Protocol as Offer
Unilateral Contract Doctrine as the Legal Grammar of Proof-of-Work Performance, Finality, and Rule-Change
Keywords
unilateral contracts; acceptance by performance; Restatement (Second) of Contracts § 45; option contract by commencement; proof-of-work; protocol finality; conditions precedent; public offers; smart contracts; retroactive modification; declaratory relief.
Summary in US Law
Proof-of-work systems are regularly misdescribed in two ways that both obscure the same commercial fact. One description treats the system as nothing but technical “rules” whose effects are purely internal. The other treats it as a social order whose meaning is determined by community governance rather than by enforceable terms. Both framings dodge what the system actually does. It publishes an intelligible bargain: any actor may choose to undertake a costly, objectively specified act; if the actor completes that act as defined by the protocol, the actor becomes entitled to a defined reward; and the system denies entitlement where the completion conditions are not met. That structure is not mysterious. It is the familiar structure of a unilateral offer inviting acceptance by performance. The legal task is not to romanticise code or to pretend code dissolves law, but to apply ordinary unilateral-contract doctrine to a setting where performance, completion, and entitlement are defined by machine-verifiable criteria.
The core claim is doctrinally conservative: proof-of-work protocol rules can be analysed as offer terms; acceptance occurs by performance rather than promise; commencement of performance has legal significance because it constrains opportunistic revocation; completion is strict and conditioned; and remedy follows conventional contract and reliance principles. Once those propositions are stated plainly, several recurrent confusions in protocol disputes can be separated and resolved. Questions that are often waved away as “governance” become questions about offer terms and acceptance conditions. Questions that are often framed as “technicalities” become questions about conditions precedent to entitlement. Arguments that rule-change is ordinary “maintenance” become arguments about revocation or modification during performance. And the fear that courts would have to “run the network” dissolves into the ordinary, modest judicial function of identifying whether stated conditions occurred and whether asserted retroactive term changes are legally effective.
A proof-of-work system is reliance-intensive by design. Participants deploy capital and incur operational costs because the published specification holds out a reward for performance. That is the very environment in which unilateral contract doctrine developed its most important refinement: the separation of protection of reliance from entitlement to payment. A unilateral offer is not a bilateral exchange of promises. The offeror seeks an act, not a promise. The offeree is free to begin, stop, or never act at all. The offeror cannot sue the offeree for failing to perform, because the offeree never promised anything. Yet the law does not treat this as a void. It treats it as a bargain that becomes enforceable when the offeree performs the requested act, and it constrains the offeror from opportunistically withdrawing the offer after performance has begun in reliance on it. That is the logic captured by Restatement (Second) of Contracts § 45: when an offer invites acceptance by performance, the beginning of the invited performance creates an option-like lock-in. The offer cannot be revoked while the offeree completes, although the duty to pay remains conditional on completion. This single doctrinal device is the correct legal grammar for a proof-of-work system: it protects reliance without paying for mere effort, and it preserves the strictness of completion-based entitlement.
The technical primer matters only insofar as it identifies the legally relevant performance conditions. Proof-of-work is not “try hard and get paid.” It is “complete the requested act and get paid.” The requested act is not merely finding a low hash. The invited act is producing a protocol-valid block, accepted under the system’s selection rule, and held through the finality horizon that makes the reward mature in spendable form. Three elements therefore matter: validity, acceptance, and finality/maturity. Validity is defined by consensus rules (transaction validity and structural constraints). Acceptance is determined by an objective selection mechanism (commonly described in terms of the chain with the greatest accumulated proof-of-work). Finality is defined by a maturity rule, typically expressed as a confirmation depth after which the reward may be spent. These are not discretionary, social, or subjective. They are rule-defined conditions. In contract terms, they function as conditions precedent to entitlement: until they occur, the promised consideration is not owed as a mature, spendable reward.
