Cloud Crypto Land

27 Pages Posted: 7 Nov 2019

See all articles by Edmund-Philipp Schuster

Edmund-Philipp Schuster

London School of Economics - Law Department

Date Written: November 21, 2018

Abstract

The supposed disruptive and transformational potential of blockchain or distributed ledger technology (DLT) has received widespread attention in the media, from legislators, as well as from academics across disciplines, including law, over the past few years. While much of this attention revolved around the cryptocurrency Bitcoin (and its numerous cryptocurrency offshoots), many see the real promise of blockchain technology in its potential use for organising transactions in real assets, including shares and other securities, as well as for facilitating self-executing “smart contracts”, which replace vague and imprecise natural language with precise and unambiguous computer code.

Focussing mainly on non-currency applications of blockchain technology, I present a simple legal argument that seeks to demonstrate the impossibility of a meaningful blockchain-based economic system. I argue that features present in all major legal systems mean that real assets cannot be traded on blockchain-based systems, unless design choices are made which necessarily remove all advantages the technology offers over existing solutions. The same argument is shown to apply to so-called smart contracts.

The paper further argues that there is no reason to expect legislators to change current legal principles in sufficiently dramatic fashion so as to carve out a space in which (non-currency) applications of blockchain technology can usefully be implemented, since the oft-promised potential efficiency gains supposedly stemming from the adoption of the blockchain technology are based on a flawed analysis of costs and benefits. Legal and practical obstacles therefore mean that, outside its original and circumscribed realm of cryptocurrency, blockchain technology is highly unlikely to transform economic interactions in the real world. Instead, it is argued that – depending on the specific implementation – blockchain technology is either pointless or useless for transactions in traditional assets.

Keywords: Blockchain, distributed ledger technology, smart contracts, crypto assets, cryptoassets, Ethereum, Bitcoin, DLT

JEL Classification: K22, K12, K11

Suggested Citation

Schuster, Edmund-Philipp, Cloud Crypto Land (November 21, 2018). LSE Legal Studies Working Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=3476678

Edmund-Philipp Schuster (Contact Author)

London School of Economics - Law Department ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
300
Abstract Views
1,210
rank
103,588
PlumX Metrics