Heroes of Underthrow: Nick Szabo

Whether Nick Szabo is Satoshi Nakamoto I cannot say. But like Satoshi, Szabo is a hero -- an exemplar of subversive innovation.

Many observers think Nick Szabo is the pseudonymous Satoshi Nakamoto, creator of Bitcoin. Szabo, you see, is a coding wizard and a law professor who had already created an earlier digital currency called “Bitgold,” which turned out to be a kind of practice run. Indeed, in the late nineties, Szabo had already formulated the concept of smart contracts, a computer function that facilitates transactions without third parties.

Szabo has also written extensively on the history of law and money. In particular, he writes about Anglo-Saxon emergent law and the English common law, which eventually collided with the “master-servant” law of Justinian’s Rome.

Szabo argues that what we have today in the United States is but a shrinking vestige of common law operating within a growing body of Byzantine statutes. The preceding might sound esoteric, but it has profound implications for cryptocurrencies, smart contracts, digital property titles, dispute resolution, and other potential applications of the technology at the heart of Bitcoin. 

In 2006, Szabo writes, 

A franchise, such as a corporation, a jurisdiction, or a right to collect certain tolls or taxes, was a kind of property: an “incorporeal hereditament.” English property law was very flexible; as a result franchise jurisdictions came in a wide variety of forms. 

Some of these aspects of the common law (law by the many) are still with us, but they have been overtaken in many quarters by edict (law by one) or especially by statute (law by few).

So, what happened to the common law?

The Anglo-Norman legal idea of jurisdiction as property and peer-to-peer government clashed with ideas derived from the Roman Empire via the text of Justinian’s legal code and its elaboration in European universities, of sovereignty and totalitarian rule via a master-servant or delegation hierarchy. By the 20th century, the Roman idea of hierarchical jurisdiction had largely won, especially in political science where government is often defined on neo-Roman terms as “sovereign” and “a monopoly of force.”

This militaristic law is so ingrained in our understanding now that it’s difficult for most of us to imagine life outside of it. (We shape our rules, and our rules shape us.) Our picture is of wise stewards minding the upper echelons of statecraft while the rest of us teem and hustle in relatively peaceful interstices that a regulatory state provides. It’s hard to conceive of alternative forms of governance and law doing better. Peace is a product of Leviathan, or so the story goes.

Most of us have been thoroughly inculcated with this Hobbesian rationale. Consciously or not, most assume that any persistent peace requires a final arbiter—one whose might quashes conflict and whose law is made absolute through enforcement. And when it comes to alternatives, our failure of imagination has given rise to some of the most predatory regimes in history.

As Szabo writes,

Our experience with totalitarianism of the 19th and 20th centuries, inspired and enabled by the Roman-derived procedural law and accompanying political structure (and including Napoleon, the Csars, the Kaisers, Communist despots, the Fascists, and the National Socialists), as well as the rise of vast and often oppressive bureaucracies in the “democratic” countries, should cause us to reconsider our commitment to government via master-servant (in modern terms, employer-employee) hierarchy, which is much better suited to military organization than to legal organization. [Emphasis mine.]

Indeed, we should reconsider our unreflective commitments to such hierarchies because law and society are not only possible without them but could be more robust, peaceful, and prosperous without them. 

But how do we move beyond such hierarchies?

One can see how Szabo might appreciate the flexibility of common law as a software developer. That interest lies in the idea that one could encode law with computers and have others update it as necessary, as humanity’s original open-source code. Whoever designed the basic protocols of the blockchain understood the power of “dumb networks” as opposed to Byzantine command-and-control codes.

Szabo writes,

Fortunately, franchise jurisdiction has left permanent influences on modern governments, including on the republican form of government in general and the United States Constitution, federalism, and procedural rights in particular. It also left a record of a wide variety of forms of law and government that can provide us with alternatives to the vast employee hierarchies wielding coercive powers that have given rise to modern oppression.

One of the basic questions of “good” law is whether people actually follow it. Similarly, the inventor(s) of Bitcoin must have known that and helped us imagine a different sort of code—one that weaves legal and computer code together. Of course, people are using Bitcoin—all without anyone’s permission.

Can something similar be said about future law?

Venture fund manager Michael P. Gibson leaves us a bright glimpse of the future—a future in which we choose our governance. I have probably quoted it a hundred times to be sure people get the idea. Once again:

It turns out there’s only one thing that guarantees production of good laws. The people bound by the laws have to agree to be bound by them. Not hypothetically or tacitly, as in some imaginary will of the people or behind a veil of ignorance. Consent must be real, transparent, and continuous. No law can bind a single person unless that person consents to be bound by that law. All laws must be strictly opt in. Lawmakers could be saints, devils or monkeys on typewriters—doesn’t matter. The opt out–opt in system lets only good laws survive. Bad laws are driven out of production.

Bad laws can only inflict harm and destroy wealth up to the cost to opt out of them. We can underthrow the state one contract at a time.

This basic insight surely informed Nick Szabo and inspired Satoshi Nakamoto, too.

Szabo is, in fact, a software developer who set about writing source code for peer-to-peer law. In a sense, he wanted to ‘hard code’ something like the common law. So if the “underthrow“ of Leviathan lies ahead, it will be thanks not only to encryption technology but also to understanding the beauty, flexibility, and robustness of emergent law. Smaller jurisdictions created by forking the code or by allowing people to vote with their boats will be enough to reduce the costs of exit for millions looking for a better life.

I cannot say whether Nick Szabo is Satoshi Nakamoto. But at the very least, Szabo was part of a community from which Nakamoto drew knowledge and inspiration. That community was built on ideas—both time-tested and new—that are being given expression in ones and zeros.