judicial remedy to resolve disputes outside the legal fora. These techniques can be used in all those cases, which are capable of being resolved, under law, by mutual agreement between the parties. The scope of ADR is wider and can cover cases of civil nature, commercial, industrial and family disputes or any other cases of urgent nature. The ADR works across the full range of business disputes: banking; contract performance and interpretations, construction contracts, intellectual property rights, insurance coverage, conflicts in joint ventures, partnership differences, personal injury; product liability; professional liability, real estate, and securities. The mechanism of the ADR system may offer the best solution in commercial disputes of an international character. The scope of an ADR System is not intended to supplant existing means of dispute resolution. It offers only alternative options to litigation. There is a large