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PAUSE THE BLOCKCHAIN LEGAL REVOLUTION

Published online by Cambridge University Press:  19 December 2019

Kelvin F. K. Low  and
Eliza Mik
Kelvin F. K. Low
Affiliation:
Professor of Law, City University Hong Kong, kelvin.low@cityu.edu.hk
Eliza Mik
Affiliation:
Honorary Fellow, Melbourne Law School, Research Associate, Tilburg Institute of Law and Technology, eliza@elizamik.io
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Abstract

When bitcoin was released by the mysterious Satoshi Nakamoto in 2008, few could have predicted that it would attract as much attention as it has today. It has spawned a veritable host of other cryptocurrencies, including ether on the upstart Ethereum network, which boasts smart contract functionality. The underlying blockchain technology has also attracted attention, with some within the blockchain community suggesting that it can solve such diverse problems as secured digital voting to tracking food provenance. In the legal context, blockchains have been envisaged as capable of revolutionising registries for assets ranging from land to intellectual property, modernising clearing and settlement, and even fundamentally transforming the contracting process. This article critically evaluates the popular claims surrounding the potential of blockchain technologies to disrupt the legal system by separating hype from fact.

Keywords

public international lawcryptocurrenciesblockchainasset registriesclearing and settlementsmart contracts
Type
Articles
Information
International & Comparative Law Quarterly , Volume 69 , Issue 1 , January 2020 , pp. 135 - 175
Copyright
Copyright © The Authors (2019). Published by Cambridge University Press for the British Institute of International and Comparative Law.

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Footnotes

The authors wish to acknowledge the invaluable assistance of their technical colleagues Ernie Teo, Pralhad Deshpande, Anthony Lewis, Mano Thalaban, Gaurang Torvekar, Vinay Mohan, Darren Frankel, and Marco Crepaldi. Professor Hugh Beale was also of invaluable assistance for pointing us to the sources for the comparative law aspects of the article. We would also like to thank Professor Spyros Maniatis for his encouragement and the two anonymous reviewers, whose comments helped us to improve the article. The usual caveats apply.

References

1 The true identity of Satoshi Nakamoto has been much speculated but remains unknown. See A O'Hagan, ‘The Satoshi Affair’ London Review of Books (30 June 2016).

2 S Nakamoto, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ (October 2008) at <https://bitcoin.org/bitcoin.pdf>.

3 cf Grusky, DB, Western, B and Wimer, C (eds), The Great Recession (Russell Sage Foundation 2011)Google Scholar.

4 ie alternatives to bitcoin.

5 N Roubini, Testimony to the US Senate Committee on Banking, Housing, and Urban Affairs on ‘Exploring the Cryptocurrency and Blockchain Ecosystem’ (11 October 2018).

6 R McMillan, ‘The Inside Story of Mt Gox, Bitcoin's $460 Million Disaster’ Wired (3 March 2014).

7 For the massive crash in 2018, see P Vigna, ‘Bearish on Bitcoin: Crypto Markets Take Steep Dive’ The Wall Street Journal (20 November 2018).

8 ‘Bitcoin's Future: Hidden Flipside’ The Economist (13 March 2014).

9 C Metz, ‘Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain’ Wired (17 December 2015). The convergence of the two fields is often dubbed ‘fintech’ for short.

10 ‘The Promise of the Blockchain: The Trust Machine’ The Economist (31 October 2015).

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13 Casey and Vigna (n 11) 208.

14 ibid.

15 See eg Paech, P, ‘The Governance of Blockchain Financial Networks’ (2017) 80 MLR 1073CrossRefGoogle Scholar.

16 cf A Pope, An Essay on Criticism (1709): ‘A Little Learning Is a Dangerous Thing’. The naïveté about economics among many crypto-enthusiasts have led some to christen bitcoins as ‘Dunning-Kruggerands’: D. Gerard, Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum and Smart Contracts (Createspace 2017) 42. The Dunning-Kruger effect is the name given to the cognitive bias in which incompetence leads to inflated self-assessments, after the authors of the seminal paper: Kruger, J and Dunning, D, ‘Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments’ (1999) 77 Journal of Personality and Social Psychology 1121CrossRefGoogle ScholarPubMed.

17 Y Sakaguchi, ‘New Global Cryptocurrency System Set to Fight Money Laundering’ Nikkei Asian Review (9 August 2019) at <https://asia.nikkei.com/Spotlight/Bitcoin-evolution/New-global-cryptocurrency-system-set-to-fight-money-laundering>.

18 See generally Walch, A, ‘The Path of the Blockchain Lexicon (and the Law)’ (2016) 36 Review of Banking and Financial Law 713Google Scholar.

19 InterPARES Trust Terminology Project: Key Blockchain Terms and Definitions (2018) <https://interparestrust.org/terminology/term/blockchain>.

20 A hash algorithm takes an arbitrary-length data input and produces a fixed-length deterministic result. For any specific input, the resulting hash will always be identical and can be easily calculated and verified by anyone implementing the same hash algorithm. It is computationally infeasible to find two different inputs that produce the same fingerprint (a collision) or to select an input in such a way as to produce a desired fingerprint, other than trying random inputs. See Antonopoulos, AM, Mastering Bitcoin (2nd edn, O'Reilly 2017) 228Google Scholar.

21 Some blockchains have been designed for specific purposes or industries, others are generic.

22 Distributed ledgers are a broader category of dispersed, synchronised and cryptographically secured databases: Maull, R et al. , ‘Distributed Ledger Technology: Applications and Implications’ (2017) 26 Strategic Change 481, 483CrossRefGoogle Scholar.

23 Insofar as they do not do so, they are not immutable to the same extent that blockchains are. Corda, a distributed ledger, developed by the R3 consortium, famously ‘abandoned’ the concept of blocks; see generally R Gendal Brown, J Carlyle, I Grigg and M Hearn, Corda: An Introduction (2016) available at <https://docs.corda.net/_static/corda-introductory-whitepaper.pdf>.

