Duties owed by Bitcoin developers to users

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In summary, the court found that the developers of the Bitcoin software are not responsible for fiduciary duties to the true owner of Bitcoin cryptocurrency, Tulip. The developers argue that they do not have the power or control Tulip alleges, and that any duties of the kind Tulip contend for would be highly onerous and unworkable.
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One of the advantages of keeping your money in a bank account is that banks are under various duties to help you keep control of that money in the event that someone steals your bank card, and to compensate you if they culpably fail to do so. Is the same true of crypto assets kept on the blockchain?

A claim by a Bitcoin user against a number of developers of the software raising exactly that question has been allowed to proceed by the English Court of Appeal (Tulip Trading Limited (A Seychelles Company) v Bitcoin Association For BSV & Ors [2023] EWCA Civ 83). The remedy sought is not damages, but essentially the equivalent of cancellation of the stolen bank card and the issuing of a new one.

None of the devlopers are resident within the jurisdiction, so the claimant had to satisfy the court that one of the gateways in para 3.1 of CPR Practice Direction 6B applied, that England was the appopriate forum, and that the case had a real prospect of success. The judge at first instance decided that it did not; the Court of Appeal took the view that this is a developing area of law where such decisions should not be taken summarily on the basis of assumed facts (and the facts - namely what degree of control the developers have - are of course highly disputed).

[1] ... Tulip Trading Limited, a company associated with Dr Craig Wright, claims to be the owner of some bitcoin with a very high total value (the value in $ expressed in April 2021 was about $4 billion). The bitcoin is held at two addresses on the blockchain called 1Feex and 12ib7. However the private keys have been lost in a hack, likely stolen. Without its private keys Tulip cannot access its assets or move them to safety. However, Tulip contends, the developers named as defendants in this case control and run the four relevant bitcoin networks, and it would be a simple matter for them to secure Tulip's assets, e.g. by moving them to another address which Tulip can control. Tulip contends that the role the developers have undertaken in relation to Tulip's property (the bitcoin) and the power this role gives them, and all the circumstances (discussed below), mean that the developers should be recognised as a new ad hoc class of fiduciary, owing fiduciary duties to the true owners of bitcoin cryptocurrency, including in this case Tulip as true owner of the bitcoin at 1Feex and 12ib7. The fiduciary duties owed should extend to implementing the necessary software patch to solve Tulip's problem and safeguard Tulip's assets from the thieves. Tulip also alleges the existence of certain duties in tort. The developers deny they owe fiduciary or any other duties to Tulip. They contend that they have nothing like the power or control Tulip alleges and that duties of the kind Tulip contend for would be highly onerous and unworkable.
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  • #2
pasmith said:
Is the same true of crypto assets kept on the blockchain?
No. The blockchain is not the property of anyone. The blockchain is not a safe where bitcoins are stored. It is money.

What they are asking is the following:

I gave something to someone who gave me an IOU in the form of a piece of paper. Let's call that IOU money. Whatever I gave that person, we evaluated it to 100 $US, which is the "unit" used for that IOU system. Now, wherever I go, I can prove to anyone someone owes me 100 $US and I can exchange that IOU with anyone else for a product or service we both agree is worth 100 $US.

But then I lose the 100 $US bill I received (or it gets stolen). Well, the issuer of the 100 $US bill is the American government, surely they can cancel the 100 $US bill I lost, print another one and give it back to me. After all, they are the "developers" who created the system in the first place. Of course, this is ridiculous. The American government doesn't know that I used to have that 100 $US bill and that I may or may not gave it to someone else willingly.

The proof of the transaction was the 100 $US bill. You lose the bill, you lose the proof. Someone else steals it, he now has an IOU that is indistinguishable from any other 100 $US bill you can find. How did he get it? Nobody knows; not the government, not the bank, not the store that accepts it in exchange for something else.

A bank will accept to keep your money for you and attest it is indeed your money. If THEY lose somehow the 100 $US you gave them, THEY will give you another one to replace it. Why would you give freely your money to anyone else if that wasn't the deal between you two?

And if that doesn't convince you, replace the 100 $US bill in the previous example with a TV and the American government with the TV manufacturer.
  • #3
jack action said:
And if that doesn't convince you, replace the 100 $US bill in the previous example with a TV and the American government with the TV manufacturer.
I don't agree with all you say @jack action, but in this case it is not relevant what does or does not convince pasmith, me, you or anybody else apart from the courts of England and Wales where this action has been brought and, following the decision of the Court of Appeal linked above, will almost certainly proceed in due course.

For a more extensive analysis see https://www.shlegal.com/insights/th...e-of-bitcoin-tulip-trading-ltd-v-van-der-laan.
  • #4
Do you guys realize we're taking about Craig Wright, the dude who doesn't understand cryptography (nor Bitcoin), but claims to the media that he is the creator of Bitcoin, since ages? The dude has 0 credibility. Do you really believe his company lost access to mega dollars worth of Bitcoin?
  • #5
In crypto-land, credibility is a rare thing period.
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