The New York Times commented: When DeFi accidents happen frequently, "code is law" still established?

About 20 years ago, Harvard Law Professor Lawrence Lessig first told computer scientists that they had become regulators of the digital age unknowingly. He said that he cried a programmer. The programmer was frightened by this view, "I am not a politician, I am a programmer," Professor Lessig recalled her protest.

Professor Lessig's book "Code and Other Rules of Cyberspace" published in 1999 put forward the concept of "code is law". Now, this view no longer shocks young engineers or lawyers, the professor said. For the digital native generation, it is clear that technology is governing behavior with non-value-neutral rules.

Large technology companies have admitted this reluctantly. Meta, a social media company formerly known as Facebook, even established a court-like committee of experts to evaluate some of the decisions made by the program. At the same time, a relatively young field of technology-the cryptocurrency industry-has embraced the concept of "code as law" wholeheartedly. Some encryption companies have made it clear that the code can be a better arbiter than traditional regulators.

Many crypto enthusiasts are betting on such a future scenario-we create, entertain, and work on the platform where the code runs. In the booming decentralized finance (DeFi) field, pre-programmed automated "smart contracts" have been Processing billions of dollars in transactions every day does not require any human intervention, at least in theory.

Users have full confidence in programming. No one shares personal information. The code completes all this and becomes the whole of the rules. "There is no human judgment, no human error, no processing. Everything is instant and automatic," Robert Leshner, founder of the DeFi lending agreement Compound, said in an interview in August.

However, although it is attractive to build a completely neutral and automatic system, many major security incidents have made people suspect that "code itself is a sufficient form of supervision" or "it is not affected by human error and manipulation." ".

When certain conditions are met, the smart contract is automatically executed. Therefore, if there is an error in the system, the user may technically follow the code "law" while triggering a free transfer-this is why Poly Network stolen $600 million this summer. Poly Network allows users to transfer cryptocurrency across chains. Allegedly, hackers used flaws in the code to modify smart contract instructions to trigger large-scale money transfers. In essence, he induces the automated system to operate as if the proper conditions for transmission have been met.

"If you can say to the smart contract'give me all your money' and it does, then is this theft?" Nicholas Weaver, a computer scientist at the University of California, Berkeley, wrote about the theft of the Poly Network article. Weaver writes that unlike old-fashioned agreements, the ambiguity of smart contracts cannot be resolved in court, and automated transactions are irreversible-so when things go wrong, developers must resort to "begging."

After $600 million was stolen, Poly Network posted a request on Twitter starting with "Dear Hacker", asking them to return the funds, calling the behavior a "major economic crime." In the end, most of the funds were returned, and discussions about resorting to law enforcement stopped. The hacker stated that he wanted to prove that the code was flawed in order to protect the project.

Similarly, in September of this year, a software upgrade of Compound resulted in $90 million being erroneously sent to users. Mr. Leshner said that receiving users who did not return the cryptocurrency after receiving the wrong payment will be reported to the tax authorities. This statement triggered a strong protest from the Compound community because they did not adopt "These programs are technically incompatible with the identification of users. "Traditional regulatory requirements". Leshner's request also weakened the view that "DeFi does not need the supervision of traditional regulatory agencies"-when problems arise, Mr. Leshner appealed to the government.

Currently, the DeFi platform is operating in a regulatory gray area and is subject to rules written by private programmers who claim to have no control over the governance of the project. Platforms and applications built for blockchain networks are usually formed under a new type of business structure called "Decentralized Autonomous Organizations (DAO)". These projects are ostensibly composed of user communities that use encrypted tokens to vote. The group conducts democratic management.

But as many accidents have shown, there is always someone behind the code.

"Their claim that'everything is coded without human intervention' is not entirely true. In an emergency, you can see where the power is," said Thibault Schrepel, a law professor at the University of Amsterdam. Schrepel created a project called "computational antitrust" at the CodeX Legal Informatics Center at Stanford University.

Mr. Schrepel analyzed, “The reason why no one wants to claim control of decentralized projects is that doing so reduces the obligation-no one controls, there is no way to punish when there is a problem, and there is no place to enforce the law.”

"But the idea that'the code itself is enough' is wrong," he said. Mr. Schrepel believes that if the blockchain community uses code to evade regulation, it will only hinder innovation.

Thibault Schrepel is a member of the team of "techno-lawyers", a group of people who want to bridge the gap between code and law. Schrepel said that ideally, code and law can work together. Companies can use smart contracts on the blockchain to cooperate or strengthen competition, so regulators can analyze codes and programs and cooperate with core developers of decentralized systems. Similarly, policymakers can begin to "translate" the traditional concept of "risk mitigation" into codes in DeFi, and translate bank reserve requirements into project parameters.

"I wouldn't say that advancing our ideas is easy," said Chris Giancarlo of the law firm Willkie Farr & Gallagher, the former chairman of the US Commodity Futures Trading Commission. "

He also asked, "Should we not try to rethink our regulatory approach to achieve the same policy goals in different ways?" Giancarlo is also the author of "CryptoDad: Fighting for the Future of Currency".

Mr. Lessig agreed. "We need a more complex method, allowing technical experts and lawyers to sit next to behavioral psychologists and economists." People in all the above fields define the program parameters of the project to compile the public values of society. Into the procedures so that private interests will not replace them. "Our democracy is facing an existential threat, and we don't have 20 years to wait."