5 ms·

I do get it. I just don't think that's realistic. What smart contracts should be according to you is mostly irrelevant to how the law will treat them.

jacquesm 9y ago
You still don't get it. The law will not have anything to say about smart contracts because the law will not be able to enforce a contract one way or another depending on some judge but it will simply execute and that's the end of that. This so that some guy in China or India and some guy in the United States can agree on terms without having to haggle over whose legal jurisdiction will kick in if and when there is a dispute about the contract. Until we get a world government and until judges are able to order millions of nodes all over the world to do a hard fork there is no way around a smart contract environment that actually works. But we don't have that at the present, Ethereum as far as I'm concerned was DOA because of DAO.
- marcoperaza 9y ago
  However a smart contract between you and me may execute, a court can still order me to give you money, or order me to enter into a different smart contract. And if I don't comply, they will eventually hold me in contempt and at some point seize my property by force and throw me in jail if I resist. The authority of the state ultimately rests on its ability to resort to violence to enforce its will. No smart contract can change that.
  - jacquesm 9y ago
    > However a smart contract between you or me may execute, a court can still order me to give you money, Just like that judge that ordered the DAO hack to be reversed? > or order me to enter into a different smart contract. No, a judge will never order anybody to enter into a different smart contract just like they don't order people into regular contracts today. > And if I don't comply, they will eventually hold me in contempt and at some point seize my property by force and throw me in jail if I resist. Judges have a lot of power, but they can't enforce their views on people not in their jurisdiction without the cooperation of judges and governments in other countries. This is one of the major drivers behind the development of smart contracts. I think that for those situations where 'dumb' contracts suffice they will continue to be used and the courts will continue to have their power. But precisely for those situations where the courts do not have such power smart contracts are a potential solution. > The authority of the state ultimately rests on its exclusive right to resort to violence to enforce its will. No smart contract can change that. The world is larger than just your own country.
    - marcoperaza 9y ago
      >The world is larger than just your own country. Not too much larger, considering that every major company and country has large amounts of assets and other financial interests that are subject to US jurisdiction. The government of Argentina recently learned that the hard way when American courts forced them to honor their sovereign debt, or have their US-based assets seized to pay them. The same applies if you want to do business in India, China, or Europe. Submit to their judgments or see your assets and interests in their jurisdiction confiscated or destroyed. Another recent example of this is French courts applying the "right to be forgotten" extraterritorially. >No, a judge will never order anybody to enter into a different smart contract just like they don't order people into regular contracts today. They certainly do, in effect. A court judgment very often creates new obligations between the parties. And if entering a new smart contract is the only way to right some legal wrong, then they can order that too. An American court, at least, can order just about anything it needs to in order to enforce its judgments.
      - jacquesm 9y ago
        Look, once more: I'm not saying smart contracts work at present. But if they work then judges would be without tools to do anything about it, that's a matter of definition, if you choose to define a smart contract in a way that does not agree with how the rest of the world views them then that's fine with me but it voids the discussion. Any contract that has all the outward aspects of being a smart contract but that allows a judge (or anybody else for that matter) to influence the outcome once it is activated is by definition a failed smart contract.
        bsaul 9y ago
        so the scope of smart contract in your definition can only cover areas not already governed by traditional regulatory system / laws. Imho that doesn't cover a lot. or laws will have to be adapted to grant values to them. But then it isn't much different from today's contracts.
        9y ago
  - learc83 9y ago
    Assuming you live in a certain subset of countries, sure that could happen (take a look at what happens when an American sues a Chinese citizen). But it defeats the purpose of a smart contract. If everyone agrees that smart contracts will pay out when they are fufilled. But only if they are fufilled in the specific way each party believes they should be (as opposed to what the code actually says)--then there is no point in smart contracts. A potential solution is some form of very explicit disclaimer that states you are agreeing X should be paid when the code in contract Y executes, not when the condition you believe the code in contract Y tests for is met. Of course a court could still ignore the disclaimer.
    - marcoperaza 9y ago
      The problem is that, for better or for worse, people do not have full freedom of contract by law. There are volumes upon volumes of laws and regulations limiting the kind of financial contracts, for example, that you are allowed to enter into. Every bank has a massive compliance department dedicated to making sure that they abide by those rules. You can't just ignore these rules by making a system that executes contracts automatically. The judge will simply order you to make the other party whole. Then, if the law allows it, he might hit you with a massive fine for breaking the rules.
      - learc83 9y ago
        That's what I meant when I said courts might chose to ignore the disclaimer. It is possible you could eventually be able to sign something making the smart contract a form of binding arbitration. But you're correct, courts law enforcement isn't going to let you enter into illegal contracts just because it's a smart contract.
- gjjrfcbugxbhf 9y ago
