Image created with ChatGPT My co-author, Daniil Rose and I are delighted to circulate a discussion draft of a recently roughed out essay: Blockchain Regulatory Systems—Conceptual and Operational Challenges. The Abstract gives one a fairly clear idea of our aim: Abstract: This article challenges one of the most common assumptions in contemporary blockchain discourse: that code can be understood as a “rule” analogous to law. It argues instead that code is better conceived as a system, an environment, or even an ecology of layered rule frameworks through which regulation is produced, translated, and enforced. In the process of its creation, the human and human systemicity is displaced and subordinated. In the blockchain context, what is often described as the “Rule of Code” is not a singular rule of or by code but an interactive multilingual system of command that follows its own logic. From that premise, the article reorients the debate between Rule of Law and Rule of or by Code. The real conflict is not between two neatly opposing sovereigns, but between different regulatory ecologies that organize meaning in fundamentally different ways. The paper begins by framing blockchain as more than a technical tool, introducing it as a site where law, code, language, semiotics, and governance intersect in ways that unsettle conventional regulatory assumptions. It then develops its core argument through a series of analytical sections on the threats to the Rule of Code, the relationship between legitimacy and coded systems, and what the authors call the “Sacher-Torte” model, which shows how blockchain operates through layered communicative and regulatory environments rather than a single rule structure. Finally, the paper turns to the dialectic between traditional legal ordering and coded systems, concluding that the real challenge is not choosing between law and code, but understanding how human regulation can still operate at the points where these distinct systems meet and produce effects in the world.The discussion draft may be accessed SSRN HERE; it may also be accessed on my personal website here: BACKER_ROSE_v1_Rule_of_Code_Blockchain4-2026. It follows below. Engagement always welcome. Blockchain Regulatory Systems—Conceptual and Operational Challenges Larry Catá Backer[1], Daniil Rose[2] Abstract: This article challenges one of the most common assumptions in contemporary blockchain discourse: that code can be understood as a “rule” analogous to law. It argues instead that code is better conceived as a system, an environment, or even an ecology of layered rule frameworks through which regulation is produced, translated, and enforced. In the process of its creation, the human and human systemicity is displaced and subordinated. In the blockchain context, what is often described as the “Rule of Code” is not a singular rule of or by code but an interactive multilingual system of command that follows its own logic. From that premise, the article reorients the debate between Rule of Law and Rule of or by Code. The real conflict is not between two neatly opposing sovereigns, but between different regulatory ecologies that organize meaning in fundamentally different ways. The paper begins by framing blockchain as more than a technical tool, introducing it as a site where law, code, language, semiotics, and governance intersect in ways that unsettle conventional regulatory assumptions. It then develops its core argument through a series of analytical sections on the threats to the Rule of Code, the relationship between legitimacy and coded systems, and what the authors call the “Sacher-Torte” model, which shows how blockchain operates through layered communicative and regulatory environments rather than a single rule structure. Finally, the paper turns to the dialectic between traditional legal ordering and coded systems, concluding that the real challenge is not choosing between law and code, but understanding how human regulation can still operate at the points where these distinct systems meet and produce effects in the world. Keywords: blockchain, rule of law, semiotics, systems, regulation, machine code I. Introduction. This article speaks to the interactions between the Rule of Code[3] and the Rule of Law[4] within the virtual spaces filled with automated data storage and sequential transactional mechanisms, and more specifically in its form as blockchain[5]. One may begin by noting a bit of absurdity in this quest, in the ancient sense of the term (from the Latin “absurdus”) suggesting harsh and clashing sounds (to the listener anyway) something and thus without sense from the perspective of expectations of order and structure.[6] Nietzsche famously mocked the English, and English attempts at philosophy, for its obsession with utility, that is for their “modernity .”[7] That obsession has now appeared to ooze into and fill the virtual world, and more specifically, the intelligences with which humans seek to populate that world without much of a thought about the organizing parameters of utility and its limits.[8] The cyberpunks of the 1980s might well have it right when they spoke to cyber anarchy rather than an Olympian ordering, and of a fracturing of the machine and human coding that may reframe the issue of the structural coupling if rules of code and law into something quite different.