Creating Markets in No-Trust Environments: The Law and Economics of Smart Contracts

Computer Law & Security Review: The International Journal of Technology Law and Practice. Vol. 35, Issue 1 (February 2019) pp. 69-88. DOI: 10.1016/j.clsr.2018.09.003

55 Pages Posted: 14 Mar 2019 Last revised: 23 Sep 2019

See all articles by Helen Eenmaa-Dimitrieva

Helen Eenmaa-Dimitrieva

University of Tartu School of Law

Maria José Schmidt-Kessen

Copenhagen Business School - CBS Law

Date Written: 2018

Abstract

Smart contracts, self-executing agreements based on blockchain technology, have the capacity to create trust in what we term no-trust contracting environments. We argue that using them in such environments is the path to unleash the full potential of smart contracts. Compared to the contract enforcement mechanisms characterized by traditional contract law or relational contracts, smart contracts can offer a superior solution for facilitating trade.

Several lawyers and economists have debated whether smart contracts might offer the prospect of cheaper, faster and better transactions. As we discuss below, contract law scholars caution that they neither replicate the relational context essential for the day-to-day practice of contracting nor offer a superior solution to problems addressed by traditional contract law, such as contract validity and legality. We clarify and systematize the current thinking on the legal nature and reliability of smart contracts, and address the concerns of contract law scholars. While doing that, we suggest a step forward in characterizing contracting environments, contract enforcement mechanisms and the trust relationship underlying contracts.

Keywords: Blockchain, Contract law, Enforcement, No-trust, Law and economics, Relational contracts, Efficient breach, Smart contracts, Trust Trustless, trust

JEL Classification: K12

Suggested Citation

Eenmaa-Dimitrieva, Helen and Schmidt-Kessen, Maria José, Creating Markets in No-Trust Environments: The Law and Economics of Smart Contracts (2018). Computer Law & Security Review: The International Journal of Technology Law and Practice. Vol. 35, Issue 1 (February 2019) pp. 69-88. DOI: 10.1016/j.clsr.2018.09.003, Available at SSRN: https://ssrn.com/abstract=3340496

Helen Eenmaa-Dimitrieva (Contact Author)

University of Tartu School of Law ( email )

Näituse 20
Tartu, 50409
Estonia

Maria José Schmidt-Kessen

Copenhagen Business School - CBS Law ( email )

Porcelaenshave 18B, 1
Frederiksberg 2000
Denmark

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
36
Abstract Views
305
PlumX Metrics