24 Some blockchains do not fall into either categorisation as they constitute a hybrid model. Sometimes, the term ‘permissioned’ is used interchangeably with ‘private’ and the term ‘permissionless’ with ‘public’ but these terms are not used consistently. See also Lai, R and Lee, DKC, Handbook of Blockchain, Digital Finance, and Inclusion, Volume 2 (Academic Press 2018) 147Google Scholar.

25 Antonopoulos (n 20) 50. End users do not need to, and many do not, operate full nodes.

26 X Xu et al., ‘A Taxonomy of Blockchain-Based Systems for Architecture Design’ 2017 IEEE International Conference on Software Architecture (ICSA), Gothenburg 2017, 243–52.

27 Miners are incentivised to add new blocks by obtaining bitcoins (when their block is added to the blockchain) and transaction fees (when they include a transaction in their block), indirectly, this incentive mechanism ensures the integrity and immutability of the blockchain. See Antonopoulos (n 20) 26.

28 There are well-known limitations to the sort of traditional game theory that many blockchain algorithms are built upon: see, eg, Colman, AM, ‘Cooperation, Psychological Game Theory, and Limitations of Rationality in Social Interaction’ (2003) 26 BBS 139Google ScholarPubMed.

29 See generally V Buterin, ‘On Public and Private Blockchains’, Blog Post (6 August 2015) at <https://blog.ethereum.org/2015/08/07/on-public-and-private-blockchains/>.

30 D Andolfatto ‘Bitcoin and Beyond: The Possibilities and Pitfalls of Virtual Currencies’ Dialogue with the Fed (31 March 2014) 16–17.

31 Low, KFK and Teo, EGS, ‘Bitcoins and Other Cryptocurrencies as Property?’ (2017) 9 LIT 235, 238Google Scholar.

32 A de Vries, ‘Bitcoin's Growing Energy Problem’ (2018) 2 Joule 801. For the latest information on Bitcoin energy consumption, see <https://digiconomist.net/bitcoin-energy-consumption>. For information on Ethereum energy consumption, see <https://digiconomist.net/ethereum-energy-consumption>. This high monitoring cost is unsurprising since ‘proof-of-work’ is designed assuming the absence of trust: cf Chang, HJ, 23 Things They Don't Tell You About Capitalism (Allen Lane 2010) 41–50Google Scholar.

33 Antonopoulos (n 20) 162.

34 Werbach, K and Cornell, N, ‘Contracts Ex Machina’ (2017) 67 DukeLJ 313Google Scholar, at 333.

35 The religious metaphor is frequently invoked to describe faith in the blockchain and bitcoin even has its own Bitcoin Jesus, one Roger Ver. See N Paumgarten, ‘The Prophets of Cryptocurrency Survey the Bust and Boom’ The New Yorker (22 October 2018); J Kelly, ‘The Unholiest of Holy Wars: ‘Satoshi’ vs ‘‘Bitcoin Jesus’’’ FT Alphaville (10 November 2018).

36 See eg in relation to the bitcoin blockchain, G Vidan and V Lehdonvirta, ‘Mine the Gap: Bitcoin and the Maintenance of Trustlessness’ (2018) New Media and Society 42, esp 49–51.

37 See CVE-2018-17144 Full Disclosure at <https://bitcoincore.org/en/2018/09/20/notice/>.

38 Fixed at 21 million bitcoins. Note that there is no cap for ether.

39 Yermack, D, ‘Corporate Governance and Blockchains’ (2017) 21 Review of Finance 7, 16Google Scholar.

40 (n 15) 1080–2, refers to ‘[a] fail-proof system, the displacement of trust and the redefinition of truth’.

41 Antonopoulos describes decentralised consensus as an emergent artifact of the asynchronous interaction of thousands of independent nodes, all following simple rules, see Antonopoulos (n 20) 217.

42 N Popper, ‘How China Took Center Stage in Bitcoin's Civil War’ The New York Times (29 June 2016). Also see H Murphy, ‘‘‘Bitcoin Whales’’ Control Third of Market with $37.5bn Holdings’ Financial Times (9 June 2018).

43 V Buterin, ‘Governance, Part 2: Plutocracy Is Still Bad’ Blog Post (28 March 2018) at <https://vitalik.ca/general/2018/03/28/plutocracy.html>.

44 Hill, J, ‘The Role of the Donee's Consent in the Law of Gift’ (2001) 117 LQR 127Google Scholar.

45 Antonopoulos (n 20) 18, 19.

46 Gray, J, ‘The Transaction Concept: Virtues and Limitations’ in Stonebraker, M (ed), Readings in Database Systems (Morgan Kaufman Publishing 1988) 140, 141Google Scholar.

47 Antonopoulos (n 20) 24, 25.

48 For a detailed description of validation criteria see Antonopoulos (n 20) 218, 219.

49 ibid 238.

50 Law Commission Consultation Paper No 237, Electronic Execution of Documents (21 August 2018) 20.

51 Xu (n 26) 6.

52 Illicit transactions on the Silk Road were an early use case for bitcoins that generated interest in the crypto-asset.

53 <https://legalfling.io/>.

54 M Salam, ‘Consent in the Digital Age: Can Apps Solve a Very Human Problem?’ The New York Times (2 March 2018).

55 <https://legalfling.io/#faq> in response to the question ‘Does this proof [sic] consent beyond any doubt?’.

56 R Matzutt et al., ‘A Quantitative Analysis of the Impact of Arbitrary Blockchain Content on Bitcoin’ in Financial Cryptography and Data Security 2018. Twenty-Second International Conference, Curaçao, Netherlands (RWTH Publications 2018).

57 Walch (n 18) 735, 736.

58 The hack entails embedding additional content in bitcoin addresses or creating ‘fake’ ASCII addresses.

59 See also Lai and Lee (n 24) for distributed ledgers, which are not blockchains.

60 See Low and Teo (n 31) 259–64.

61 Vukolić, M, ‘The Quest for Scalable Blockchain Fabric: Proof-of Work vs. BFT Replication’ in Camenisch, J and Kesdoğan, D (eds), Open Problems in Network Security (2016) Lecture Notes in Computer Science, vol 9591 (Springer 2016)Google Scholar.

