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I am a big fan of cryptocurrency, but completely agree with you about smart contracts. From a legal perspective, as you point out, they are ridiculous, because

I am a big fan of cryptocurrency, but completely agree with you about smart contracts. From a legal perspective, as you point out, they are ridiculous, because they can't encode legally "interesting" contracts. Many people seem to think that smart contracts can be used to replace more economic-oriented contacts, like "paying dividends to shareholders". Unfortunately here they are also useless -- the only contracts you can effectively have are zero-sum contracts; you can't have an unfunded future obligation. Even the most basic of financial contracts, like "I'll give you $500 now and you give me $50 a month for the next 12 months", can't be effectively encoded unless I (the debtor) has $600 at the time of the issuance of the contract, so why am I taking a loan for $500? The best you can do is create a certain class of non-deliverable futures, but in the process, tying up the funds until the contract matures, and essentially preventing the use of credit in the process, which makes them useless except for toy applications.

antonvs 10y ago
> Even the most basic of financial contracts, like "I'll give you $500 now and you give me $50 a month for the next 12 months", can't be effectively encoded The more interesting and viable use cases are actually more complex contracts. As a simple example consider a syndicated loan, where loan payments are distributed amongst a group. A smart contract could automate that distribution. There are much more complex examples with multi-directional cashflows between multiple parties, where smart contracts could absolutely take care of the day to day execution of the contract. There seems to be some confusion over the term "contract" in this context, though. Many people tend to jump to thinking it means "anything that could possibly be written in a legal contract," but the reality is that the subset of things which could be easily automated by smart contracts is enormous, worth trillions of dollars annually, even though there's a much bigger chunk that's not currently automatable.
Hermel 10y ago
If you read the following excellent comment by Matt Levine, you might recognise that there is huge potential in moving dividend payments and other standard transactions to the blockchain: https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares https://www.bloomberg.com/view/articles/2017-02-17/dole-food...
Digory 10y ago
We can get most of the way around problems like that, can't we? If there's no payment, you get an immediately collectable judgment against debtor, or trigger a transfer in other payment streams (from an employer, etc.) or transfers in non-cash collateral (which, depending on the success of block chain, could eventually include block-chain titles to cars, property, other securities, etc.). Usually, banks only lend to the cash poor but asset rich, so that's not so different. I see blockchain eventually becoming key for short term rental -- hotels, cars maybe. But the legal complexity between the law of hotel rooms and rental houses is huge.

antonvs 10y ago

> Even the most basic of financial contracts, like "I'll give you $500 now and you give me $50 a month for the next 12 months", can't be effectively encoded The more interesting and viable use cases are actually more complex contracts. As a simple example consider a syndicated loan, where loan payments are distributed amongst a group. A smart contract could automate that distribution. There are much more complex examples with multi-directional cashflows between multiple parties, where smart contracts could absolutely take care of the day to day execution of the contract. There seems to be some confusion over the term "contract" in this context, though. Many people tend to jump to thinking it means "anything that could possibly be written in a legal contract," but the reality is that the subset of things which could be easily automated by smart contracts is enormous, worth trillions of dollars annually, even though there's a much bigger chunk that's not currently automatable.

Hermel 10y ago

If you read the following excellent comment by Matt Levine, you might recognise that there is huge potential in moving dividend payments and other standard transactions to the blockchain: https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares https://www.bloomberg.com/view/articles/2017-02-17/dole-food...

Digory 10y ago

We can get most of the way around problems like that, can't we? If there's no payment, you get an immediately collectable judgment against debtor, or trigger a transfer in other payment streams (from an employer, etc.) or transfers in non-cash collateral (which, depending on the success of block chain, could eventually include block-chain titles to cars, property, other securities, etc.). Usually, banks only lend to the cash poor but asset rich, so that's not so different. I see blockchain eventually becoming key for short term rental -- hotels, cars maybe. But the legal complexity between the law of hotel rooms and rental houses is huge.