The Pencil, the Brick,and the Law

Mark S. MillerCTO, Combex Inc.

Open Source Coordinator, ERights.orgDirector, Extropy Institute

Co-Director, Agorics Projects, GMU

Removing the Next Brick

How Many Bricksin This Picture?

?

Next Bricks Past: Free Speech

From legal right to technological fact

Jurisdiction-free universal “law”

Has costs: Destruction of copyright

despite universal support of jurisdictional law

No one can negotiate compromises

Inherently coercionless (J.S. Mill)

Vast amplification of extended orientation

What Went Wrongin the 3rd & former communist worlds?

End of communism, desire for capitalismGreat liberation from oppression

New leaders included many free market folkVaclav Klaus, Miseans in the Baltics, Poland, etc.

$9.3 trillion in “extra-legal” assets

Soros, others, eager to help

“It is easy to turn an aquarium into fish soup, butnot so easy to turn fish soup back into an aquarium.”

–Lech Walesa

Low-Trust Societies

From Fukuyama, de Soto, E. DysonAbsence of oppression isn’t enough

Complex extended cooperation requires trust

Besides culture, what?Accumulated “capital” of widely trusted

intermediary institutions

Secures property, relationships, & contracts

Hubs of High Trust

Actual Virtual

Low-Trust TragedyNot no trust. No trust hubs.

Actual Virtual

Hubs: Trusted Intermediaries

Title, Insurance, Escrow, Exchanges,Arbitrators, Banks, Notaries, Visa,Underwriters, Lloyd’s, Brokers, Funds,Consumer Reports, Roger Ebert, …,

Courts, Law, Enforcement, Moneynot great, but much better than their absence

Bits Without Borders

Can now purchase e-goods & e-servicesfrom across the world as easily as next door.

Escape old limits of geography & jurisdiction.

Can trust-hubs escape too?Can they be made purely electronic?

Mostly independent of physical interaction

Many 1st world hubs are trusted worldwide

Remote Trust Bootstrapping

1st World 3rd World

Smart Contracts

Contract as Program CodeTerms enforced by program’s execution

Inescapable arrangement vs. punishment.

Contract host == trusted escrow & enforcerLocal knowledge of the “People’s Law”

provides private law per-contract

Nick Szabo’s www.best.com/~szabo

Lessig’s “Code and other Laws of Cyberspace”

Our “Capability-based Financial Instruments” at FC’00

Contracts as Games

Players make moves, but only “legal” onesMove changes state of board

Board-state determines move “legality”

ERights are “pieces” placed on boardGame escrows pieces,

Pieces/ERights released only by play

A Simple Exchange Game

Separation of Duties

Contract Host

$ Issuer

Alice

Stock Issuer

Bob

World Isn’t Purely Electronic

Can eTitles establish popular

legitimacy?

Opens new opportunities

Extra-legal:local consensus

Incentives on corrupt cops

10/10th of law

Net+Crypto:JurisdictionCoercionless

Incentives on corrupt courts

Jurisdictional:public recordslawyers, cops

Behavior is9/10th of law.

Split contracts

Purely ElectronicRights:(money, stock)

Public eTitle in physical goods

(tractor, land)

A Covered Call Option

Contracts -> Virtual Property

$ IssuerContract Host #1

Alice

StockIssuer

Bob

Fred

$ Issuer

OptionsIssuer

Contract Host #2

The Game Design Game

Contract Negotiation as Game Design

Framework as the Game of Game Design

Design rules for game all are willing to play

Write “board manager” for that game

Agree on a mutually trusted host

Pay host to run the board manager

Host verifies everyone agreed on same game

Local Knowledge vsGlobal Transferability

Contract Host trusted onlyto execute games faithfully

despite lack of prior knowledge

to create transferable title to a game seat

“People’s Law” stays in the people’s handsFormalizes de Soto’s “extra-legal” rules,

without centralization or Procrustean beds

Homogenization only required for fungibility

Next Bricks Future

Reach of title-transfer-credibilityExtent of Property (vs Territory)

Village -> Jurisdiction -> Internet

Requires credibility rating service or insurance

Cost of operating formallyCrushing Bureaucracy -> Lawyers -> Moore's Law

SecurityMafia protection -> Gov't protection -> Crypto protection

Why the 3rd World First?

Haven't already paid homogenization costs

Less burden of installed baseLike cell-phones in Eastern Europe.

Where legal system isn’t thought legitimate,legitimate businesses need not be legal.

Especially given alternate source of legitimacy.

“Rule of Law & Not of Men”

The Classical Liberal ideal

A neutral simple framework of rulesenforced impartially & justly

enabling cooperation without vulnerability

The old “right of contract”Any mutually acceptable arrangement

Law secures it, as a trusted intermediary