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The legal system has failure modes that are just as easily exploitable, but humans can intervene and reverse the failure, make people whole, etc. The problem w

The legal system has failure modes that are just as easily exploitable, but humans can intervene and reverse the failure, make people whole, etc. The problem with smart contracts isn't that there are bugs, but that buggy results are final with little to no recourse, by design, unless you get everyone to agree to hard fork the chain (rolling the "bad" transactions back and eplacing the buggy contract) and/or the implementation (if the bug was in the platform rather than the contract). The legal system has a similar principle of not being liable for conduct that predates a ruling or law that forbids it, but it also has the principle of agreements being interpreted according to common sense understanding by a person with ordinary skill, and where skill differences exist between them the non-expert's interpretation is the one given precedence. These meta rules don't have equivalents in smart contract systems, which makes them brittle. The only way smart contracts end up being used for non-trivial purposes is if they are made explicitly subordinate to the existing legal infrastructure in ways that will gum up the works, or if smart contracts are subject to mandatory formal verification possibly including game theoretic 2nd order effects.

LeifCarrotson 4y ago
I think a lot of the appeal of crypto/smart contracts is that they are final with little to no recourse, humans can't intervene and exploit failure modes which individuals using the so-called contracts can't defend against. Corporations and wealthy individuals with influence in the writing of this legal system, with massive amounts of financial resources, with negligible moral agency, and with limited criminal liability find very different utility in the ability to use the legal system to roll back contracts, to enforce them, or to ignore them. Those who find themselves on the other side of this power disparity would often prefer to risk a potentially buggy but inviolate contract than one which they expect to be abused against them.
- jeffbee 4y ago
  I don't know what jurisprudence you live under, but under English common law (also America, Canada, etc) - which, I must say, I also always denounce and rarely defend - inequitable negotiating power between parties to a contract is considered by courts when adjudicating whether parties have broken it or can be awarded damages. We don't have a system where big powerful organizations can just dictate contracts to powerless individuals and then later enforce them.
  - thaway2839 4y ago
    Unfortunately US courts have taken a very dim view towards adjusting balance of power. For example, I don't think there's anywhere else where the mere act of purchasing a product or service can result in you giving up the right to sue the company in court and be forced to enter arbitration with an arbiter of the company's choice.
- mbreese 4y ago
  I want to know what kind of contracts people entered into before this where they thought they were being abused by a big corporation? This seems like a noble endeavor, but not an entirely practical one. Both sides of a transaction have to agree to these smart contracts, so where is this an advantage (outside of internal crypto trading)?
  - majormajor 4y ago
    A bunch of those many-to-one individual:corporation contracts (like phone service) are in such imbalanced markets that you'd have to overcome the power balance problem in order to get the other party to adopt the "smart" contract. But if you can overcome the power balance problem, you can just fix the contracts directly anyway without them being smart?
- ummonk 4y ago
  That's ridiculous. If we're talking power disparities and differences in resources, corporations could just code up standard smart contracts with loopholes in them that allows the corporations to steal from their customers. It's not like customers have the resources to carefully audit the smart contract and make sure there aren't any backdoors that the corporation has written in to exploit.
  - theelous3 4y ago
    This is a significantly more ridiculous premise than the one you're calling ridiculous.
    - simonh 4y ago
      During the financial crisis Goldmans traded against the trades of their customers, who were making trades Goldmans had recommended they make. They made a few hundred million on it. Goldmans that is, not their customers.
  - woojoo666 4y ago
    That's like saying corporations can release complex open source code with backdoors in it and the userbase won't notice. Are there any big instances of this happening?
- ekidd 4y ago
  > Those who find themselves on the other side of this power disparity would often prefer to risk a potentially buggy but inviolate contract than one which they expect to be abused against them. There is no way that AT&T, Comcast or Bank of America will ever agree to a smart contract written by an ordinary customer. As always, the companies will write their own contracts, and customers will either accept them, or leave. And if the company has monopoly power, tough luck.
  - chii 4y ago