62 For bitcoins. The advice is to wait for 20–25 confirmations for ethereum. However, because the average time to mine a block for ethereum is only 15 seconds compared to 10 minutes for bitcoin, the average time for the recommended number of confirmations is only six minutes for ethereum as against 60 minutes for bitcoin. The accidental fork in the bitcoin blockchain on 11 March 2013 lasted for 24 blocks and six hours: see V Buterin, ‘Bitcoin Network Shaken by Blockchain Fork’ Bitcoin Magazine (12 March 2013).

63 ibid.

64 Low and Teo (n 31) 254–9.

65 ibid 252–4.

66 G Greenspan, ‘Why Many Smart Contract Use Cases Are Simply Impossible’ Coindesk (17 April 2016) at <https://www.coindesk.com/three-smart-contract-misconceptions>.

67 Antonopoulos (n 20) 218.

68 This is illustrated by, for example, the Hyperledger architecture, which provides the technical framework for permissioned blockchains and distinguishes between different components in this framework. ‘Hyperledger Architecture, Vol II, Smart Contracts’ at 3 <https://www.hyperledger.org/wp-content/uploads/2018/07/HL_Whitepaper_IntroductiontoHyperledger.pdf>.

69 A project to establish a blockchain land registry in Honduras was much lauded as an instance of using the blockchain's ‘trustless trust’ to fill the vacuum of trustworthy institutions in a developing economy: ‘The Great Chain of Being Sure About Things’ The Economist (31 October 2015). For more details on this project and a more sceptical view, see Lemieux, VL, ‘Trusting Records: Is Blockchain Technology the Answer?’ (2016) 26 RMJ 110CrossRefGoogle Scholar. See also Kshetri, N, ‘Will Blockchain Emerge as a Tool to Break the Poverty Chain in the Global South?’ (2017) 38 TWQ 1710Google Scholar. Sweden appears to be the most notable developed economy to explore a blockchain land registry: see Kairos Future, ‘The Land Registry in the Blockchain – Testbed’ (March 2017) <https://chromaway.com/papers/Blockchain_Landregistry_Report_2017.pdf>. See also J McMurren, A Young and S Verhulst, ‘Addressing Transaction Costs Through Blockchain and Identity in Swedish Land Transfers’ (October 2018) <https://blockchan.ge/blockchange-land-registry.pdf>.

70 The Australian Stock Exchange has decided to replace its Clearing House Electronic Subregister System (CHESS) system with one using distributed ledger technology: see Australian Stock Exchange, ‘CHESS Replacement: New Scope and Implementation Plan Consultation Paper’ (April 2018) <https://www.asx.com.au/documents/public-consultations/chess-replacement-new-scope-and-implementation-plan.pdf>. Luxembourg passed Bill 7363, which supposedly grants transactions conducted on a blockchain the same legal status as those conducted traditionally, on 14 February 2019; an informal English translation is available at <https://www.letzblock.com/blog/draft-luxembourg-law-7363>.

71 See Nakamoto (n 2) 2.

72 See, for example, M Bech and R Garratt, ‘Central Bank Cryptocurrencies’ BIS Quarterly Review (September 2017) 60, ‘Graph 3 The Money Flower: A Taxonomy of Money.’

73 Provided they are not securities. cf Jay Clayton, Chairman, US Securities and Exchange Commission, ‘Statement on Cryptocurrencies and Initial Coin Offerings’ (11 December 2017). But see Financial Conduct Authority Feedback Statement FS17/4, ‘Distributed Ledger Technology’ (December 2017).

74 See Low, KFK and Teo, E, ‘Legal Risks of Owning Cryptocurrencies’ in Lee, D and Deng, R (eds), Handbook of Blockchain, Digital Finance, and Inclusion, Vol 1 (Academic Press 2017) 225, 241–2Google Scholar.

75 For the common law, see Foley v Hill (1848) 2 HLC 28, 9 ER 1002. cf Meder, S, ‘Giro Payments and the Beginnings of the Modern Cashless Payment System’ in Fox, D and Ernst, W (eds), Money in the Western Legal Tradition: Middle Ages to Bretton Woods (Oxford University Press 2016) 409Google Scholar.

76 B Geva, ‘‘‘Bank Money’’: The Rise, Fall, and Metamorphosis of the ‘‘Transferable Deposit’’’ in Fox and Ernst (n 75) 359.

77 See eg Low, R, ‘From Paper to Electronic: Exploring the Fraud Risks Stemming from the Use of Technology to Automate the Australian Torrens System’ (2009) 21 BondLR 107Google Scholar.

78 McFarlane, B and Douglas, S, ‘Defining Property Rights’ in Penner, J and Smith, H (eds), Philosophical Foundations of Property Law (Oxford University Press 2013) 219Google Scholar.

79 ibid.

80 See Low, KFK and Wu, YC, ‘The Characterisation of Cryptocurrencies in East Asia’ in Fox, D and Green, S(eds), Private and Public Law Implications of Cryptocurrencies (Oxford University Press 2019)Google Scholar and Takahashi, K, ‘Cryptocurrencies Entrusted to an Exchange Provider: Shielded from the Provider's Bankruptcy?’ in Hugo, C (ed), Annual Banking Law Update 2018: Recent Legal Developments of Special Interest to Banks (Juta Law Publishers 2018) 1Google Scholar.

81 Blackstone, W, Commentaries on the Laws of England, Book II: Of the Rights of Things (Oxford 1766) 389Google Scholar.

82 Low, KFK and Lin, J, ‘Carbon Credits as EU Like It: Property, Immunity, TragiCO2medy?’ (2015) 27 JEL 377, 402Google Scholar.

83 [2013] Ch 156, [49].

