Nick Szabo  🔑

Worrying about whether a smart contract is "legally enforceable" reflects a profound misunderstanding. The main relation of smart Ks to traditional courts is that smart Ks control burden of lawsuit. If "possession is 90% of the law", then a good smart K may be "99% of the law".

It shows a profound misunderstanding of what? Also not clear how Rothbardian property law/theory analogies to “9/10ths” presumptions in property disputes are apposite here? Please explain/clarify.

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.

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.