    so what happens if the company's smart contract has a bug in it, and the customer takes advantage of it? In an analogous situation, if a shop mis-labels the price of an item (let's say, they forgot a zero or two for a $1000 item), the customer theoretically has the legal basis to purchase it at the labeled price. How is this scenario any different to a block chain contract with a bug?
    - vageli 4y ago
      If a site has prices stored on the frontend and a user edits the price to make it lower, do you think the user has a legal basis to receive the item at their new specified price? I don't think many jurisdictions would say they do. Further, in many places your example itself falls apart. https://smallbusiness.chron.com/company-advertising-price-wrong-responsible-mistake-73117.html https://smallbusiness.chron.com/company-advertising-price-wr... https://www.findlaw.com/smallbusiness/business-contracts-forms/is-an-advertisement-an-offer.html https://www.findlaw.com/smallbusiness/business-contracts-for...
      - nybble41 4y ago
        > If a site has prices stored on the frontend and a user edits the price to make it lower, do you think the user has a legal basis to receive the item at their new specified price? There was a case like that in the early days of online shopping, which was actually decided in favor of the customer. The prices of items in the shopping cart were stored in form fields, and the customer edited them before placing the order. The court considered that a counter-offer which was accepted by the store. (It probably wouldn't go that way today; for one thing online stores have gotten smarter about trusting data from the client.) That's a bit different from simply editing the client-side view and never informing the merchant about the change, of course.
chx 4y ago
There was a wonderful summary of what smart contracts are. https://twitter.com/qrs/status/1395784294451265536 https://twitter.com/qrs/status/1395784294451265536 > Smart contracts should be considered self-funded bug-bounty platforms.
- cinntaile 4y ago
  Mark the "should". It's just an opinion, not a fact.
  - arcticbull 4y ago
    More like a piñata full of money sitting next to a whole pile of sticks.
    - cinntaile 4y ago
      I get that you share the opinion of the tweet. It still does not mean that this is how the legal system will see it.
      - arcticbull 4y ago
        Yeah, you're totally right. I'm very curious to see where things settle out. How does one ever infer intent from a system with anonymous contributors? We do live in interesting times.
  - lostcolony 4y ago
    "Should" is modifying "consider". Considering something is obviously subjective and not fact.
    - cinntaile 4y ago
      Thanks for the English lesson, I'll add it to my notes.
  - 314 4y ago
fvdessen 4y ago
AFAIK the legal system still applies to crypto; the recourse when somebody hacks your smart contract is the same as when somebody defrauds you; you sue. Except with smart contracts you have more traceability as to what happened. And you don't need to make the smart contract explicitly subordinate to the law, they are as a matter of fact, because everything de facto is. This idea that code is law and crypto exists in a vacuum is complete delirium (although a popular one and sign that the scene has a lot of room to mature)
- coffeedan 4y ago
  I mean, anyone can sue for anything, but if you're suing for this, good luck: a) finding a judge/jury that understands it, and b) collecting
  - mullingitover 4y ago
    The jury just needs to believe “this person stole something,” and there’s a good chance they’ll judge accordingly. At least there’s a good enough chance that it will happen that it will likely lead to an out of court settlement.
- zarzavat 4y ago
  The legal contract of the EVM is “you are allowed to execute any computationally legal sequence of instructions on the EVM”. At least that’s how it has always been presented. People who post smart contract code on the EVM are equal users of a shared computation infrastructure. If they want to put legal terms on who can use their smart contract and what for, they should need to make their own blockchain platform, because they certainly don’t own Ethereum. The law already regulates mistakes in traditional markets. If you accidentally sell your shares for a fraction of what they are worth, you cannot go to a judge and ask them to return the “stolen” shares. When you subject yourself to a mechanistic market system, the predictable operation of the system is more important than any participant’s bad fortunes.
  - vageli 4y ago
    > The legal contract of the EVM is “you are allowed to execute any computationally legal sequence of instructions on the EVM”. Where is this contract? I've never seen it. The rest of your argument is based on this premise. The "legal contract" of a computer program is the same, yet we have laws on what you can and can't do to other people's computer programs. > The law already regulates mistakes in traditional markets. If you accidentally sell your shares for a fraction of what they are worth, you cannot go to a judge and ask them to return the “stolen” shares. Someone taking all the money from a smart contract you gave money to is not like your fictional example of a person selling their shares for the wrong value.