84 In its original implementation of the EU legislation, Germany took pains to describe such ‘electronic money’ as ‘Werteinheiten in Form einer Forderung gegen die ausgebende Stelle, die auf elektronischen Datenträgern gespeichert sind’ (units of account in the form of a claim against the issuing entity, which are recorded on electronic media): Section 1(14), Kreditwesengesetz. But contra Section 1(2), Zahlungsdiensteaufsichtsgesetz.

85 For carbon credits, see Low and Lin (n 832).

86 Wyo. Stat. Ann. section 34-29-101. The law envisages three categories of ‘digital assets’: (i) digital consumer assets; (ii) digital securities; and (iii) virtual currencies. To the extent that the last category encompasses native crypto-assets, this may be accurate but the first two categories clearly envisage the digital record as reflecting off-chain enforceable legal rights.

87 Low and Teo (n 31) 252–4.

88 Companies Act 2006, section 127.

89 Patents Act 1977, section 32(9), although its operation in this respect is arguably somewhat indirect.

90 Registered Designs Act 1949, section 17(8).

91 Trade Marks Act 1994.

92 Ellinger, EP, Lomnicka, E and Hare, CVM, Ellinger's Modern Banking Law (5th edn, Oxford University Press 2011) 236Google Scholar.

93 Land Registration Act 2002, section 58(2).

94 cf The Law Commission's description of the Land Registration Act 2002 as endorsing ‘qualified indefeasibility’: Law Commission Report No 271, Land Registration for the Twenty-First Century: A Conveyancing Revolution (2001) 221.

95 Land Registration Act 2002, section 32(3).

96 van Erp, S and Akkermans, B (eds), Cases, Materials and Text on Property Law (Hart Publishing 2012) 844–71Google Scholar (for the German land registration system) and 891–902 (for the French land registration system).

97 cf Low and Teo (n 31) 254–9. See also Yeung (n 12) 214.

98 Rudden, B, ‘Economic Theory v Property Law: The Numerus Clausus Problem’ in Eekelaar, J and Bell, J (eds), Oxford Essays in Jurisprudence, 3rd series, (Oxford University Press 1987) 262Google Scholar. See also Merrill, TW and Smith, HE, ‘Optimal Standardization in the Law of Property: The Numerus Clausus Principle’ (2000) 110 YaleLJ 1Google Scholar; Akkermans, B, ‘The Numerus Clausus of Property Rights’ in Graziadei, M and Smith, L (eds), Comparative Property Law (Edward Elgar Publishing 2017) 100Google Scholar.

99 See van Erp and Akkermans (n 96) 388–91, for both the German and French positions.

100 Tham, CH, Understanding the Law of Assignment (Cambridge University Press 2019)CrossRefGoogle Scholar. See also Smith, M and Leslie, N, The Law of Assignment (3rd edn, Oxford University Press 2018) 213–21, 230–4Google Scholar.

101 Fox, D, Property Rights in Money (Oxford University Press 2008) para [5.05]Google Scholar.

102 B Geva, ‘‘‘Bank Money’’: The Rise, Fall, and Metamorphosis of the ‘‘Transferable Deposit’’’ in Fox and Ernst (n 75) 359, 360. cf B Geva, ‘The Order to Pay Money in Medieval Continental Europe’ in Fox and Ernst (n 75) 409.

103 Fox (n 101) at paras [5.70]–[5.73].

104 ibid at paras [5.25]–[5.32].

105 I Becker et al., ‘International Comparison of Bank Fraud Reimbursement: Customer Perceptions and Contractual Terms’, Workshop on the Economics of Information Security (WEIS) (13–14 June 2016) Berkeley, CA.

106 ‘Banking: Conduct of Business Sourcebook’ (Release 34: December 2018) paras [5.1.11]–[5.1.12].

107 Schedule 2 of the Competition and Consumer Act 2010 (Cth), replacing the Trade Practices Act 1974 (Cth).

108 Contractual prohibitions of assignments do not actually effectively prevent the assignment of the property. For chattels, see Barker v Stickney [1919] 1 KB 121. For leases, see Old Grovebury Manor Farm v W Seymour Plant Sales and Hire Ltd (No 2) [1979] 1 WLR 1397. cf. Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 in relation to purely contractual choses in action; Tulk v Moxhay (1848) 2 Ph 774 in relation to restrictive covenants for land.

109 <http://open-music.org/>.

110 <https://www.blokur.com/>.

111 <http://myceliaformusic.org/>.

112 <https://soundac.io/>.

113 <https://ujomusic.com/>.

114 For shares (Companies Act 2006, section 127), patents (Patents Act 1977, section 32(9)), and registered designs (Registered Designs Act 1949, section 17(8)), registration merely provides prima facie evidence of title.

115 See, eg, Trade Marks Act 1994.

116 Sheppard, F and Belcher, V, ‘The Deeds Registries of Yorkshire and Middlesex’ (1980) 6 Journal of the Society of Archivists 274CrossRefGoogle Scholar.

117 cf the position of modern French law, for which see van Erp and Akkermans (n 96) 891–902.

118 For a list of jurisdictions that have adopted a Torrens system of land registration, see Simpson, SR, Land Law and Registration (Cambridge University Press 1976) 81Google Scholar.

119 Ruoff, TBF, An Englishman Looks at the Torrens System (Law Book Company 1957)Google Scholar.

120 K Gray and SF Gray, Land Law, (7th edn, Oxford University Press 2009) at para [2-044].

121 ibid. See also Law Commission Consultation Paper No. 254, ‘Land Registration for the Twenty-First Century: A Consultative Document’ (1998); Law Commission Consultation Paper No. 227, ‘Updating the Land Registration Act 2002: A Consultation Paper’ (2016).

122 Demogue, R, ‘Security’ in Fouilleé, A, Charmont, J, Duguit, L and Demogue, R (eds), Scott, FW and Chamberlain, JP (trans), Modern French Legal Philosophy (The Macmillan Company 1968) 418Google Scholar.

123 No one may give what he does not have.

124 He who is earlier in time is stronger in law.

125 One cannot transfer to another more rights than he has.

126 cf van Erp and Akkermans (n 96) 52–3.

