Developers who are constructing decentralized applications (DApps) must ensure that the underlying smart contracts are immutable in order to minimize their liability for any fraudulent activities that may occur on these platforms, according to a statement made by a policy executive. Peter Van Valkenburgh, the research director at Coin Center, emphasized the importance of enforcing immutability into smart contracts from the outset, particularly for Bitcoin developers who are interested in building DApps on the blockchain’s layer 2 networks. By doing so, they can avoid potential legal repercussions and prevent themselves from being held accountable for any illegal activities that take place on the platform.
On the other hand, developers who allow the smart contracts to be modified through a multisignature mechanism or a governance vote are more likely to be found liable if any unlawful actions occur on the platform. Van Valkenburgh also cautioned against the decision to keep the smart contracts closed-source, stating that it is not a wise choice.
Van Valkenburgh further explained that the Ethereum ecosystem provides an interesting model for Bitcoin developers to follow in order to avoid regulatory obstacles. By building something that is not under the control of any human discretion, they can circumvent potential choke points that may arise from regulatory oversight. He cited the recently dismissed Uniswap lawsuit as an example, where the court ruled that individuals who develop computer code should not be held responsible for any misuse of the platform by third parties.
However, it should be noted that even with immutability-enforced contracts, developers are not completely immune from prosecution. The case of the Tornado Cash developers serves as an example, where one of the developers was imprisoned for eight months in the Netherlands on suspicion of involvement in money laundering. Another developer has pleaded not guilty to charges in the United States related to operating a money transmitter and facilitating money laundering and sanctions evasion.
Van Valkenburgh concluded by stating that more clarity regarding the legal implications for developers will be achieved once the Tornado Cash developer’s case is finalized.