Bitcoin is a protocol promoted as the first peer-to-peer institution, an alternative to a central bank. The decisions made through this protocol, however, involve no judgment. Could a peer-to-peer protocol underpin an institution that makes normative decisions? Indeed, an extension to the Bitcoin protocol could allow a cryptocurrency to make law. Tacit coordination games, in which players compete to identify consensus issue resolutions, would determine currency ownership. For example, an issue might be whether a cryptocurrency-based trust should disburse funds to a putative beneficiary, and the game’s outcome would resolve the question and result in gains or losses for coordination game participants. A cryptocurrency can also be used to generate rules or other written codes. Peer-to-peer law might be useful when official decisionmakers are corrupt or when agency or transactions costs are high. A modest starting point for cryptocurrency-based governance would be as a replacement for Bitcoin’s centralized system for changing its source code. A cryptocurrency incorporating tacit coordination games could serve as a foundation for other projects requiring peer-to-peer governance, ranging from arbitration to business associations, which would enjoy inherent limited liability and would lack designated management.
GW Paper Series
GWU Legal Studies Research Paper No. 2015-9 GWU Law School Public Law Research Paper No. 2015-9
Abramowicz, Michael, Peer-to-Peer Law, Built on Bitcoin (March 4, 2015). GWU Law School Public Law Research Paper. Available at SSRN: http://ssrn.com/abstract=2573788 or http://dx.doi.org/10.2139/ssrn.2573788