127 O'Connor, P, ‘Registration of Title in England and Australia: A Theoretical and Comparative Analysis’ in Cooke, E (ed), Modern Studies in Property Law Vol 2 (Hart Publishing 2003) 85–6Google Scholar.

128 RR Torrens, A Handy Book on the Real Property Act of South Australia (The Advertiser 1862) 23. See also Fox, PM, ‘The Story Behind the Torrens System’ (1950) 23 ALJ 489, 492Google Scholar.

129 HK Lücke, ‘Ulrich Hübbe and the Torrens System: Hübbe's German Background, His Life in Australia and His Contribution to the Creation of the Torrens System’ (2009) 30 Adel. L. Rev. 213. See also Creque v Penn [2007] UKPC 44, at [13] per Lord Walker of Gestingthorpe.

130 G Taylor, ‘The Torrens System - Definitely Not German’ (2009) 30 AdelLRev 195. For the modern German position, see van Erp and Akkermans (n 96) 844–71.

131 cf Croucher, RF, ‘Inspired Law Reform or Quick Fix – Or, Well, Mr. Torrens, What Do You Reckon Now – A Reflection on Voluntary Transactions and Forgeries in the Torrens System’ (2009) 30 AdelLRev 291Google Scholar.

132 Tang, HW and Loh, KC, ‘A Law Which Favours Forgers: Land Fraud in Two Torrens Jurisdictions’ (2011) 19 Australian Property Law Journal 130Google Scholar, highlighting the different incidences of fraud in the two Torrens jurisdictions. As Singapore used to be part of Malaysia from 1963-1965, the comparison of the two jurisdictions is particularly instructive. In Singapore, land fraud is remarkably uncommon. In Malaysia, it is significantly more widespread.

133 United Overseas Bank Ltd v Bebe bte Mohammad [2006] 4 SLR(R) 884; [2006] SGCA 30. Fortunately for Bebe, she could avail herself of the State insurance despite the relatively parsimonious regime operating in Singapore: see Crown, B, ‘Whither Torrens Title in Singapore?’ (2010) 22 SAcLJ 9Google Scholar. cf Tang, HW and Low, KFK, Tan Sook Yee's Principles of Singapore Land Law (4th edn, LexisNexis 2019) 268–9Google Scholar.

134 New Zealand Land Transfer Act 2017, sections 54–57, introducing the controversial concept of manifest injustice.

135 Keenan, S, ‘From Historical Chains to Derivative Futures: Title Registries as Time Machines’ (2019) 20 Social & Cultural Geography 283CrossRefGoogle Scholar.

136 cf Lemieux (n 69).

137 A Mizrahi, ‘Factom CEO: Blockchain-based Transparent Mortgages Can Restore Trust in Markets’ Finance Magnates (3 March 2016) at <www.financemagnates.com/cryptocurrency/interview-2/factom-ceo-blockchain-based-transparent-mortgages-can-restore-trust-in-markets/>.

138 P Rizzo, ‘Blockchain Land Title Project ‘‘Stalls’’ in Honduras’ Coindesk (26 December 2015) at <https://www.coindesk.com/debate-factom-land-title-honduras>.

139 Alongside the ‘mirror principle’ and the ‘curtain principle’.

140 Stein, RTJ and Stone, MA, Torrens Title (Butterworths 1991) 349–50Google Scholar; Woodman, RA and Grimes, PJ, Baalman on The Torrens System in New South Wales (2nd edn, Law Book Company, 1974) 389Google Scholar.

141 Cap 585.

142 N Ng, ‘Overdue Law on Land Titles Could Have Simplified Flat-Buying in Hong Kong, Audit Commission says’ South China Morning Post (23 November 2017).

143 O'Connor, P, ‘Deferred and Immediate Indefeasibility: Bijural Ambiguity in Registered Land Title Systems’ (2009) 13 Edinburgh Law Review 194, 195–6CrossRefGoogle Scholar.

144 cf Land Registration Act 2002, section 58(1).

145 Low and Teo (n 31) 240.

146 Rose, CM, ‘Crystals and Mud in Property Law’ (1988) 40 StanLRev 577Google Scholar. See also Smith, HE, ‘Rose's Human Nature of Property’ (2011) 19 William and Mary Bill of Rights Journal 1047Google Scholar.

147 See, eg, Land Registration Act 2002, Sch 4, paras 1 and 2.

148 Lamport, L, Shostak, R and Pease, M, ‘The Byzantine Generals Problem’ (1982) 4 ACM Transactions on Programming Languages and Systems 382CrossRefGoogle Scholar.

149 ibid, 384–7.

150 Vukolić, M, ‘The Quest for Scalable Blockchain Fabric: Proof-of Work vs. BFT Replication’ in Camenisch, J and Kesdoğan, D (eds), Open Problems in Network Security (2016) Lecture Notes in Computer Science, vol 9591 (Springer 2016)Google Scholar.

151 <https://www.mail-archive.com/cryptography@metzdowd.com/msg09997.html>.

152 de Vries (n 32). cf Becker, J et al. , ‘Can We Afford Integrity by Proof-of-Work? Scenarios Inspired by the Bitcoin Currency’ in Böhme, R (ed), The Economics of Information Security and Privacy (Springer 2013) 135Google Scholar.

153 I Eyal and EG Sirer, ‘Majority Is Not Enough: Bitcoin Mining Is Vulnerable’ in N Christin and R Safavi-Naini (eds), Financial Cryptography and Data Security – 18th International Conference, FC 2014 (2014) 436.

154 A Hertig, ‘Blockchain's Once-Feared 51% Attack Is Now Becoming Regular’ Coindesk (8 June 2018) at <https://www.coindesk.com/blockchains-feared-51-attack-now-becoming-regular/>; JI Wong, ‘Every Cryptocurrency's Nightmare Scenario Is Happening to Bitcoin Gold’ Quartz (24 May 2018) at <https://qz.com/1287701/bitcoin-golds-51-attack-is-every-cryptocurrencys-nightmare-scenario/>.

155 (n 50) 16.

