Law and the Blockchain

66 Pages Posted: 22 Feb 2018 Last revised: 6 May 2018

See all articles by Usha Rodrigues

Usha Rodrigues

University of Georgia School of Law

Date Written: February 21, 2018

Abstract

All contracts are necessarily incomplete. The inefficiencies of bargaining over every contingency, coupled with humans’ innate bounded rationality, mean that contracts cannot anticipate and address every potential eventuality. One role of law is to fill gaps in incomplete contracts with default rules. The blockchain is a distributed ledger that allows the cryptographic recording of transactions and permits “smart” contracts that self-execute automatically if their conditions are met. Because humans code the contracts of the blockchain, gaps in these contracts will arise. Yet in the world of “smart contracting” on the blockchain, there is no place for the law to step in to supply default rules — no legal intervention point. The lack of a legal intervention point means that law on the blockchain works in a fundamentally different way from law in the corporeal world. Business organizational law provides a prime example of how the law uses default rules to fill gaps in an incomplete contract and how the law works differently in the blockchain context.

Keywords: corporate law, contracts, bitcoin, blockchain, business organizations, decentralized autonomous organization, DAO, cryptocurrency, Ethereum. disputes, business associations, corporations, partnerships, smart contracts, ledger technology, law and technology, limited liability, tokenholders

JEL Classification: K12, K22, K41, L22

Suggested Citation

Rodrigues, Usha, Law and the Blockchain (February 21, 2018). Iowa Law Review, Vol. 104, 2018, Forthcoming; University of Georgia School of Law Legal Studies Research Paper No. 2018-07. Available at SSRN: https://ssrn.com/abstract=3127782

Usha Rodrigues (Contact Author)

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States
706-242-5562 (Phone)

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