‘Code is Law’ documentary explores the void between DeFi and law

upcoming documentaries, Code is law: The unstoppable heist of cryptocurrenciesLet’s take a look at why, even as multi-million dollar hacks continue to plague our industry, so few of those responsible are brought to court.

The cryptocurrency industry, especially decentralized finance (DeFi), continues to feel like a financial wasteland, full of expectations, risks, and an ever-present sense of lawlessness.

A general lack of legal repercussions and a sense of impunity for those who can abuse the system has led to questions about where the authority lies.

So where does the traditional legal system fit in the nebulous world of on-chain finance, where millions of people can be kept safe with just a line of code?

Protoss showed a sneak peek of the film and spoke with director James Craig. Unlike many founders, developers, and security researchers who consider “code is law” to be nothing more than a meme, he says, “More important than the industry would like to admit”

If the code is law, is there a way to go back?

In the mainstream, cryptocurrency is often seen as a dirty word. High-profile cases like FTX and Celsius made headlines around the world. Their founders are currently sitting in solitary confinement, and that’s no surprise.

But these are pretty standard white-collar crimes, and the cryptographic element is more of a coincidence than a necessity. Like countless pre-encryption schemes, they relied on deception and treated customers’ money like a personal piggy bank.

Meanwhile, the “unstoppable heist” explored in James Craig and Lewis Giles’ documentary is unique to the world of cryptocurrencies.

Once a vulnerability is exploited, it cannot be undone. Some even claim that “the code is the law.” If you are smart enough to manipulate the system, you deserve to be rewarded..

read more: ‘Code is Law’ goes to court in $25M Ethereum MEV exploit

If ByBit’s hack didn’t change the conversation, what will?

The film features a series of high-profile hacks dating back to 2016 as case studies. The story of DAO, Index Finance, Mango Market, and Khyber Network is told through fluid montages, voiceovers, and interviews from those directly involved.

Developers said they were worried about seeing millions of dollars worth of cryptocurrency funneled into smart contracts they created. When vulnerabilities are discovered, immutable code cannot be patched.

If things don’t work out (spoiler alert, they do), developers can only watch as money bleeds from their creations.

The developer’s reaction is explained in thrilling detail. From hacking by copying proprietary protocols to save money from hackers, to tracking down culprits through a trail of unsavory clues that lead to ostensibly “anonymous” online personas.

Surprisingly, this story barely mentions the then-nascent Ethereum blockchain’s “hard fork” in response to the DAO hack. Such action “would be technically and politically infeasible today,” Craig said.

Even if North Korea’s $1.5 billion hack of ByBit doesn’t change the conversation, it’s “hard to imagine what will.”

What can you do?

Craig’s impression is that “as the field matures, the consensus has become that there must be real consequences for malicious behavior on the chain.”

“Hacking will never go away,” he says, but “ecosystems seem to be getting better at protecting themselves.”

He praises efforts like the Security Alliance to coordinate incident response through experienced volunteers, formalizing the frenzied response depicted in the film.

However, self-regulation in cryptocurrencies is almost entirely reactive in nature. Negotiations can be fruitful, but often the carrot of prize money is ignored and It’s not a deterrent anyway.

If that happens, the risk of legal consequences remains.

Lawrence Day, one of the developers interviewed, said, “I feel like an independent financial network… is moving away from the banks, not from the legal system.”

However, as Craig points out, “existing law does not specifically address smart contract exploitation.”

This could frustrate efforts to convict hackers, even if they admit to their actions.

read more: Avi Eisenberg seeks leniency in child pornography and cryptocurrency sentencing

Only one arrest was made for what they called a “high-profit trading strategy” two months after the attacker asked, “What are we going to do? Get arrested?”

Initially touted as an opportunity to set a precedent with the “code is the law” argument, the defense ultimately decided to call into question the prosecution’s evidentiary base.

Although he was initially convicted, the charges were later dismissed.

Barring a rare dose of poetic justice, the documentary’s various antagonists have so far escaped punishment for their actions.

Immutable code is an afterthought

Despite the film’s central theme of self-executing code interacting with a faceless legal system, these are inescapably human stories.

In the film, Day describes the painful similarities between himself and his project’s hackers. He has called this day “the worst day of my life, and the one that started almost everything I’ve done professionally since then.”

Craig found that people who faced significant exploitation “described the same thing: complete emotional and psychological exhaustion.”

He said that the developer “afraid of being blown away” and are hesitant to report it to the police.

read more: What does Roman Storm’s conviction mean for the broader DeFi sector?

Developers and auditors alike have a heavy responsibility. Deploying immutable code is a leap of faith for those creating it, and lingering doubts are inevitable, especially as money flows in and the stakes grow.

Cryptocurrency, especially DeFi, is a new world, and its rules are still being written line by line. But if code is law, where are the consequences?

Code is law: The unstoppable heist of cryptocurrencies It will be released tomorrow. Watch the trailer here.