  If you try to argue this to a judge you will most likely end up doing some time for contempt of court. I am not a lawyer and not your lawyer.
  - jacquesm 9y ago
    Keep in mind that the parties entering into a smart contract may not even be known, so who will do the arguing?
- canoebuilder 9y ago
  >This so that some guy in China or India and some guy in the United States can agree on terms without having to haggle over whose legal jurisdiction will kick in >there is no way around a smart contract environment that actually works. What about the present system where people develop trusting relationships in business and elsewhere and deal with the occasional anomalies and breaches of trust as they arise, but in the big picture they're not really a deal breaker because they are relatively rare and we humans are wired for socially harmonious behaviour and mutually beneficial actions. Is that a way around it? It seems to have been working decently well thus far in terms of facilitating extensive commercial networks around the world.
  - jacquesm 9y ago
    > Is that a way around it? No, that's an alternative, and smart contracts are attempting to become a way around that.
    - canoebuilder 9y ago
      Well it's not really an alternative, it's just reality at the moment, so long as smart contracts are more theory than practical. What if trust is a feature not a bug? Why is it something we need to engineer around?
      - jacquesm 9y ago
        > What if trust is a feature not a bug? But not everybody can be trusted. > Why is it something we need to engineer around? We don't, but that won't stop it from happening and it is usually better to enter those situations informed rather than arguing from what world it would be nicer to live in. When the automobile entered mass production the world changed. You could have of course argued that this made the world a worse place to live in (which it did in many respects) but the reality was that once invented people apparently wanted automobiles and that demand ended up being satisfied. If enough people want smart contracts they will be a fact of life, knowing their limitations, how to deal with them and whether or not you should enter into one is important knowledge. No amount of sticking your head in the sand will reverse the course of history, smart contracts will happen, or they won't and if they do it will pay off to know about them. Right now they're on the edge of being useful, in a few more years we will know for sure whether or not they were a fad or a harbinger of a novelty whose impact will be hard to predict. I don't like them but I do believe they will happen and I also believe that they will alter our societies in material ways.
- lmm 9y ago
  The "contract execution" can't touch anything in the real world. People do that. Maybe a "smart contract" says Joe Hacker is entitled to reside in 168 Park Avenue. Maybe everyone on the Ethereum blockchain agrees that Joe is entitled to reside in 168 Park Avenue. If a judge rules that it's Bob's house and Joe has no right to be there, that's gonna trump all of that, if only because the judge has more people with guns to call on.
  - jacquesm 9y ago
    The contract execution is only going to work if all parties bound by it agree that the execution is the full extent of their agreement. For instance, if two people who have no business to reside in 168 Park Avenue make up a contract in 'the real world' that the other can go and occupy 168 Park Avenue then they will find - probably not to their surprise - that their agreement will not work, regardless of which medium it is conveyed on. Smart contracts are a tool for those situations where you believe present day law is going to leave you stranded or in a situation that is legally ambiguous. I do not believe their strength lies in areas that are already properly governed by existing law. Now you could argue that that is all of society as we know it right now, but in international commerce there are quite a few legally gray areas that are now patched over with mechanisms such as escrow and various other instruments. But those are only 'worth it' when the transaction amounts are larger than a certain minimum. So, in short, you are absolutely right, if you use a smart contract in a situation where a regular contract would suffice it will not change anything. All the parties to the contract are known, the whole thing has immediately verifiable effects in the real world and 'might makes right'. But in situations where the participants would like to remain anonymous, in situations where both parties would for reasons known to them rather avoid dealing with lawyers, the law and associated mechanisms smart contracts could become an enabling device.
canoebuilder 9y ago
It sounds like you're both in agreement that it doesn't seem realistic. What jacquesm is explaining is that the intention of "smart contracts" is to work entirely outside the existing legal system. There is no need for adjudication of any contract by a court because the contract is the law and the court. Put in X out comes Y,every time. No room for interpretation, just pure beautiful math. That was the idea anyway, for some reason it seems they decided to implement some of these contracts in a not particularly rigorous way. Jacques is talking about the theory and premise behind the smart contracts, and you Marco are talking about the people interacting with the smart contracts. People who of course are existing under the scope of our present legal systems. As long as real people can be hauled before a real court I think this is the crux of the misunderstanding. Because actions can be taken in these crypto-systems more or less anonymously, it is not obvious that you can "haul some one before a real court" should they wrong you in some way, and in those cases when you have parties interacting in these systems anonymously, the laws of the crypto-systems are the extent of the laws they are operating under. Provided extensive investigative effort isn't undertaken to unmask anyone operating anonymously.
- throwawayjava 9y ago
  > it is not obvious that you can "haul some one before a real court" should they wrong you in some way... the laws of the crypto-systems are the extent of the laws they are operating under Tell that to Ross Ulbricht. Anonymity is not a guarantee of immunity from the long arm and unforgiving memory of the law. Especially in the United States.

