Stage 1 • Module 3

The Role of Rules

Rules either constrain power or enable it

Rules as Constraints vs. Suggestions

A constitution is just words on paper. A law is just text in a book. A regulation is just ink on a page. Rules only matter if they're enforced.

Throughout history, governments have written beautiful constitutions guaranteeing rights, limiting power, and protecting citizens. Yet those same governments routinely violate their own rules when convenient.

Why? Because discretionary enforcement means rules are optional. If a human can choose whether to enforce a rule, then power — not principle — decides what happens.

⚖️ Core Principle

Rules without automatic enforcement are merely suggestions. The moment discretion enters the system, rules bend to serve power. True constraints must be non-negotiable and self-executing.

Constitutional Drift: When Rules Become Suggestions

Consider the U.S. Constitution. It explicitly grants Congress the sole power to declare war (Article I, Section 8). Yet the U.S. has fought wars in Korea, Vietnam, Iraq, Afghanistan, and countless other conflicts without a formal declaration of war.

The rule didn't change. The enforcement did. When those in power can reinterpret, suspend, or ignore rules, the rules cease to constrain.

This pattern repeats everywhere:

Money supply limits: Central banks ignore their own inflation targets.
Spending caps: Governments declare "emergencies" to bypass budget rules.
Term limits: Leaders amend constitutions to stay in power.
Privacy protections: Surveillance expands through "national security" exceptions.

📜 The Discretion Trap

Any rule that includes phrases like "unless necessary," "in times of emergency," or "subject to review" is not a rule — it's a guideline that power will ignore whenever convenient. Discretion is the enemy of constraint.

Interactive Lab: Code vs. Discretion

Compare how rules behave when enforced by code versus human discretion. Attempt to violate the same rule in both systems.

RULE: Maximum supply = 21,000,000 units. No exceptions.

Code-Enforced System

Rule Enforcement Strength
100% - Automatic
0
Successful Violations

👤 Human Discretion (Fiat)

Rule Enforcement Strength
80% - Discretionary
0
Successful Violations
Click the buttons above to attempt rule violations in both systems...
What You're Seeing

Code-enforced rules cannot be violated. The system rejects invalid transactions automatically. Discretion-based systems allow violations when authority figures declare "emergencies" or "special circumstances." An algorithmic system would eliminate discretion entirely: the protocol would enforce rules without human judgment.

What Would Rules-Based Money Look Like?

Imagine a monetary system where the supply limit isn't a guideline. Not a target. Not "subject to change in emergencies." Instead, it's enforced by mathematics.

Every participant in the network would run the same code. If someone tried to create extra units, their transaction would be rejected automatically. There would be no appeals process, no committee to petition, no emergency override. The rule would be absolute.

This is the theoretical breakthrough: rules enforced by code rather than discretion. No human could bend the rules, because no human would control the consensus. The network would validate everything against the protocol automatically.

The Theoretical Solution

Such a system would replace "trust the authority to follow the rules" with "trust the math that enforces the rules." Discretion would be removed entirely. Rules would become constraints rather than suggestions. This is how you would build a monetary system that cannot be corrupted: make corruption mathematically impossible.

Coming in Stage 3: You'll discover how this theoretical system became reality. For now, understand the principle: rules only constrain power when they're enforced automatically, not interpreted by humans.

Reflect on What You've Learned

Test your understanding with interactive reflections. Get immediate feedback on your thinking.

Question 1
Why do governments write constitutions with strict limits on power, but then routinely violate those limits?

What's the main reason constitutional limits fail?

Question 2
Can a rule that includes discretionary enforcement ever truly constrain power?

Does discretionary enforcement constrain power?

Question 3
What would it take to change the rules of a truly decentralized code-based monetary system?

Select all the requirements that would make rule changes extremely difficult: