He argues that there are several kinds of “code” that can shape human behavior. So, for any given problem (e.g., speeding in a residential neighborhood) there are several codes at work trying to prevent you from committing it. There’s a moral/social/ethical code (e.g., you diswant the disapproval of your neighbors who have small children), there’s legal code (e.g., if you speed you’ll get a ticket, maybe lose your license, go to jail), and there’s physical/reality code (e.g., a speed bump that physically prevents you from going too fast). The premise of the book is that there’s increasingly a new kind of code, computer code, that is stronger than laws and social norms, almost on par with reality (e.g., if your car has software that prevents it from going faster than a certain speed, perhaps tied to GPS to track what street you’re on and what the speed limit is).
Taking this even further, distributed applications operating on a blockchain platform could perhaps operate outside of the reach of the law. Wired explains how this might work:
Corporations and economic transactions are fundamentally driven by contracts. By providing the foundation to validate these contracts, Ethereum allows for the deployment of so-called distributed autonomous companies (DACs) or organizations (DAOs). These systems operate on the blockchain with an autonomy of their own. They earn money by charging users for the services they provide (in the example applications cited above, those services are DNS resolution and social networking) so that they can pay others for the resources they need (such as the processing power and bandwidth necessary to run the network).
As the name suggests, DAOs are autonomous entities that subsist independently from any legal or moral entity. After they have been created and deployed onto the internet, they no longer need (nor heed) their creators. Yes, they need to interact with their users, but they are not dependent on any one of them. Smart contracts are automatically enforced by the applications running over the blockchain.