LeifCarrotson 4y ago

I think a lot of the appeal of crypto/smart contracts is that they are final with little to no recourse, humans can't intervene and exploit failure modes which individuals using the so-called contracts can't defend against. Corporations and wealthy individuals with influence in the writing of this legal system, with massive amounts of financial resources, with negligible moral agency, and with limited criminal liability find very different utility in the ability to use the legal system to roll back contracts, to enforce them, or to ignore them. Those who find themselves on the other side of this power disparity would often prefer to risk a potentially buggy but inviolate contract than one which they expect to be abused against them.

jeffbee 4y ago
I don't know what jurisprudence you live under, but under English common law (also America, Canada, etc) - which, I must say, I also always denounce and rarely defend - inequitable negotiating power between parties to a contract is considered by courts when adjudicating whether parties have broken it or can be awarded damages. We don't have a system where big powerful organizations can just dictate contracts to powerless individuals and then later enforce them.
- thaway2839 4y ago
  Unfortunately US courts have taken a very dim view towards adjusting balance of power. For example, I don't think there's anywhere else where the mere act of purchasing a product or service can result in you giving up the right to sue the company in court and be forced to enter arbitration with an arbiter of the company's choice.
mbreese 4y ago
I want to know what kind of contracts people entered into before this where they thought they were being abused by a big corporation? This seems like a noble endeavor, but not an entirely practical one. Both sides of a transaction have to agree to these smart contracts, so where is this an advantage (outside of internal crypto trading)?
- majormajor 4y ago
  A bunch of those many-to-one individual:corporation contracts (like phone service) are in such imbalanced markets that you'd have to overcome the power balance problem in order to get the other party to adopt the "smart" contract. But if you can overcome the power balance problem, you can just fix the contracts directly anyway without them being smart?
ummonk 4y ago
That's ridiculous. If we're talking power disparities and differences in resources, corporations could just code up standard smart contracts with loopholes in them that allows the corporations to steal from their customers. It's not like customers have the resources to carefully audit the smart contract and make sure there aren't any backdoors that the corporation has written in to exploit.
- theelous3 4y ago
  This is a significantly more ridiculous premise than the one you're calling ridiculous.
  - simonh 4y ago
    During the financial crisis Goldmans traded against the trades of their customers, who were making trades Goldmans had recommended they make. They made a few hundred million on it. Goldmans that is, not their customers.
- woojoo666 4y ago
  That's like saying corporations can release complex open source code with backdoors in it and the userbase won't notice. Are there any big instances of this happening?
ekidd 4y ago
> Those who find themselves on the other side of this power disparity would often prefer to risk a potentially buggy but inviolate contract than one which they expect to be abused against them. There is no way that AT&T, Comcast or Bank of America will ever agree to a smart contract written by an ordinary customer. As always, the companies will write their own contracts, and customers will either accept them, or leave. And if the company has monopoly power, tough luck.
- chii 4y ago
  so what happens if the company's smart contract has a bug in it, and the customer takes advantage of it? In an analogous situation, if a shop mis-labels the price of an item (let's say, they forgot a zero or two for a $1000 item), the customer theoretically has the legal basis to purchase it at the labeled price. How is this scenario any different to a block chain contract with a bug?
  - vageli 4y ago
    If a site has prices stored on the frontend and a user edits the price to make it lower, do you think the user has a legal basis to receive the item at their new specified price? I don't think many jurisdictions would say they do. Further, in many places your example itself falls apart. https://smallbusiness.chron.com/company-advertising-price-wrong-responsible-mistake-73117.html https://smallbusiness.chron.com/company-advertising-price-wr... https://www.findlaw.com/smallbusiness/business-contracts-forms/is-an-advertisement-an-offer.html https://www.findlaw.com/smallbusiness/business-contracts-for...
    - nybble41 4y ago
      > If a site has prices stored on the frontend and a user edits the price to make it lower, do you think the user has a legal basis to receive the item at their new specified price? There was a case like that in the early days of online shopping, which was actually decided in favor of the customer. The prices of items in the shopping cart were stored in form fields, and the customer edited them before placing the order. The court considered that a counter-offer which was accepted by the store. (It probably wouldn't go that way today; for one thing online stores have gotten smarter about trusting data from the client.) That's a bit different from simply editing the client-side view and never informing the merchant about the change, of course.