This completion structure aligns precisely with unilateral contract doctrine’s strictness about performance. The law distinguishes between beginning to perform and completing performance. Beginning can matter for revocation, but it does not itself generate entitlement to payment unless the offer expressly so provides. The duty to pay is conditional on completion. That is not punitive; it is definitional. The offeror promised payment for the completed act, not for the attempt. The proof-of-work system adopts the same structure: the system promises reward for a completed, accepted, matured block, not for computation per se. The risk that a valid block may be displaced before maturity is part of the bargain’s risk allocation, internalised by participants as a cost of competing for the reward. When a block is later orphaned before maturity, the right analysis is not “payment was taken away.” It is “the condition precedent to entitlement did not occur.” The offer defined completion to include persistence through finality; without that persistence, the invited act is not complete.
The doctrinal foundation for treating protocol rules as offer terms is the ordinary law of public offers. Courts enforce public offers when terms are clear, definite, and explicit, leaving nothing open for negotiation, and they refuse to allow offerors to add “house rules” after acceptance is attempted by performance. That basic principle is decisive in disputes about protocol rule-change. If a published protocol specification is treated as the offer, then a purported rule-change that seeks to alter the conditions of acceptance after participants have begun performance is not neutral. It is an attempt to modify or revoke an offer midstream. Under § 45’s option-like effect, that attempt is constrained once performance begins. The offeror’s obligation remains conditional on completion, but the offeror cannot withdraw or rewrite the offer so as to defeat reliance after performance has begun.
The serial nature of proof-of-work systems does not weaken this argument; it sharpens it. Proof-of-work opportunities recur in discrete intervals. The most legally coherent description is therefore not a single perpetual contract, but a rolling series of unilateral offers operating on a stable specification. Each interval publishes the same invitation: perform the defined act under defined rules; if completion occurs, receive the defined reward subject to maturity conditions. Each interval induces fresh reliance. Each interval’s offer becomes subject to the same constraint against opportunistic revocation once performance begins. The existence of a future interval does not justify retroactive alterations to the current interval’s governing terms. It simply means that new offers may be proposed for future performance opportunities.
This yields a disciplined taxonomy of protocol change. A change that applies prospectively operates as a new offer: it publishes new terms for future performance opportunities, and future performers may choose whether to perform under them. A change that purports to alter the completion conditions governing performance already underway is evaluated as revocation or modification during performance. It is legally charged because it seeks to change the bargain after inducing reliance. The point is not that protocol specifications can never evolve. The point is that retroactive rewrite is doctrinally constrained in precisely the circumstances where reliance is induced and performance is underway.
Authority claims become justiciable once framed correctly. Operational capacity to publish code or coordinate releases is not the same thing as legal authority to bind others to retroactive term changes. Contract law has always distinguished the power to alter an arrangement from the legal right to impose altered obligations on counterparties. In the protocol setting, courts need not decide who is “right” in a cultural debate. They need only decide ordinary legal questions: who, if anyone, had authority to modify offer terms; whether assent was obtained where assent is required; whether a reserved power of modification exists and is enforceable; and whether reliance and commencement constrain revocation or retroactive modification. The unilateral-offer frame therefore converts vague “governance” rhetoric into concrete legal questions about modification mechanisms, assent, and reliance constraints.
Invalid performance is likewise clarified by basic acceptance doctrine. In unilateral contracting, the offeror defines the act that constitutes acceptance. A purported performance that does not comply with the offer’s terms is not defective acceptance; it is no acceptance. A block that violates validity rules is not performance of the invited act. It is an attempt to perform a different act than the offer invited. The system’s exclusion of invalid blocks is therefore not discretionary “governance.” It is the objective classification of non-conforming acts as non-acceptance. This distinction prevents category errors. The system is not “punishing” invalid performance; it is refusing to recognise it as acceptance. Because invalid performance occurs before acceptance, it is not best analysed as breach. Breach presupposes a contract. Non-conforming performance in a unilateral-offer setting usually means no contract formed for that attempt, and therefore no entitlement exists. That is orthodox and sharply limits the kinds of claims that can be made about excluded blocks.
