The Great Smart Contract Code Debate: Is It Free Speech or Just Software?

Blockchain Today
5 min readFeb 7, 2024

Smart contracts are self-executing agreements encoded directly into lines of code residing on blockchains. They are one of the most revolutionary inventions from the crypto world, promising to rewire how business is conducted. But simmering legal tensions surround smart contracts concerning the thorny issue of free speech.

What Are Smart Contracts?

Before assessing the constitutional debate around them, let’s understand what smart contracts are. A smart contract is software that automatically moves digital assets between parties when certain programmed conditions are met.

For example, a smart contract could automatically release funds to a freelancer two weeks after work is approved by a client, adding timestamps to ensure timely payment. The entire workflow from invoicing, payment releases and paperwork is directly coded into software rather than paper contracts.

Smart Contracts vs Traditional Code

While all software encodes logic, smart contract code has special characteristics:

  • It controls valuable assets, including cryptocurrencies worth real money
  • It cannot be changed after deployment, only new versions can be launched
  • All parties must agree to the same contract code for assets to be moved
  • The software runs exactly as programmed without any exceptions or third party interruptions

These immutable, self-contained qualities allow smart contracts to enable commerce between completely anonymous counterparties without traditional legal agreements. Bitcoin’s scripting language enabled the first smart contracts. But platforms like Ethereum expanded capabilities dramatically by allowing Turing complete programming languages.

Why Do Smart Contracts Have Speech Implications?

Given their binding economic powers, do smart contract scripts deserve free speech protections like a political opinion or poem? Or are they functionally mundane software like an app or website backend? This crucial dilemma holds monumental import.

Smart contract code directly controls financial assets. Thus contractual claims encoded in scripts are exceptionally impactful speech acts. And speech cannot be restricted under the First Amendment. So if code is deemed speech, virtually no smart contract censorship is permissible — no matter how fraudulent or risky the code maybe.

If however contracts are mere software, then significant oversight is possible. Taking down buggy, malicious or illegal contract code would face no constitutional hurdles. Stakes surrounding the speech versus software choice carry dizzying consequences for contract law, finance and technology.

Why Smart Contract Code is Not Pure Speech

Several key arguments challenge blanket free speech status for smart contract scripts:

Code Performs Actions Beyond Communication

Most accepted speech acts communicating worldviews or ideas rather than executing monetary actions. But smart contracts directly move assets between signatories. This performative dimension exceeds traditional communication norms. Contract code straddles speech and actions inextricably.

No Human Speech is Actually Involved

Speech requires intent and discretion by conscious human beings. But after deployment, smart contracts operate autonomously without developers being involved. They cannot meaningfully said to be speaking once launched. The speech emerged during coding, not executing.

Contracts Bind Parties to Financial Terms

By encoding agreements that appropriate value from signers, smart contracts resemble binding deal terms rather than free opinions. Terms of service carrying legal weight are not granted full speech privileges. Smart contracts similarly restrict freedoms via code.

Software is Already Regulated Heavily

Digital artifacts like apps and databases are subject to complex compliance laws surrounding data, privacy, security, access etc. So software cannot possess absolute free speech either. Smart contracts bare computing similarities to these regulated infrastructures.

Based on such rationale, smart contract supporters argue that code should not receive automatic, sweeping speech immunity. More nuanced framework are required befitting their blended software and contractual nature.

Counterpoint — Smart Contract Code is Still Expression

Free speech advocates present compelling counters too for smart contract scripts being protected expressions:

Code Communicates Agreements Between Parties

At their core, contracts memorialize understanding between signatories. Smart contracts encode the same memorialization, communicating agreed terms over blockchain networks. Communication merits some speech coverage even if financial and computable.

Code Represents Creative Design Choices

Developing smart contract architecture involves creative choices — language selection, data modeling, business logic flows etc. These multivariate decisions deserve artistic protection against censorship. Code contributions represent creative effort.

Overly Broad Regulation Could Suppress Innovation

Excessive speech controls on code can restrict developer imagination. Innovation blossoms best when engineers have latitude exploring ideas without constraints. So regulating contracts require narrow, surgical approaches.

Code is Still Created By Humans

Contracts execute automatically after launch but ultimately arise from intentional human design. Their origins trace back to protected speech acts by creators during development. Early free expression matters fundamentally.

Limited Carve Outs Rather Than Blanket Bans

If smart contracts deserve unique treatment from conventional speech, then only clear problematic areas should lose protection rather than whole formats. For example, security issues, economic risks or identity violations could be specially regulated instead of general code suppression.

Free speech advocates believe such arguments strongly merit smart contract code retaining essential speech characteristics. However, unfettered permissions could spawn unforeseeable problems from automated agreements. The debate continues simmering, awaiting decisive legal or legislative guidance.

The Critical Ripple Effects from Resolution

How regulators and courts eventually rule on this seminal question can impact technologists and businesses profoundly across industries like:

Financial Services

Stringent oversight would permit substantive monitoring, curation and takedowns of risky DeFi protocols before launch. This may enhance stability but lessen innovation too. Light-touch models however spark creativity but increase harmful contract risk. The optimal balance has huge financial implications.

Technology

Clarifying code’s speech protections restricts certain types of undesirable software regulation. But exceptions for smart contracts may fuel calls demanding other expanded speech exemptions. These could encompass AI systems, 3D printing templates, patented algorithms etc. Such expansions may profoundly impact technological progress.

Platform Governance

If contracts receive speech status, then blockchain networks must cement extremely narrow, developer friendly rules governing security, fraud and integrity protection. But weaker rules likely spawn problematic contracts that damage ecosystems. It necessitates complex philosophical balancing by crypto founders mindful of principles underpinning their networks.

Legal Field

Attorneys serve indispensable contract drafting roles. But smart agreements directly connect technical and legal domains. This bridge requires lawyers adept in both disciplines. Resolution introduces urgency around enhancing legal training in software skills and crypto awareness. Blending both professions better becomes imperative.

The raging debate has such wide spanning consequences across business, society and governance. How the status of smart contract code shapes up carries weighty repercussions that cannot be underestimated. The answers could steer technological directions profoundly for decades.

Navigating Towards Balance and Reconciliation

While polarized positions persist currently, the reality likely warrants moderate balance. Protecting legitimate expressions encoded in code while permitting interventions countering clear threats seems prudent.

Customized regulatory powers targeting evident smart contract risks balanced by crisp speech guardrails elsewhere may sustain both innovation and stability. While absolutes simplify governance, nuanced solutions reflecting sociotechnical complexities appear better suited for guiding blockchain’s future — where code and speech fuse more tightly than ever before.

Sources

  1. https://www.technologyreview.com/2016/02/24/161408/why-smart-contracts-need-to-be-more-trustworthy-than-traditional-contracts/
  2. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4124605
  3. https://www.finra.org/sites/default/files/2020-12/report-digital-asset-securities.pdf
  4. https://www.forbes.com/sites/michaeldelcastillo/2020/02/05/us-cftc-says-ethereum-smart-contracts-are-legally-enforceable-agreements/
  5. https://www.natlawreview.com/article/smart-contracts-dumb-ideas-beware-law-code
  6. https://academy.binance.com/en/articles/smart-contracts-explained
  7. https://arxiv.org/abs/2108.06322
  8. https://hbr.org/2017/03/the-potential-for-blockchain-to-transform-electronic-health-records
  9. https://www.gibsondunn.com/wp-content/uploads/2018/11/Practical-Tips-for-Navigating-Blockchain-Smart-Contracts.pdf

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