chx 4y ago

There was a wonderful summary of what smart contracts are. https://twitter.com/qrs/status/1395784294451265536 https://twitter.com/qrs/status/1395784294451265536 > Smart contracts should be considered self-funded bug-bounty platforms.

cinntaile 4y ago
Mark the "should". It's just an opinion, not a fact.
- arcticbull 4y ago
  More like a piñata full of money sitting next to a whole pile of sticks.
  - cinntaile 4y ago
    I get that you share the opinion of the tweet. It still does not mean that this is how the legal system will see it.
    - arcticbull 4y ago
      Yeah, you're totally right. I'm very curious to see where things settle out. How does one ever infer intent from a system with anonymous contributors? We do live in interesting times.
- lostcolony 4y ago
  "Should" is modifying "consider". Considering something is obviously subjective and not fact.
  - cinntaile 4y ago
    Thanks for the English lesson, I'll add it to my notes.
- 314 4y ago

fvdessen 4y ago

AFAIK the legal system still applies to crypto; the recourse when somebody hacks your smart contract is the same as when somebody defrauds you; you sue. Except with smart contracts you have more traceability as to what happened. And you don't need to make the smart contract explicitly subordinate to the law, they are as a matter of fact, because everything de facto is. This idea that code is law and crypto exists in a vacuum is complete delirium (although a popular one and sign that the scene has a lot of room to mature)

coffeedan 4y ago
I mean, anyone can sue for anything, but if you're suing for this, good luck: a) finding a judge/jury that understands it, and b) collecting
- mullingitover 4y ago
  The jury just needs to believe “this person stole something,” and there’s a good chance they’ll judge accordingly. At least there’s a good enough chance that it will happen that it will likely lead to an out of court settlement.
zarzavat 4y ago
The legal contract of the EVM is “you are allowed to execute any computationally legal sequence of instructions on the EVM”. At least that’s how it has always been presented. People who post smart contract code on the EVM are equal users of a shared computation infrastructure. If they want to put legal terms on who can use their smart contract and what for, they should need to make their own blockchain platform, because they certainly don’t own Ethereum. The law already regulates mistakes in traditional markets. If you accidentally sell your shares for a fraction of what they are worth, you cannot go to a judge and ask them to return the “stolen” shares. When you subject yourself to a mechanistic market system, the predictable operation of the system is more important than any participant’s bad fortunes.
- vageli 4y ago
  > The legal contract of the EVM is “you are allowed to execute any computationally legal sequence of instructions on the EVM”. Where is this contract? I've never seen it. The rest of your argument is based on this premise. The "legal contract" of a computer program is the same, yet we have laws on what you can and can't do to other people's computer programs. > The law already regulates mistakes in traditional markets. If you accidentally sell your shares for a fraction of what they are worth, you cannot go to a judge and ask them to return the “stolen” shares. Someone taking all the money from a smart contract you gave money to is not like your fictional example of a person selling their shares for the wrong value.