[9] It might then be useful to take a moment, to consider this obsession and its virtual manifestation for humans and for machines from the perspective of phenomena, of semiotics, language, and collective meaning making. It has become almost a cliché that modernity[10] that some of the most profoundly interesting and foundational shifts in the management of human collective organization and, more importantly, its rationalization of the surrounding reality, can be projected from out of the smallest and most laterally irrelevant advances. So it might be said of blockchain—as technology, as a means of facilitating the structural coupling of individuals and their collective institutions, and at a fundamental level, as an ideology of managing human collectives and its manifestation of a peculiar and quite specific form of organizing reality.[11] At the same time, that cliché becomes a threat as well as a compulsion/temptation where modernity, having “lost the ideological drive of reason and progress, and confounds itself more and more with the formal play of change” and having been reduced “into a culture of daily events,” now finds that “[e]ven its myths turn against it (technology, once triumphant, is today full of menace).”[12] The core of the cognitive cage that emerges as blockchain, one manifested in real space through digitized bits of data that are significant[13] to participants and then ordered chronologically, is deceptively simple: the creation of a digital ledger. That digital ledger, as its name implies, is a space in which something is recorded—something of interest or value to those who would expend time and effort on its creation. From the perspective of semiotics, one encounters here the mimesis of a discrete object (temporally and spatially) which acquires signification through its virtual representation, which is then itself made real by its effects beyond the digitized ledger.[14] In the beginning one recorded transactions and developed something like a self-referencing currency (and all currencies whether digital or analog are by definition self-referencing in the sense that their value is a function of collective belief in their value through use).[15] And yet there is nothing to prevent the recording of any collection of bits of data to which one or more providers might attach significance—subject, perhaps, only to the limits if temporality built into the fundamental structures of sequentially ordered streams of transactions and memory.[16] Nonetheless, that signification is of little value when the self-referencing unit is the autonomous individual.[17] One speaks here to identity, that is to the constitution of an object as other than itself as such, but as the vessel for meaning that is an aggregation of its constituents parts (data) but autonomous of them as its own thing—effectively perhaps something like a machine/process version of “identity” which has been the central semiotic problem of the last century.[18] That act of recording becomes more interesting for the ordering of social relations when such digitized ledgers then acquire collective significance and are distributed across many digitized spaces (computers or other holders of virtual “memory” in mimetic form).[19] Here one encounters not just memory but trust management in blockchain.[20] It follows that one creates, in virtual form, transparency, and trustworthiness of the “memory” recorded in the ledger in the sense that such memories are harder to contaminate or otherwise be tampered with. They might be appended but not overwritten; [21] consequently their existence in virtual time and space is unalterable as such. That inalterability provides a powerful basis for utility—in the sense that it populates the cognitive spaces for which it was created, and it itself becomes an object of consumption, use, negotiation, or judgment, which can then be consumed in the construction of other objects without losing its historical facticity.[22] Those other objects could encompass virtually anything, from rewards and punishments grounded on ledger entries of behaviors, to the accounting for wealth grounded in the meaning, the significance, of both the ledger entry and its deployment.[23] At the same time, the collectivization of signification of ledger entries acquires an internal collective aspect—and again a means of organizing its cognitive signification, by organizing multiple ledger entries together into “blocks”. The cognitive signification becomes more profound as the internal collective signification manifested in and as the block then is put in motion, creating a cognitive “flow” in and through collections of blocks linked in a chronological “chain” (and here time becomes an element of code, and of cognition).[24] All of this, however, produces a cognitive system that is not self-aware. Something else is necessary—and that something are the “nodes” in the networks that host copies of the ledger in its blocks.[25] Nodes are also objects, but they are objects outside the “chain” of “blocks” around which data is organized through digitized records of whatever object has been selected for such virtualization. In a sense, the nodes were the physical user interface that constituted the members of the collective within which self-referencing systems of ledger entries of data in blocks, temporally chained, could be “activated” by producing consequences or actions (and thus additional blocks along the chain). The nodes are both the guardians and the beneficiaries of the realities created within temporal “block”—“chains” by protecting the integrity of the “past” and providing a consensus-based protocol for validating activation consequences in the form of new blocks along the chain (it need not be so but nodes also mimic the more fundamental ordering ideologies from which they emerge).