156 Ellison, C and Schneier, B, ‘Ten Risks of PKI: What You're Not Being Told about Public Key Infrastructure’ (2000) 16 Computer Security Journal 1, 2Google Scholar. See also Mason, S and Reiniger, TS, ‘‘‘Trust’ between Machines? Establishing Identity between Humans and Software Code, or Whether You Know It Is a Dog, and If So, Which Dog?’’ (2015) 21(5) CTLR 135Google Scholar, referencing the famous New Yorker cartoon by Peter Steiner with the caption, ‘On the Internet, nobody knows you're a dog’ (5 July 1993).

157 cf R Armstrong, ‘Cryptocurrency Exchange Boss's Death Locks away $150m in Digital Assets’ Financial Times (6 February 2019), detailing the loss of US$150m worth of crypto-assets following the alleged death of QuadrigaCX founder, Gerald Cotten, supposedly the only person who could access the private keys to several cold wallets. But see C Stokel-Walker, ‘The QuadrigaCX Crypto Mystery Deepens as Wallets Turn up Empty’ Wired UK (4 March 2019).

158 Low and Teo (n 74) 236.

159 I Kaminska ‘Bitcoin Bitfinex Exchange Hacked: The Unanswered Questions’ Financial Times (4 August 2016).

160 N Popper, ‘Identity Thieves Hijack Cellphone Accounts to Go After Virtual Currency’, The New York Times (21 August 2017).

161 B Schneier, ‘Semantic Attacks: The Third Wave of Network Attacks’ Crypto-Gram (15 October 2000) at <https://www.schneier.com/crypto-gram/archives/2000/1015.html#1>. See also Evans, M et al. , ‘Human Behaviour as an Aspect of Cybersecurity Assurance’ (2016) 9 Security and Communications Networks 4667CrossRefGoogle Scholar; Ellison and Schneier (n 156) 4.

162 L Coleman, ‘Researcher Has Bitcoin Stolen off His Back in a Public Experiment’ Crypto Coins News (11 November 2015) at <https://www.ccn.com/researcher-bitcoin-stolen-off-back-public-experiment/>.

163 N Popper, ‘Bitcoin Thieves Threaten Real Violence for Virtual Currencies’ The New York Times (18 February 2018).

164 Joint Law Society and HM Land Registry Note, Property and Title Fraud (September 2017).

165 See, eg, A Das et al., ‘The Tangled Web of Password Reuse’ in NDSS 2014 at <http://wp.internetsociety.org/ndss/wp-content/uploads/sites/25/2017/09/06_1_1.pdf>; Hong, J, ‘The State of Phishing Attacks’ (2012) 55 Communications of the ACM 74CrossRefGoogle Scholar.

166 Low and Teo (n 74) 242, drawing on the broader Internet experience for the elderly, for which see Carlson, EL, ‘Phishing for Elderly Victims: As the Elderly Migrate to the Internet Fraudulent Schemes Targeting Them Follow’ (2007) 14 The Elder Law Journal 423, 424, 428–9Google Scholar.

167 B Schneier, ‘There's No Good Reason to Trust Blockchain Technology’ Wired (6 February 2019).

168 See, eg, Guo, Y and Liang, C, ‘Blockchain Application and Outlook in the Banking Industry’ (2016) 2 Financial Innovation 24CrossRefGoogle Scholar.

169 Critchley, P, ‘Taking Formalities Seriously’ in Bright, S and Dewar, J (eds), Land Law: Themes and Perspectives (Oxford University Press, 1998) 507Google Scholar. For a general discussion of the functions of formalities, see LL Fuller, ‘Consideration and Form’ [1941] 41 ColumLRev 799. Also see TG Youdan, ‘Formalities for Trusts of Land, and the Doctrine of Rochefoucauld v Boustead’ [1984] CLJ 306;

170 Joint Law Society and HM Land Registry Note, Property and Title Fraud (September 2017).

171 cf Australian Stock Exchange, ‘CHESS Replacement: New Scope and Implementation Plan Consultation Paper’ (n 71) 6.

172 Geva, B, ‘The Clearing House Arrangement’ (1991) 19 CBLJ 138Google Scholar.

173 cf House of Commons Treasury Committee, 22nd Report of Session 2017–19, Crypto-Assets (12 September 2018) 13.

174 Gullifer, L, ‘Ownership of Securities: The Problem Caused by Intermediation’ in Gullifer, L and Payne, J (eds), Intermediated Securities: Legal Problems and Practical Issues (Hart Publishing 2010) 1, 2Google Scholar.

175 ibid 3.

176 ibid 3–4.

177 J Poon and T Dryja, ‘The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments’ (Draft Version 0.5.9.2, 14 January 2016) at <https://lightning.network/lightning-network-paper.pdf>.

178 R Auer, ‘Beyond the Doomsday Economics of ‘‘Proof-of-Work’’ in Cryptocurrencies’ (January 2019) BIS Working Papers No 765 <https://www.bis.org/publ/work765.pdf> 20–1.

179 R Goode, ‘Are Intangible Assets Fungible?’ [2003] LMCLQ 379.

180 Nakamoto (n 2) 1.

181 I Kaminska, ‘But, but … I Thought Bitcoin Was Supposed To Be Cheap?’ FT Alphaville (17 March 2017).

182 Geva (n 76).

183 Cranston, R et al. , Principles of Banking Law (3rd edn, Oxford University Press 2017) 339Google Scholar. For the civilian position, cf B Geva, ‘The Order to Pay Money in Medieval Continental Europe’ in Fox and Ernst (n 75) 409.

184 cf M Arnold, ‘Swift Says Blockchain Not Ready for Mainstream Use’ Financial Times (8 March 2018).

185 Moore, T, Clayton, R and Anderson, R, ‘The Economics of Online Crime’ (2009) Journal of Economic Perspectives 3, 16CrossRefGoogle Scholar.

