Who is Liable for Cryptocurrency Consensus Mechanism (Mis)Representations?

Abstract

Cryptocurrencies are based on cryptography-signed transactions propagated peer-to-peer to be validated in a distributed manner according to consensus mechanisms in compliance with consented protocols. The performance of the consensus mechanism is crucial for a consistent, available, and fault-tolerant cryptocurrency ledger. The quality of consensus mechanisms is communicated by various representations such as narratives, mathematical models, visual illustrations, pseudocode and code. Sometimes, these representations are misleading, which can cause harm to those relying on them. This paper discusses legal liability for misrepresentations of cryptocurrency consensus mechanisms and finds that, inter alia, protocol developers, professionals, and trading platforms can be liable.

Keywords: Blockchain, Consensus, Cryptocurrencies, Liability, Open Source

JEL Classification: E42, K13, K24, L17