[26] It is here that digitalization[27] occurs, through the incorporation of digital technologies to automate tasks, including the retention of data. Nodes are themselves, for the most part, computers or servers—that serve as their physical bodies. These physical bodies then operate through a meta-operating system and more specifically with respect to the blockchain, from software that sets out the operating rules applicable to each node and limiting their actions in communion with all other nodes admitted to the congress of nodes that constitute the blockchain collective. Software is itself a set of human-readable, and sometimes human written,[28] instructions in a programming language, also traditionally devised by humans and for their pleasure (utility), that provides the basis for computers to perform certain tasks with and on available data, the digitization of which is also a product of software coding. Coding, source coding, is itself the process of writing software in human-readable form; it was the way that humans communicate with virtual intelligence (in their hardware bodies), but not necessarily the way that virtual intelligence communicated among themselves. To those ends, virtual intelligence communicates with each other using machine language—a series of binary codes that can be utilized by a computer processor to execute commands, including, eventually, the command to write their own code and execute their own machine language instructions. It also includes object coding (machine-readable output of source code compiler), and executable code (computer operational programs sometimes in the well-known .exe format that are one’s program files). Humans can read source code, but not machine and object coding.[29] Source coding is for programming (at least at the start), and machine coding is for execution (including execution that permits machine coding to undertake its own source coding). Here lies both the independence of rules of code from rules of law—built into the language of these systems that both constitute a regulatory order and erect walls against the projection inward of other regulatory rule orders.[30] In a sense, then, blockchain involves the alignment of three languages—human to human (and with it its own semiotics of meaning making), human to machine language (and with it a transposition of more personal value semiotics translated for machine intelligence), and machine to machine language, the semiotics of which is a function of the possibilities written into its own language. And it is in this alignment of language—and with it, its semiotics and phenomenology of disciplining collective meaning and enforcing command—that one can, at last, speak to the rise of collective legalities beyond that of their traditional manifestation in physical power asserted through action, text, and institution.[31] We focus on two in the context of blockchain—the well-known law of code and the law of regulation. Both embrace the notions of the rule of law to the extent that they are encoded within its language meaning structures, and from there applied in ways that reinforce or at least manifest meaning and values onto regulatory objects. And now one encounters a Sacher-Torte of languages—at least five—dense layers of cake separated by a jelly that serves as the medium of connection between them, and all to produce what appears at first blush to be a straightforward and efficient system. And it does! The elegance of this form is irresistible. It is democratic and anti-hierarchical in ways that only technology enhanced participation can make possible (at least for those who can afford the technology and the cost of the training in it).[32] It provides an enhanced security against corruption (the limits of which remain to be tested), and it provides an equalizing transparency that protects the immutability of facts—that is of the recording of data that is widely shared and thus much more difficult to “remake” to suit the times or the inclinations of power. Its decentralization provided a virtual pathway to strong tendencies that were already largely visible in the world of human organizational regulation—from a revived federalism in the United States[33], to the rise (more or less) of the principle of subsidiarity in the European Union[34], to selective centralization and decentralization within Chinese Marxist-Leninism[DJR1] [35]. And its efficiencies were unparalleled. It appeared to solve the great challenge of law making—one in which its essence as command (*.exe) was an exogenous projection onto the bodies of those who were to comply.[36] That produced the great procedural jurisprudence of law: to figure out of means of naturalizing the principles of legal text in its subjects and to develop mechanisms for external policing. Blockchain automated the process of regulation and compliance, embedding internalization within the language of its own coding. The languages of programming, then, were normative, regulatory, descriptive, and procedural, creating the subject of compliance and its methodologies simultaneously. II. The Challenges Virtually any collective human (and machine) activity can be “blockchained,” and thus “blockchained,” automated in a virtual space with effects not just there but in human physical spaces as well.[37] [DJR2] While it plays a significant role in human activities that lend themselves to chrono-blocking information and decision systems—that is, to ledger records blocked and ordered in time which are then subject to sequential action along linear temporal arcs. These include the usual suspects —cryptocurrency, supply chain management, smart contracts[38], banking, and digital identity—its potential extends far beyond that to the operation of municipal administration in the fo
