1/ Blockchains will support not only cryptoeconomic and financial primitives, but also legal primitives. Legal primitives streamline existing commercial transactions and will power new emergent forms of commercial activity and arrangements over the upcoming decades.
2/ At a high level, primitives are well established, generic building blocks designed to do one very specific task in a highly reliable fashion.
3/ For example, cryptoecomomic primatives are blockchain-based incentives systems uniquely enabled by tokens. Systems like token curated registries (TCRs) and curved bonding are early crypto-economic primatives, which help create scarcity or align incentives.
4/ We've seen increased interest in on-chain financial primatives, which aim to define common financial transactions like lending, swaps, debt, etc. Many of these primatives are quasi-legal in nature and essential try to map common performance obligations.
5/ While these developments are interesting, existing blockchain contructs often lack important legal primatives, which serve as the last missing piece of the puzzle. Once developed, they will help develop a truly decentralized, peer to peer, autonomous ecosystem.
6/ Legal agreements manage risk and help define performance obligations often in a way that complies with existing law. When examining legal agreements across a spectrum, patterns emerge. Legal agreement have certain primitives that will be reduced down to code.
7/ Common legal primitives deal with basic commercial activity -- termination, arbitration, escrow, vesting, payment, etc. They are commercial and legal building blocks that help folks manage risk in a responsible way. They will not go away in a blockchain-based world.
8/ By way of illustration, a basic smart contract can define payor, payee, interest rate, time of payment and can be used for a range of commercial transactions. Employment agreements, lending agreements, etc., all rely on primitives like these.
9/ Title can be embodied as a primitive such an NFT with various subtokens cryptographically tied to model out licensing provisions or easement rights. Intellectual and real property rights are often thought of as a bundle of sticks (or are defined by metes and bounds).
10/ Now those “sticks” (and boundaries) can be modeled as digital assets on a blockchain.
11/ Termination primitives are found in most agreements and are a necessary predicate for dispute resolution solutions. They define a change in state in an agreement and thus can help change the direction of an agreement or be used to layer in additional performance obligations.
12/ Dispute resolution legal primitives exist and have commonalities in terms of scoping out who can adjudicate a dispute under what terms and in which jurisdiction.
13/ Limitation of liability primitives will be used to cap payments in the event of a termination or after a dispute resolution procedure is triggered.
14/ Vesting and option-based primitives will help distribute assets over time or in response to milestones fed in by an oracle.
15/ Escrow primitives have already started to be reduced down into code in the form of multisignature smart contracts; we'll see more complex escrow primitives deal emerge to deal with more complex transactions and to administer estates.
16/ Over time, I suspect we'll see a range of legal primitives uncovered, breaking agreements down to their basic constituent parts. Through this process, blockchain technology may help atomize and eventually reassemble traditional legal norms using code.
17/ With financial and legal primitives, agreements will increasingly turn into lego blocks. Both will be assembled and combined to build complex commercial transactions.
18/ In the interim, many of these provisions will still be memorialized in natural language provisions. These provisions will help accommodate edge cases and be necessary until trust in these code-based systems grows.
19/ Blending legal primitives, financial primitives, with natural language provisions is thus essential and the core focus of what we're exploring at @OpenLawOfficial.
@OpenLawOfficial 20/ Legal primitives can not--and should not--be ignored. When combined with crypto-economic and financial primitives, they form a foundational fabric of the next generation blockchain-based commercial stack. Scarcity, performance, and risk mitigation.
