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I think his meaning is quite clear: Since smart contracts automatically execute, the liability of legal non-enforceability is overbalanced by their inherent avoidance the legal system to as high a degree as possible.
Indeed, there are many contexts e.g. cross-border financial deals between individuals, in which the costs of legal recourse are usually prohibitive -- the burden of lawsuit outweighs the ex ante (and often even ex-post) benefit of its use to incentivize performance.
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Very true. Not to mention the biggest 'transaction cost' of all--which is that when two parties sufficiently distrust one or more of the applicable legal systems, the 'transaction' simply might never occur at all. Trust-minned escrows could seal deals that otherwise wouldn't go.
Indeed, cross-border financial transactions between nearly all individuals are extremely rare, but have IMHO vast potential if their performance could be efficiently incentivized.
The question isn’t whether there’s vast potential. The question is whether “smart contract” & “smart property” terminology are the best tactical/strategic choices for global scaling.
While law is territorial (&based on outdated categories like person&object),thequestion is how to allowpeople to transact in manners they want in a de-territorialized,depersonalized world with hardlyanydistinctions between persons,objects&where clear identification is difficult.
First, it’s nice to see a “usually” reappear amidst the sea of categorical imperatives. Second, to make sure we’re on the same page regarding “burden of lawsuit,” we offer this:https://medium.com/cryptolawreview/how-expensive-was-your-last-refund-dispute-with-target-or-another-big-box-retailer-when-you-70d41ab474ba …
Third, how does “smart contract” lower the “cost of enforcement” exactly? Thus far, the conceptual engine that’s doing this sounds like the following: “Smart Ks hyper-incentivize bilateral performance, so that, statistically, non-performance is reduced to *just* 1% of the time!”
It lowers the cost of enforcement because the assets flow based on the code--thus, going to court is less likely to be necessary for the party that ends up with asset possession. As Nick mentioned, cross-border deals (+ very low $ value deals) are one area where this could help.
We hear you, but “going to court less likely” sounds an awful lot like “legal enforcement” in those cases where it will still be done. So, “legal enforcement” is not eliminated but “minimized” — but how? Right now, the “answers” are anecdotal examples of “high risk” transactions.
No. If/since they’re legally unenforceable, no legal enforcement is possible. That’s a downside that can be expressed as a liability. Just as the reduction in likelihood can be expressed as an asset. The question isn’t either/or — it’s the balance.
The parties can if they choose write a traditional K to backstop a smart K, although in many situations where a smart contract is useful the exercise would be pointless because the ex ante burden of lawsuit is higher than its added performance incentive benefits.
Also, legal recourse usually necessarily compromises privacy, so SCs add value for cases where being anon/pseudo anon is important by minimizing the risk of exposure via legal entanglement, and thus generally expand the economic scope of bearer instruments.
Agreed,insomesense, what law actually mostly does is instill fear of punishment in case of non-execution.there are ways to bypass fear by technological design.but code in direct opposition to law brings fraudsters...can we use technological argument to change law&maybe replace it
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