Why Multisig Might Not Be Ready for Widespread Arbitration Use | HackerNoon

Table of Links

Abstract and I. Introduction

II. Award Form and Content

III. Electronic Signatures, Writing Requirement, and Authentication

IV. Can Multisig Arbitration be Seen as an Autonomous Legal Order?

V. Conclusion

Appendix A: Multisig Transaction on Bitcoin Testnet Example

Appendix B: Breakdown of BTC Stored in 2/3 Multisig Accounts

V. CONCLUSION

Multisig is an exciting technology that could change how merchants resolve cross-border disputes. The multisig protocol functions similar to escrow, but a key difference is that no one party, including the arbitrator, has sole possession of the funds. In a 2/3 multisig account, at least two parties must authorize a transfer by signing data with their respective private keys. This scheme provides a more efficient and trust-less mechanism for trading. However, there is some uncertainty whether or not multisig can be recognized as an arbitral award in some jurisdictions. The New York Convention requires awards to be “duly authenticated.” In civil law systems, the authentication of signatures is traditionally performed by public authorities or notaries. Moreover, the lex arbitri may impose additional form and document legalization requirements.

If parties select the law of England as the seat of arbitration, they are free to agree on the form of an award under Section 52(1) of the Arbitration Act 1996. Through the concept of party autonomy, parties can restrict arbitrators from following guidelines on the content of awards and authorize the issuance of an award in electronic form. The parties should explicitly opt-out of a reasoned award as provided for under some arbitration rules. In addition, names and wallet addresses should be associated with parties at the time when the arbitration agreement is made. By doing this, an expert witness is able to certify the identity of parties and authenticate electronic signatures. Under ECA 2000, Section 7(1) (a), electronic signatures are admissible as evidence and under section 7(3), any person can certify the authenticity of such signatures.

Multisig ought to be viewed as compatible within the international arbitration legal order, where the process is defined in an arbitration agreement and the raw transaction data is the actual arbitral award in an electronic form. Much in the same way courts have been able to adapt the law regarding paper contracts to the emergence of technologies like telegram, telex, fax, and e-mail, blockchain-based applications will be another method for entering into contractual relations. The technological novelty of multisig does not justify characterizing it as a separate legal order.

Although multisig is compatible with the aims of international arbitration, in that it could provide a fast, cost-effective, and final method for resolving disputes privately, it is unlikely it will be widely used at the present. For one, there is a steep learning curve for merchants and their legal representatives to learn how to adequately use the technology. Secondly, arbitration institutions might be reluctant or slow to modernize rules to allow for conducting arbitration by electronic means. And finally, the multisig protocol is not intuitive enough for ordinary commercial use.