Venture Capitalist, Partner @HYPE Capital, Board Advisor, Ex-Fed Reserve, IBM, HP, Entrepreneur 2x
An interview with Amy Wan, ICO smart contract legal entrepreneur
I meet and connect with many inspiring entrepreneurs, innovators, thought leaders and academics, working relentlessly on the blockchain phenomenon. Some of them are in the public light and some are not. I thought it would be great to dive into the minds of such known and unknown blockchain entrepreneurs and innovators. That’s how this interview blog started. This will be a technical interview, so if you are new to Blockchain, you may want to get up to speed with Coindesk.
This rendezvous is with ICO smart contract legal entrepreneur Amy Wan. She is a London School of Economics grad and earned her JD from the University of Southern California Gould School of Law. Amy is the co-founder and CEO of one of the top ICO blockchain legal startup ‘Sagewise’. Sagewise is a dispute resolution infrastructure startup for smart contracts.
In this interview, we will dive deep into the legal nuances of smart contracts. The smart contract protocol was developed and designed by Nick Szabo, later Vitalik Buterin incorporated smart contracts into the blocks that led to distributed-development platform Ethereum. Back in the day, we have heard so much about how smart these smart contracts are and that has really boggled my mind. An inflexible system with no accountability or recourse, especially when it comes to people’s money built on static code copied by legions of developers in building their own ICO somewhat fails at Nick Szabo’s original vision. There will be multiple blockchain iterations in our lifetime and we will get to a place where private key thieves can be held legally accountable. I know smart contracts are supposed to be lawyer-less smart code, but sophisticated multi-sig and DAO hacking had led us to question our lackadaisical approach to security code audits.
Thank you Amy for giving us your valuable time and working on some of the challenging and most interesting projects in blockchain.
Q. Tell us about your legal background and what you were doing before working on Blockchain.
Amy: I’ve had an unusual career that’s spanned government and policy, the private sector, law firms, and startups. I started off doing international trade and regulatory affairs for the federal government in Washington DC; then became general counsel at an early stage startup; and spent some time as a partner at a boutique law firm before finally leaving to start this company.
Originally, the company started with the mission of automating myself as a securities attorney — we created software to draft the securities documents that I had previously been drafting manually. But as I started to get calls in late 2016/ early 2017 about ICOs, I began noticing that millions of dollars worth of crypto kept falling into the wrong hands — starting with the DAO hack. While I believe blockchain technology will change the future, I also believe that people and businesses will only transact where there is transactional confidence and certainty — and today, smart contracts provide none. They are riddled with coding errors and security vulnerabilities. What’s more, code is static, but the real world is not. I firmly believe that success of the blockchain industry depends on creating an ecosystem that promotes transactional confidence, which is why we pivoted to create Sagewise, a dispute resolution infrastructure for smart contracts.
Q: Suppose I wrote some code on a smart contract with agreeable terms between us and I changed my mind. Can I challenge the smart contract code in a court of law before the terms mature? If I do then who is the plaintiff and who is the challenger (because I wrote the code)?
Amy: There are a lot of different questions there. First, we have to define what a ‘contract’ even is. In the legal arena, it’s merely an offer, acceptance, and consideration. It can take any form, whether on paper, orally, or even scribbled on a napkin. A smart contract, on the other hand, is instructions for execution written in code — some have called it a programmable contract, but it may not even necessarily a ‘contract’ as thought of in traditional terms, though it can be one.
One of the most important things in a contract is intent. What is each party’s intent? This is where smart contracts become not quite so smart. Perhaps you change your mind, but in a way that I’m still okay with because it fulfills the intent of both parties.
It doesn’t really matter who wrote the code — same as when it doesn’t matter who writes a contract. It only matters that both parties agreed to the contract. The ‘plaintiff’ or ‘challenger’, if you will, is whichever party believes that the spirit or intent of the contract is not being fulfilled.
Q. Tell us your opinion, from a legal perspective, on how smart is a smart contract?
Amy: I believe smart contracts have great potential. At the same time, in order to understand how to effectively use them, one must come to terms with their limitations. Just as lawyers cannot write the perfect disputeless contract, developers cannot write the perfect errorless, disputeless smart contract — especially when they adopt a ‘fail fast and iterate’ mentality. Solidity code is also constantly changing, which causes issues. And even if a smart contract undergoes a security audit, that only detects the presence of bugs, but cannot guarantee the absence of them. Further, we live in a constantly changing world, but humans write static code. I often call lawyers ‘the janitors of society’ — we are the garbagemen that deal with situations when they go bad. And I can foresee so much going bad.
Also, smart contacts are also not great in understanding intent. For example, the intent of the DAO was to operate a decentralized fund. The hack against the DAO was not a hack against the code of the smart contract, but against the intent of the smart contract. Perhaps this will become less of an issue when we’ve got sentient AI (which raises a whole suite of other issues), but until then, we still need to rely, in part, on human judgment.
Q. What are you doing with Sagewise with regard to your digital jurisdiction?
Amy: As we were diving into the dispute resolution problem with smart contracts, it occurred to me that every other industry will fundamentally change over the next decade due to blockchain technology — except law. We’re dragging along this incumbent legal system that evolved in a haphazard way in the absence of technology, and in many ways, in archaic and outdated. So, we thought, why shouldn’t the legal system get a refresh too? We’re using blockchain as the perfect opportunity to architect a legal paradigm that is better suited to today’s complex, borderless economy. One of our advisors Dr. Gillian Hadfield inspired us with her recent book Why Humans Invented Law and How to Reinvent It for a Complex Global Economy, which addresses this exact subject. It sounds crazy, but the incumbent legal system has only been around for a few hundred years — it served its purpose up until now, but it’s time for a change.
Q. Tell us about Sagewise and its token usage.
Amy: Sagewise is a dispute resolution infrastructure that provides parties the ability to monitor, freeze, fix, and dispute smart contracts, choose from a variety of dispute resolution vendors, and allow enforcement of such resolutions. Our tokens have a number of different purposes, all aims are incentivizing and disincentivizing certain behaviors. For example, I hate the vexatious litigants the game our current legal system — people who run causing trouble for others. They’re the employees who go around suing every employer for ridiculous reasons, or the tenants that stop paying after the first month because they know it’ll take the landlord a year to kick them out. There are people who literally make a career out of doing this stuff. To combat this problem in our ecosystem, in order to call a dispute, disputers have to stake a certain amount of Sagewise tokens. This forces disputers to have to really care about the dispute and be willing to put skin in the game to call a dispute. If they lose the dispute, they lose their tokens.
Q. There is no end to human stupidity and greed. But how can we securely audit our codes without getting hacked in a DAO like situation or a multi-sig hack?
Amy: I saw someone say on social media that hackers are the new lawyers — you hire them to help you find a loophole in your contract. Security audits are very helpful, but in some ways, it’s akin to hiring another attorney to review your regular contract. A lawyer cannot address the infinite number of things that might go wrong with a written contract, just as a developer/auditor cannot address the infinite number of things that might go wrong with a smart contract. In the end, I cannot control what types of smart contracts developers decide to code, the quality of their coding, or the quality of the firm that audits the smart contract. All I can do is provide a freeze button and safety net to handle those (hopefully rare) situations in which a smart contract fails.
Q. How do you think legal professionals like you can innovate in the blockchain space to bring up the next generation protocols?
Amy: The field is wide open — there is a lot to be done, both to change the legal system and also to formulate laws and policy for this brave new world. As a first step though, I think legal professionals need to take the time understand blockchain’s uses and potential implications.
Disclaimer: I’m not an investor/advisor or token holder in Sagewise.
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