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Polygon Labs penned a letter petitioning the European Union that the Data Act bill as written could hamper efforts to stimulate innovation considered critical to guarantee economic prosperity.

Polygon Labs is a firm involved in developing scaling solutions using Ethereum layer-2 – Polygon. The firm urged the policymakers to clarify the legislation scope and intention regarding smart contracts.

Clarity of Article 30 Set to Dominate Negotiations on Data Act

The letter published on April 17 Identifies the European Commission, Council, and Parliament as the recipients. Polygon alleges that Article 30 needs more clarity and would be detrimental unless amended to restrict its application to permissioned smart contact-oriented systems that an enterprise owns and operates.

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Polygon invalidates the bill’s current wording owing to the inclusion of ‘permissionless’ under the current version. The current wording also attracted the attention of Ledger, a firm involved in hardware involvement. The developer signed the letter urging clarity in the legislative intention.

The letter reveals Polygon Labs’s interest in facilitating growth while developing permissionless systems built upon blockchain technology. The firm asks the legislators and European Council to revise Article 30 to prevent the new law from capturing permissionless and transparent elements of blockchain technology.

Blockchain Tech Experts Consider Article 30 as Incapacitating Smart Contracts

Polygon decries that the Data Act version enacted by the European Parliament outlined essential conditions that smart contracts should fulfill, particularly those involved in data sharing. The letter cautions the legislators that adopting the Act without amending the sections to identify the parties, such as those operating smart contracts, would make the provision inhibitive. In particular, it makes the article unenforceable in matters involving decentralized, open, and permissionless applications of smart contracts. The letter considers such eventualities inhibiting EU efforts to spur innovation and economic prosperity in the region.

The ambiguity of Data Act provisions is attracting criticism from experts as confusing. Michael Lewellen of OpenZeppelin admitted that the current version would severely incapacitate smart contracts. The executive heading solution architecture indicated that the current wording portrayed a killer switch to smart contracts. It would hinder immutability guarantees since it introduces the basis of failure.

Schrepel’s Criticism of Article 30 as Ambiguous and Enforceable

Polygon’s letter demanding clarification on Article 30 draws a similar reference as Thibault Schrepel from VU Amsterdam University illustrated. The associate professor tore to the provisions lamenting the current wording endangers smart contracts to an unpredictable extent.

The redrafted bill by lawmakers Pillar Castilo Vero makes it an ambiguous legal text. Schrepel questions who among the parties have the power to activate the kill switch within the smart contract. The blockchain expert in legal matters alleges that the current wording inhibits the fundamental principle that no individuals should alter automated programs.

Schrepel reveals that the primary issue concerns the failure to illustrate the party who will control the killer switch to the smart contract. The legal specialist indicated that several parties, including the creator, public authorities, and the court, could exercise such control.

Smart contract creators can control the killer switch during emergency cases. However, exercising such control could extinguish the popular claim that creators are decentralized and do not control smart contracts.

The legal specialist considers that the current version would readily apply to machine-to-machine data sharing without contention. Nevertheless, its application in DeFi could trigger concerns over its viability.

The emerging criticism of the Data Act is timely as the 2022 EU bill is subjected to negotiations between the member countries, EU Commission and EU Council. The bill seeks to empower individuals to exercise control over information sharing within smart devices.

Polygon is petitioning for the Data Act to portray consistency with the approach and pronouncement adopted within the Markets in Crypto Assets (MiCA) subjected to a final voting on Wednesday April 19. MiCA’s current version is a product of extensive negotiations undertaken by the council, commission and parliament representatives.

It is unlikely that the EU policymakers would overlook the pertinent issues raised by stakeholders on the ambiguity inherent in Article 30 of the Data Act.

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Michael Scott

By Michael Scott

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