jacquesm 9y ago

You still don't get it. The law will not have anything to say about smart contracts because the law will not be able to enforce a contract one way or another depending on some judge but it will simply execute and that's the end of that. This so that some guy in China or India and some guy in the United States can agree on terms without having to haggle over whose legal jurisdiction will kick in if and when there is a dispute about the contract. Until we get a world government and until judges are able to order millions of nodes all over the world to do a hard fork there is no way around a smart contract environment that actually works. But we don't have that at the present, Ethereum as far as I'm concerned was DOA because of DAO.

marcoperaza 9y ago
However a smart contract between you and me may execute, a court can still order me to give you money, or order me to enter into a different smart contract. And if I don't comply, they will eventually hold me in contempt and at some point seize my property by force and throw me in jail if I resist. The authority of the state ultimately rests on its ability to resort to violence to enforce its will. No smart contract can change that.
- jacquesm 9y ago
  > However a smart contract between you or me may execute, a court can still order me to give you money, Just like that judge that ordered the DAO hack to be reversed? > or order me to enter into a different smart contract. No, a judge will never order anybody to enter into a different smart contract just like they don't order people into regular contracts today. > And if I don't comply, they will eventually hold me in contempt and at some point seize my property by force and throw me in jail if I resist. Judges have a lot of power, but they can't enforce their views on people not in their jurisdiction without the cooperation of judges and governments in other countries. This is one of the major drivers behind the development of smart contracts. I think that for those situations where 'dumb' contracts suffice they will continue to be used and the courts will continue to have their power. But precisely for those situations where the courts do not have such power smart contracts are a potential solution. > The authority of the state ultimately rests on its exclusive right to resort to violence to enforce its will. No smart contract can change that. The world is larger than just your own country.
  - marcoperaza 9y ago
    >The world is larger than just your own country. Not too much larger, considering that every major company and country has large amounts of assets and other financial interests that are subject to US jurisdiction. The government of Argentina recently learned that the hard way when American courts forced them to honor their sovereign debt, or have their US-based assets seized to pay them. The same applies if you want to do business in India, China, or Europe. Submit to their judgments or see your assets and interests in their jurisdiction confiscated or destroyed. Another recent example of this is French courts applying the "right to be forgotten" extraterritorially. >No, a judge will never order anybody to enter into a different smart contract just like they don't order people into regular contracts today. They certainly do, in effect. A court judgment very often creates new obligations between the parties. And if entering a new smart contract is the only way to right some legal wrong, then they can order that too. An American court, at least, can order just about anything it needs to in order to enforce its judgments.
    - jacquesm 9y ago
      Look, once more: I'm not saying smart contracts work at present. But if they work then judges would be without tools to do anything about it, that's a matter of definition, if you choose to define a smart contract in a way that does not agree with how the rest of the world views them then that's fine with me but it voids the discussion. Any contract that has all the outward aspects of being a smart contract but that allows a judge (or anybody else for that matter) to influence the outcome once it is activated is by definition a failed smart contract.
      - bsaul 9y ago
        so the scope of smart contract in your definition can only cover areas not already governed by traditional regulatory system / laws. Imho that doesn't cover a lot. or laws will have to be adapted to grant values to them. But then it isn't much different from today's contracts.
        9y ago
- learc83 9y ago
  Assuming you live in a certain subset of countries, sure that could happen (take a look at what happens when an American sues a Chinese citizen). But it defeats the purpose of a smart contract. If everyone agrees that smart contracts will pay out when they are fufilled. But only if they are fufilled in the specific way each party believes they should be (as opposed to what the code actually says)--then there is no point in smart contracts. A potential solution is some form of very explicit disclaimer that states you are agreeing X should be paid when the code in contract Y executes, not when the condition you believe the code in contract Y tests for is met. Of course a court could still ignore the disclaimer.
  - marcoperaza 9y ago
    The problem is that, for better or for worse, people do not have full freedom of contract by law. There are volumes upon volumes of laws and regulations limiting the kind of financial contracts, for example, that you are allowed to enter into. Every bank has a massive compliance department dedicated to making sure that they abide by those rules. You can't just ignore these rules by making a system that executes contracts automatically. The judge will simply order you to make the other party whole. Then, if the law allows it, he might hit you with a massive fine for breaking the rules.
    - learc83 9y ago
      That's what I meant when I said courts might chose to ignore the disclaimer. It is possible you could eventually be able to sign something making the smart contract a form of binding arbitration. But you're correct, courts law enforcement isn't going to let you enter into illegal contracts just because it's a smart contract.
gjjrfcbugxbhf 9y ago
If you try to argue this to a judge you will most likely end up doing some time for contempt of court. I am not a lawyer and not your lawyer.
- jacquesm 9y ago
  Keep in mind that the parties entering into a smart contract may not even be known, so who will do the arguing?
canoebuilder 9y ago
>This so that some guy in China or India and some guy in the United States can agree on terms without having to haggle over whose legal jurisdiction will kick in >there is no way around a smart contract environment that actually works. What about the present system where people develop trusting relationships in business and elsewhere and deal with the occasional anomalies and breaches of trust as they arise, but in the big picture they're not really a deal breaker because they are relatively rare and we humans are wired for socially harmonious behaviour and mutually beneficial actions. Is that a way around it? It seems to have been working decently well thus far in terms of facilitating extensive commercial networks around the world.
- jacquesm 9y ago
  > Is that a way around it? No, that's an alternative, and smart contracts are attempting to become a way around that.
  - canoebuilder 9y ago
    Well it's not really an alternative, it's just reality at the moment, so long as smart contracts are more theory than practical. What if trust is a feature not a bug? Why is it something we need to engineer around?
    - jacquesm 9y ago
      > What if trust is a feature not a bug? But not everybody can be trusted. > Why is it something we need to engineer around? We don't, but that won't stop it from happening and it is usually better to enter those situations informed rather than arguing from what world it would be nicer to live in. When the automobile entered mass production the world changed. You could have of course argued that this made the world a worse place to live in (which it did in many respects) but the reality was that once invented people apparently wanted automobiles and that demand ended up being satisfied. If enough people want smart contracts they will be a fact of life, knowing their limitations, how to deal with them and whether or not you should enter into one is important knowledge. No amount of sticking your head in the sand will reverse the course of history, smart contracts will happen, or they won't and if they do it will pay off to know about them. Right now they're on the edge of being useful, in a few more years we will know for sure whether or not they were a fad or a harbinger of a novelty whose impact will be hard to predict. I don't like them but I do believe they will happen and I also believe that they will alter our societies in material ways.
lmm 9y ago
The "contract execution" can't touch anything in the real world. People do that. Maybe a "smart contract" says Joe Hacker is entitled to reside in 168 Park Avenue. Maybe everyone on the Ethereum blockchain agrees that Joe is entitled to reside in 168 Park Avenue. If a judge rules that it's Bob's house and Joe has no right to be there, that's gonna trump all of that, if only because the judge has more people with guns to call on.
- jacquesm 9y ago
  The contract execution is only going to work if all parties bound by it agree that the execution is the full extent of their agreement. For instance, if two people who have no business to reside in 168 Park Avenue make up a contract in 'the real world' that the other can go and occupy 168 Park Avenue then they will find - probably not to their surprise - that their agreement will not work, regardless of which medium it is conveyed on. Smart contracts are a tool for those situations where you believe present day law is going to leave you stranded or in a situation that is legally ambiguous. I do not believe their strength lies in areas that are already properly governed by existing law. Now you could argue that that is all of society as we know it right now, but in international commerce there are quite a few legally gray areas that are now patched over with mechanisms such as escrow and various other instruments. But those are only 'worth it' when the transaction amounts are larger than a certain minimum. So, in short, you are absolutely right, if you use a smart contract in a situation where a regular contract would suffice it will not change anything. All the parties to the contract are known, the whole thing has immediately verifiable effects in the real world and 'might makes right'. But in situations where the participants would like to remain anonymous, in situations where both parties would for reasons known to them rather avoid dealing with lawyers, the law and associated mechanisms smart contracts could become an enabling device.

