The Limits of Smart Contracts
Journal of Institutional and Theoretical Economics (JITE), published Online First February 1, DOI: 10.1628/jite-2019-0021 (2019).
Posted: 17 Feb 2019
Date Written: February 1, 2019
This essay investigates the potential of smart contracts to replace the legal system as an infrastructure for transactions. It argues that (contract) law remains relevant in most transactions even if they are entirely structured by way of smart contract. The reason for this is that the power of smart contracts to create and enforce obligations against attempts by the legal system to thwart their execution is limited. These limitations are most relevant for obligations to perform certain actions outside the blockchain, but also apply to other obligations contingent on facts outside the records stored on the blockchain.
Keywords: Blockchain, Cryptocurrency, Tokens, Smart Contracts, Distributed Ledgers, Bitcoin, Ethereum, Open Source, Contract Law, Regulability
JEL Classification: K12, K24, K42, L14, O33
Suggested Citation: Suggested Citation