Regression to the Code
= the tendency to only refer to code as the ethical basis for behaviour in crypto communities
Contextual Quote
"Regression to the code erodes social norms, and this consequence accounts in large part for what repulses people from crypto. Even as protocols fulfill important social functions like affordable remittances and escape from inflationary regimes, “the space” appears to outsiders as greedy and riddled with scams. It is for this reason that crypto seems to stand apart from all prior human institutions. More than just “lawless,” it comes off as a “normless” zone where morality is suspended, even if the prevailing intention is to support the resiliency of all manner of social organizations."
- Toby Shorin, Laura Lotti, Sam Hart [1]
Discussion
Toby Shorin, Laura Lotti, Sam Hart:
"We’ve demonstrated how institutions regulate behavior through the arrangement of effective forces, and how the behavioral dynamics innate to crypto are the result of regulatory instability in the absence of law. While law may not be entirely self-coherent, it does at least provide a single jurisdictional surface through which all other regulatory forces may be altered. In contrast to the state’s overarching regulatory system, life within the jumbled patchwork of crypto protocols is a far more untethered and and risk-prone condition for inhabitants. This hasn’t stopped brave people from migrating their assets to the digital frontier. But how do crypto-citizens reckon with the frequently contradictory outcomes of the 3-body regime? A protocol’s ability to credibly enforce discretionary principles is substantially less developed than the state.
Readers will observe that in the three cases explored above—Curve, NFT Royalties, and ENS—institutional behavior tends toward “regression to the code.” By this we mean that whatever role norms play in a protocol ecosystem, the ultimate determinant of institutional and user behavior is the encoded architecture and market incentives. With Curve, we saw “greedy” behavior was a valid social norm enabled by vote-buying mechanisms. With NFT royalties, we saw artist-supporting residuals collapse in a price war. And with ENS, the in-built coin voting system overruled the community’s normative stance on Brantly Millegan’s removal and abstention. When normative behavior is unenforceable, it tends to regress to behaviors afforded by the other regulatory forces. New social norms that correspond to the extant architecture then prevail.
Some view this regression phenomenon as the foundational policy of the crypto space: “whatever is permitted by the protocol’s code and market structure is legitimate.” This viewpoint, while rarely expressed in such direct terms, is remarkably common among crypto users. It is certainly present in the Curve case. It is also what is voiced when one defends the rights of hackers to exploit poorly designed protocols. As the hacker of Mango Markets infamously stated, his team merely “operated a highly profitable trading strategy.”
However, regression to the code doesn’t always produce legitimate outcomes, so it can’t be true all the time. In the cases explored earlier, the legitimacy of protocol adjudication is precisely what is in question. It is not clear, for example, that the inability to protect artist royalties is a good outcome. Many viewed it instead as an architectural shortcoming, taken advantage of by unscrupulous traders who skirted designers’ good intentions.
Regression to the code erodes social norms, and this consequence accounts in large part for what repulses people from crypto. Even as protocols fulfill important social functions like affordable remittances and escape from inflationary regimes, “the space” appears to outsiders as greedy and riddled with scams. It is for this reason that crypto seems to stand apart from all prior human institutions. More than just “lawless,” it comes off as a “normless” zone where morality is suspended, even if the prevailing intention is to support the resiliency of all manner of social organizations.
Even within the stifling discourse of credible neutrality, there is a desire among some protocol designers and users to make norms a larger part of crypto’s self-regulatory function. In response to the paucity of effective normative regulation, a small cadre of self-regulating parties have stepped up to promote different forms of social welfare. Two institutions in particular have managed to get social buy-in by activating cross-cutting values shared by many in the Ethereum ecosystem: the public goods project Protocol Guild and the vigilante investigator ZachXBT.
Users who notify others about scammers and front-end interfaces that de-list scamcoins are acting on moral grounds to protect others. ZachXBT is one prominent on-chain researcher who documents and exposes scammers to whom the crypto community has previously turned a blind eye."