Review of Banking and Finance Law
The terminology around blockchain technology is notoriously confusing, with disputes over whether a blockchain is the same as a distributed ledger or whether an appcoin is the same as a protocol token. In this article, I examine the difficulties the rapidly shifting, contested vocabulary poses for regulators seeking to understand, govern, and potentially use blockchain technology, and I offer suggestions for how to fight through the haze of unclear language.
I provide examples of the fluctuating, contested language in the blockchain technology space and describe the forces at play in shaping the language. I then lay out the problems the language raises for regulators, including challenges in identifying the facts about the technology, distinguishing among the many variations of the technology, and communicating clearly about the technology, as well as increasing the chances of regulatory capture, inconsistent regulation across jurisdictions and subject domains, and "perverse innovation.”
Next, I closely analyze the use of the term "immutable" in blockchain discourse to illuminate the confusion a single term can cause for regulators (and the public at large). I argue that the widespread use of the term "immutable" as a defining feature of blockchain technology is misleading given that: (1) real world events have demonstrated that the unchangeable nature of a blockchain record is always limited by the decisions of its human governors to change it, and (2) the source of a blockchain record's "immutability" is disputed, meaning that it is unclear whether any particular variation of the technology may be fairly described as creating an "immutable" record. This is problematic as regulators have already begun to craft legislation describing the records created by blockchain technology as immutable and are making decisions to use the technology in large part because of its "immutability."
Finally, I suggest ways regulators can become better educated about blockchain technology, which is essential to responsibly govern or use the technology. I also recommend that regulators take a highly critical approach that: (1) seeks to separate hype from reality; (2) is sensitive to how incentives may shape the way blockchain technology is portrayed by industry and those sponsored by industry and how misleading terminology appears in publications of the highest prestige levels; (3) includes diverse perspectives from proponents and critics of the technology, multiple disciplines, and across the gender, race, geographic, and economic development spectrums; (4) takes nothing, including descriptions of the technology itself, at face value but deeply interrogates and scrutinizes the technology and its stated capabilities; and (5) asks regulators to think for themselves about the technology and its benefits rather than succumbing to herd behavior
Angela Walch, The Path of the Blockchain Lexicon (and the Law), 36 Rev. Banking & Fin. L. 713 (2017).