canoebuilder 9y ago

It sounds like you're both in agreement that it doesn't seem realistic. What jacquesm is explaining is that the intention of "smart contracts" is to work entirely outside the existing legal system. There is no need for adjudication of any contract by a court because the contract is the law and the court. Put in X out comes Y,every time. No room for interpretation, just pure beautiful math. That was the idea anyway, for some reason it seems they decided to implement some of these contracts in a not particularly rigorous way. Jacques is talking about the theory and premise behind the smart contracts, and you Marco are talking about the people interacting with the smart contracts. People who of course are existing under the scope of our present legal systems. As long as real people can be hauled before a real court I think this is the crux of the misunderstanding. Because actions can be taken in these crypto-systems more or less anonymously, it is not obvious that you can "haul some one before a real court" should they wrong you in some way, and in those cases when you have parties interacting in these systems anonymously, the laws of the crypto-systems are the extent of the laws they are operating under. Provided extensive investigative effort isn't undertaken to unmask anyone operating anonymously.

throwawayjava 9y ago
> it is not obvious that you can "haul some one before a real court" should they wrong you in some way... the laws of the crypto-systems are the extent of the laws they are operating under Tell that to Ross Ulbricht. Anonymity is not a guarantee of immunity from the long arm and unforgiving memory of the law. Especially in the United States.