Illegality is treated with the same analytic discipline. Contract doctrine treats illegality as a limit on enforceability and often as a defence or implied condition. If protocol terms are treated as offer terms, claims that the system “requires” unlawful performance can be analysed through ordinary doctrines rather than slogans. A court can construe the offer as subject to an implied condition of legality, or treat unlawful demanded performance as outside the scope of the invited act, or apply illegality doctrines to prevent enforcement where the underlying act would contravene law. The salient point is modest: the law does not vanish because a bargain is expressed as a protocol specification. Ordinary doctrines governing unlawful bargains remain available, and they operate through the familiar forms of implied conditions, defences, and limits on remedy.
Once the bargain is described in contract terms, remedies follow conventional structures. Where a unilateral contract is formed and then breached by impermissible revocation or retroactive modification, expectation damages are conceptually available subject to proof, causation, foreseeability, and mitigation. The completion conditions of the offer define when expectation attaches: if completion occurred under the governing terms and the promised consideration is withheld due to an impermissible retroactive change, the loss is the promised reward as defined by the offer. Where contract formation is disputed but reliance is substantial and injustice would result, promissory estoppel provides a backstop for reliance remedies. The doctrine is not a general licence to pay for effort. It is a targeted tool for reliance induced by a promise where enforcement is necessary to avoid injustice.
Declaratory relief is often the most valuable remedy in protocol disputes. A declaration of the operative offer terms, whether an asserted change was retroactive or prospective, and whether performance conditions were satisfied can stabilise expectations without requiring a court to supervise ongoing operations. Declaratory judgments are designed to clarify legal relations and constrain opportunism. In a domain where disputes can replicate across participants and intervals, a declaratory resolution of the governing terms can be more valuable than damages in a single case.
Equitable relief is not categorically excluded, but it should be tailored with institutional restraint. Courts should avoid remedies that amount to continuous technical supervision. Yet courts can enjoin narrow forms of opportunistic retroactive manipulation or require adherence to enforceable modification mechanisms without “running the network.” The proper goal is to remedy legal wrongs—impermissible revocation, misrepresentation of retroactive binding effect, unlawful imposition of new conditions—not to administer an enterprise.
The institutional competence objection—“courts cannot understand or run these systems”—fails once the task is correctly defined. Courts routinely decide disputes involving technical conditions precedent, objectively verifiable performance, and reliance. The protocol setting often makes adjudication easier rather than harder because the relevant criteria are explicit and objective. Validity conditions are rule-defined. Finality horizons are numerical thresholds. The dispute can be framed as whether stated conditions occurred, whether a purported retroactive change is legally effective, and what remedy follows. Courts already decide far more indeterminate questions in ordinary contract litigation, including course of dealing, reasonableness, and ambiguous text. Here, much of the ambiguity is replaced with explicit criteria.
The overall effect of the unilateral-offer framing is to replace mysticism and politics with doctrine. It supplies a stable vocabulary for systems where real money turns on objective completion. It preserves the essential asymmetry of unilateral contracting: performers remain free to stop; the offeror remains unable to compel performance; but the offeror is constrained from opportunistic revocation once performance begins. It preserves the strictness of completion-based entitlement: effort is not entitlement; completion under defined conditions is entitlement. It clarifies exclusion: invalid performance is non-acceptance, not governance discretion. It clarifies change: prospective changes are new offers; retroactive rewrites are constrained modifications. And it locates remedies in familiar categories—expectation, reliance, declaratory relief—without forcing courts into the role of system administrators.
This framework does not claim that law replaces technical verification. It claims something narrower and more accurate: when a system publishes definite terms, invites costly performance, and conditions reward on objectively defined completion, it operates as a unilateral offer of the kind contract doctrine has long governed. The medium is new; the legal structure is old. Recognising that structure yields institutional clarity and limits opportunism in a domain where the temptation to relabel retroactive rewrites as “maintenance” will otherwise remain a permanent threat to reliance and orderly performance.