Smart Contracts and Transaction Costs
20 Pages Posted: 16 Nov 2018 Last revised: 16 Apr 2020
Date Written: September 25, 2018
Over the last years, with the sudden and rising appeal of blockchain technology, some scholars have begun to investigate smart contracts, namely blockchain-enforced agreements. According to enthusiastic (and naïve) views, smart contracts are supposed to allow parties to conduct transactions more efficiently than traditional or semantic contracts. This paper challenges that claim. I argue that because of the need for an efficiency-enhancing adaptation of institutional arrangements—a chief problem of transaction cost economics—smart contracts may incur higher transaction costs than semantic contracts.
Keywords: Adaptation, Blockchain, Enforcement, Incomplete contracts, Smart contracts, Transaction costs
JEL Classification: D23, D86, L14, L86, O33
Suggested Citation: Suggested Citation