Thoughts on Regulation

Regulation is a patch to the current economic and social paradigms. For example, capitalism and free markets are currently seen as the best working solutions for the economy. However, private ownership of the means of production and their operation for profit which are inherent in capitalism result in less than optimal conduct by the economic actors. Information asymmetries between the participants of the economy and selfish behavior of dominant parties result in exploitation of less informed or weaker participants of the economies or less than optimal results for the society in general. As a reaction, regulation is implemented as a patch to the disadvantages of capitalism.

Regulation has a purpose and is generally good for the people. In a somewhat functioning system of government, i.e. a good democracy, opposite to the perception of the regulated subjects, regulation is not something that is imposed by some random mad tyrant. Instead, regulation has a very specific purpose. For example, financial regulation has the goal to protect the creditors and investors as well as the target to ensure financial system stability.

Regulation is usually reactive. Regulation is a severe intervention in people’s liberty. Thus, it is rarely implemented with the foresight of a vague upcoming issue. Regulation is typically implemented after there was a severe impact of adverse behavior on society or after the perception of such with a public outcry.

Smart contract creators are responsible. As smart contracts are immutable after deployment, regulatory action cannot be effectively summoned upon them reactively. This may result in nuisance with regulators and the public. Any assumption by smart contract creators that they are not responsible for their creations is dangerous. Thinking that there are no consequences of their works being used by bad actors and that there will be no repercussions might be naïve.

I appeal to the blockchain community to think about the implications of on-chain creations before the respective deployment and promotion. It is essential that smart contracts are created with a pure intent and wise foresight. Also, the comprehension of the general values of society is paramount to create solutions which are seen as valuable and do not result in outrage and a devastating reaction.

Let’s be great pioneers of blockchain technology by acting and creating responsibly! Regulatory elements can be embedded into smart contracts. Please, let this be the inception of a respective discussion.

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There was a great panel at ETHBuenosAires on self regulation:
ETHBuenosAires: Self Regulation Panel

I had made some comments on it in a Telegram group that I’ll repost here:

“Regulators have this box, and they want to put this new world in this box. That’s not the right approach.”

I think Maria hit the nail on the head with that one.

“We shape our tools and our tools shape us.”

Technologists shape the tools used to shape tools, and they shape the tools they use to create those tools.

Regulators use the same tool, over and over and over again.

I think there’s a fundamental gap between regulators and technologists.

The tool of the regulator is coercion. Dress it up however you like, every regulator acts as the smiling, briefcase carrying enforcer for violent monopolists to extort value out of their victims.
I got the shotgun. You got the briefcase.

Until regulators adopt the approach of technologists, which is to always use the best tool for the job (and to create a better one if you believe it doesn’t exist), there will NEVER be a regulatory framework that can “accomodate” the cambrian explosion of value emerging from this space.

Except if regulators did adopt the technologist approach… then they would no longer be regulators… they would become technologists.

Thus, I don’t see any other future here other than self-regulation.

Rather, I can’t imagine a future worth living for where technologists don’t take on the responsibility of holding themselves accountable, without the need for violence.