186 For a more in-depth analysis, see Low and Teo (n 74) 230–1.

187 O Ohayon, ‘What's Missing from Crypto? Insurance That Makes Sense’ Forbes (22 May 2019).

188 On forks more generally, see Low and Teo (n 31) 259–64.

189 J Kelly, ‘Bitcoin's Repeated Splits Undermine Its Long-Term Value’ Financial Times (19 November 2018).

190 Bill 7363 (n 710).

191 See Low and Teo (n 31) 256.

192 So-called because it is derived from British South Africa Co v Companhia de Moçambique [1893] AC 602.

193 Most famously, in Penn v Baltimore (1750) 1 Ves Sen 444, 27 ER 1132.

194 William Shakespeare, Henry VI, Part 2 (1591), Act IV, Scene 2.

195 S Ozelli, ‘Smart Contracts Are Taking over Functions of Lawyers: Expert Blog’ Cointelegraph (12 January 2018) at <https://cointelegraph.com/news/smart-contracts-are-taking-over-functions-of-lawyers-expert-blog>.

196 V Buterin, ‘Ethereum White Paper: A Next-Generation Smart Contract and Decentralized Application Platform’ (2015) <https://github.com/ethereum/wiki/wiki/White-Paper>. F Zhang et al., ‘Town Crier: An Authenticated Data Feed for Smart Contracts’ (2016) Proceedings of the 2016 ACM SIGSAC Conference on Computer and Communications Security 270.

197 N Szabo, ‘Smart Contracts: Formalizing and Securing Relationships on Public Networks’ (1997) 2(9) First Monday; for a broader review of smart contracts see Mik, E, ‘Smart Contracts: Terminology, Technical Limitations and Real-World Complexity’ (2017) 9 LIT 269Google Scholar.

198 Hyperledger Architecture, Volume II, Smart Contracts (April 2018) <https://www.hyperledger.org/wp/content/uploads/2018/04/Hyperledger_Arch_WG_Paper_2_SmartContracts.pdf> 8.

199 I Nikolic et al., ‘Finding the Greedy, Prodigal, and Suicidal Contracts at Scale’ (2018) <https://arxiv.org/pdf/1802.06038.pdf>.

200 Xu (n 26) 1.

201 For an overview of Distributed Applications, see <https://www.stateofthedapps.com>.

202 Werbach and Cornell (n 34) 357.

203 Cieplak, J and Leefatt, S, ‘“Smart Contracts”: A Smart Way to Automate Performance’ (2017) 1 Georgetown Law Technology Review 417Google Scholar; such view is also represented in German scholarship: Paulus, D and Matzke, R, ‘Smart Contracts und das BGB – Viel Lärm um nichts?’ (2018) Zeitschrift fur die gesamte Privatrechtswissenschaft 431Google Scholar.

204 Werbach and Cornell (n 34) 355, 356.

205 See generally UK Law Commission Consultation Paper No 237, Electronic Execution of Documents (21 August 2018) 20; on formal requirements under German law: Heckelmann, M, ‘Zulässigkeit und Handhabung von Smart Contracts’ (2018) Neue Juristische Wochenschrift 505Google Scholar; the lack of default formal requirements is evident from section 125–127 BGB. The same rule is embodied in the Unidroit Principles of International Commercial Contracts (PICC), the Principles of European Contract Law (PECL) and the United Nation Convention of Contracts for the International Sale of Goods.

206 Beale, H (ed) Chitty on Contracts (32nd edn, Sweet & Maxwell 2015)Google Scholar paras 1-016, 2-001.

207 Beatson, J, Burrows, A and Cartwright, J, Anson's Law of Contract (29th edn, Oxford University Press 2010) 75CrossRefGoogle Scholar.

208 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.

209 Gimmy, M, Vertragsschluss im Internet in Kroeger, D and Gimmy, M (eds), Handbuch zum Internetrecht (Springer 2000) 86Google Scholar; Kaulartz, M and Heckmann, J, ‘Smart Contracts – Anwendungen der Blockchain-Technologie’ (2016) Computer und Recht 618Google Scholar.

210 See B2C2 Ltd v Quoine Pte Ltd [2019] 4 SLR 17; [2019] SGHC(I) 03, for an instance of algorithmic failure in cryptocurrency trading. Consider also the 2010 flash crash that is widely considered to have been exacerbated by high frequency algorithmic trading: see the Joint Report of the Commodity Futures Trading Commission and Securities Exchange Commission, ‘Findings Regarding the Market Events of May 6, 2010’ (30 September 2010) at <https://www.sec.gov/news/studies/2010/marketevents-report.pdf>. For a popular account, see Lewis, M, Flash Boys: A Wall Street Revolt (WW Norton & Co 2014)Google Scholar. See also Minasi, M, The Software Conspiracy (McGraw-Hill 2000) 43–4Google Scholar.

211 For the civil law equivalent, see Chen-Wishart, M, ‘Consideration and Serious Intention’ [2009] SingJLS 434, 453–5Google Scholar.

212 Chappell & Co. Ltd. v Nestle Co. Ltd. [1960] A.C. 87 (H.L.); Bainbridge v Firmstone [1960] AC 87.

213 Currie v Misa (1875) LR 10 Ex 153.

214 Bearing in mind its controversial status as a currency: see Low and Teo (n 31).

215 Lorenzen, EG, ‘Causa and Consideration in the Law of Contracts’ (1919) 28 YaleLJ 621Google Scholar.

216 Macneil, I, ‘Relational Contract Theory as Sociology’ (1987) 143 JITE 272, 274Google Scholar.

217 Buchleitner, C and Rabl, T, ‘Blockchains und Smart Contracts’ (2017) 1 Ecolex, Fachzeitschrift fur Wirtschaftsrecht 4, 6Google Scholar; Paulus, D and Matzke, R, ‘Smart Contracts und das BGB – Viel Lärm um nichts?’ (2018) Zeitschrift fur die gesamte Privatrechtswissenschaft 431, 437, 439Google Scholar.

218 cf Marino, B and Juels, A, ‘Setting Standards for Altering and Undoing Smart Contracts’ in Bertossi, AJ et al. (eds), Rule Technologies. Research, Tools, and Applications, Lecture Notes in Computer Science, vol 9718 (Springer 2016)Google Scholar.

219 Atzei, N, Bartoletti, M and Cimoli, T, ‘A Survey of Attacks on Ethereum Smart Contracts (SoK)’ in Maffei, M and Ryan, M (eds), Proceedings of the 6th International Conference on Principles of Security and Trust – Volume 10204 (Springer 2017) 6, 10, 11Google Scholar.

220 Szabo (n 197).

221 cf Arnold v Britton [2015] UKSC 36; [2015] 2 WLR 1593. See also Blandy, S, Bright, S, and Nield, S, ‘The Dynamics of Enduring Property Relationships in Land’ (2018) 81 MLR 85CrossRefGoogle Scholar.

222 Cieplak and Leefatt (n 203) 420.

223 Sklaroff, J, ‘Smart Contracts and the Cost of Inflexibility’ (2017) 166 UPaLRev 263Google Scholar.

224 C Metz, ‘The Biggest Crowdfunding Project Ever – the DAO – Is Kind of a Mess’ Wired (6 June 2016).

225 For an etymology of the word ‘bug’, see Minasi (n 210) 24–6.

226 K Finley, ‘A $50 Million Hack Just Showed that the DAO was all too Human’ Wired (18 June 2016).

227 Although the terms have now been deleted from the DAO website, they can be found on Reddit: <www.reddit.com/r/ethereum/comments/4oiqj7/critical_update_re_dao_vulnerability/d4cy4v0/>.

228 J Dietz, ‘DAOs, Hacks and the Law’ Medium (18 July 2016) at <https://medium.com/@Swarm/daoshacks-and-the-law-eb6a33808e3e>.

229 L Lessig, Code, Version 2.0 (Basic Books 2016).

230 I Nikolic et al., ‘Finding the Greedy, Prodigal, and Suicidal Contracts at Scale’ (2018) <https://arxiv.org/pdf/1802.06038.pdf> 5.

231 cf Harari, YN, Sapiens: A Brief History of Humankind (HarperCollins 2015) 305–33Google Scholar.

232 Zhang (n 196) 270.

233 Mik (n 197) 296.

234 See Gergen, MP, ‘The Use of Open Terms in Contract’ (1992) 92 ColumLRev 997Google Scholar.

235 Levy, KEC, ‘Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and the Social Workings of Law’ (2017) 3 Engaging Science, Technology, and Society 10, 11CrossRefGoogle Scholar.

236 Jones, C, Estimating Software Costs (2nd edn, McGraw-Hill 2012) 450Google Scholar.

237 See generally Khalil, F Al et al. , ‘Trust in Smart Contracts Is a Process, As Well’ in Brenner, M et al. . (eds), Financial Cryptography and Data Security, Lecture Notes in Computer Science, vol 10323 (Springer 2017)Google Scholar.

238 Jones (n 236) 444.

239 Shirlaw v Southern Foundries (1926) Ltd. [1939] 2 KB 206 at 227 (MacKinnon LJ).

240 Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896 at 913 (Lord Hoffmann). cf Jones (n 236) 444.

241 Minasi (n 210) 27.

242 McConnell, S, Code Complete (2nd edn, Microsoft Press 2004) 521Google Scholar. See also Minasi (n 210) for a scathing critique on the software industry's attitude towards bugs.

243 P Vessenes, ‘Ethereum Contracts Are Going to Be Candy for Hackers’ Blockchain, Bitcoin and Business (18 May 2016) at <https://vessenes.com/ethereum-contracts-are-going-to-be-candy-for-hackers/>.

244 Jones (n 236) 652.

245 Jones (n 236) Table 27-1, 652.

246 See, eg, Axa's Fizzy <https://www.axa.com/en/newsroom/news/axa-goes-blockchain-with-fizzy>. The vendor's claims that the platform is 100% secure should not be taken seriously and must be taken as pure puff and read in light of all the limitations enumerated in this article. All of this automation could have been achieved without the blockchain.

247 cf Jones (n 236) 446.

248 Consider Japan's experience in regulating cryptocurrency exchanges following the disastrous Mt Gox hack of 2014. On 26 January 2018, yet another Japanese cryptocurrency exchange, Coincheck, one licensed under the new regime, suffered an even worse hack, leaving Japan with the dubious honour of having suffered the two worst crypto-asset hacks in the history of the asset class. See L Lewis and R Harding, ‘‘‘Crypto crazy’’ Japanese Mystified by Virtual Heist’ Financial Times (3 February 2018). For a legal analysis of the Tokyo District Court's decision in the Mt Gox insolvency, see Low and Wu (n 80) and Takahashi (n 80).

249 C Kim, ‘Sweden's Land Registry Demos Live Transaction on a Blockchain’ Coindesk (15 June 2018) at <https://www.coindesk.com/sweden-demos-live-land-registry-transaction-on-a-blockchain>.

250 Reuters, ‘ASX Delays Blockchain Transition by Six Months’ The Sydney Morning Herald (4 September 2018).

251 Many blockchain projects never proceed past the pilot stage. See, eg, in the context of international development, the devastating report by J Burg, C Murphy and JP Pétraud, ‘Blockchain for International Development: Using a Learning Agenda to Address Knowledge Gaps’ MERLTech (29 November 2018) at <http://merltech.org/blockchain-for-international-development-using-a-learning-agenda-to-address-knowledge-gaps/>. cf L Mearian, ‘Blockchain: What's It Good for? Absolutely Nothing, Report Finds’ Computerworld (5 December 2018).

252 The Law Commission Annual Report 2017–18 (Law Com No 379) (19 July 2018) 10.

253 D McCum and J Kelly, ‘Chancellor's Blockchain Idea Is a Desperate Scrape of the Brexit Barrel’ FT Alphaville (2 October 2018).

254 M Hughes, ‘No, Blockchain Can't Solve the Irish border Problem’ The Next Web (2 October 2018) at <https://thenextweb.com/hardfork/2018/10/02/no-blockchain-cant-solve-the-irish-border-problem/>.