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Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. This is a fundamental misunderstanding th

Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. This is a fundamental misunderstanding the purpose of contracts. Contracts are almost by definition mutually beneficial, at least nominally. Otherwise the only reason parties would enter into them is under duress or out of ignorance. And in fact, contracts backed by a legal system are routinely struck down if either of those cases occur. What you are describing is a situation where neither party has an incentive to defect or default on the contract. And if that is the case then there was no need for a contract in the first place. For example, you and I agree to meet Friday night for dinner. This is a beneficial arrangement for both of us, neither of us need sign anything. The purpose of contracts is to solve a game-theoretic problem: it is to our mutual benefit to cooperate in some way. But if we cooperate, then one of us can do even better by defecting. For example, it might be mutually beneficial for me to give you $1,000 today, and for you to give me 100 widgets on Thursday. But if I give you $1,000 today, you can do better than the original agreement by keeping the money and the widgets. So the only reason I would ever give you $1,000 is if there was some way to enforce that you give me 100 widgets. That can be by legal means, or technological means. The threat of punishment under a legal system is one traditionally effective way to incentivize you to hold your end of the bargain, and in many ways is at the very heart of what makes modern society work. A technological solution, that avoided law enforcement and judiciary systems, has the potential to be even better because there are obvious negative effects to having a large and over-reaching police force, for example. TL;DR The enforceability of the contract is the whole point. The only reason you need a contract in the first place is because someone has an incentive to defect.

ewzimm 11y ago
Thanks. That's exactly it. People might try to counter by saying that specific cases don't work that way, but that's not what game theory predicts. It won't tell you the outcome of a specific instance of a conflict, but it will predict the overall trend when a winning strategy exists. Traditionally, the counter to exploitable strategies was the honor system. You trusted the people you interacted with not to take advantage of you because you believed in their character. While that can work in specific cases, it's not an overall good system for running a large-scale system of social interactions because it invites exploitation. We tend to think of corruption as inevitable, but the degree of corruption in a system is actually somewhat predictable by the incentives for it built into the rules of the system when that system runs at a large scale.
- mempko 11y ago
  If you asked Nash what he thought of game theory if he was alive today, he would tell you it have very little to do with how most people interact with each other. It was said earlier. People get into contracts out of desperation or ignorance. Therefore there are contracts that are not mutually beneficial. Since the vast majority of the people of this world are desperate or ignorant, ethereum can become a frightening tool. Imagine this horrific scenario. It is the year 2030. Ethereum contracts can be written where a robot comes and steals your child for slavery automatically if you don't hold your end of the bargain. Even today people sell themselves to pay off debts. Ethereum would just be another tool creditors can use to enslave people.
  - ewzimm 11y ago
    Game theory is usually presented as the science of human interaction, but I admit that I have no special knowledge about what Nash might think. I do think that individual interactions are very different from overall trends in the same way that the structure of how two grains of sand interact with each other is different from the structure of a beach as a whole. I have no doubt that every new technology invites exploitation, and you're right to think about the consequences. That's an essential part of the design process of any technology, especially one that's general useful. That's the reason why we have such complicated software licenses. But EvilCorp doesn't need smart contracts to send robots to steal your children. It will definitely use them if they're convenient, but they could just as easily go with the traditional human blood on dead trees contract that's ensnared many souls. Smart contracts add very little to their already efficient operation. But the people who can't afford to hire lawyers, bribe the police, and build robot armies will benefit a lot from enforceable contracts that don't require huge resources to enforce for purely digital transactions.
- EublepharisRex 11y ago
  Thanks for some fascinating contributions to this thread. I see both sides of the debate, and lean toward your side. But I also think both sides are probably wrong to speak as if we will have either one system or the other in the foreseeable future. I think it is more likely that government resources and law enforcement will exist alongside any trustless contract system, acting as a failsafe (or guarantor of exploitation, depending on your POV I suppose). Few contracts would be irreversible, and few holders of contracts would resist reversal, if physical violence from the state were brought to be bear, even if the issue had already been "settled" by software. I believe the reality is that Ethereum-style contracts would increase efficiencies in more routine, less controversial contracts and the state would remain the final recourse in more extreme cases. As some have said, 30 years down the road when machines are more intelligent, all bets are off. But for the foreseeable future, the state isn't going to wither away just yet. As far as people obfuscating with complex contracts, yes, of course they will do that. But the obvious implication is that a class of techno-jurists will have to arise to help advise users. Again, that's not much different than the current system of clueless folk consulting attorneys, and I imagine both systems would coexist for some time to come.

ewzimm 11y ago

Thanks. That's exactly it. People might try to counter by saying that specific cases don't work that way, but that's not what game theory predicts. It won't tell you the outcome of a specific instance of a conflict, but it will predict the overall trend when a winning strategy exists. Traditionally, the counter to exploitable strategies was the honor system. You trusted the people you interacted with not to take advantage of you because you believed in their character. While that can work in specific cases, it's not an overall good system for running a large-scale system of social interactions because it invites exploitation. We tend to think of corruption as inevitable, but the degree of corruption in a system is actually somewhat predictable by the incentives for it built into the rules of the system when that system runs at a large scale.

mempko 11y ago
If you asked Nash what he thought of game theory if he was alive today, he would tell you it have very little to do with how most people interact with each other. It was said earlier. People get into contracts out of desperation or ignorance. Therefore there are contracts that are not mutually beneficial. Since the vast majority of the people of this world are desperate or ignorant, ethereum can become a frightening tool. Imagine this horrific scenario. It is the year 2030. Ethereum contracts can be written where a robot comes and steals your child for slavery automatically if you don't hold your end of the bargain. Even today people sell themselves to pay off debts. Ethereum would just be another tool creditors can use to enslave people.
- ewzimm 11y ago
  Game theory is usually presented as the science of human interaction, but I admit that I have no special knowledge about what Nash might think. I do think that individual interactions are very different from overall trends in the same way that the structure of how two grains of sand interact with each other is different from the structure of a beach as a whole. I have no doubt that every new technology invites exploitation, and you're right to think about the consequences. That's an essential part of the design process of any technology, especially one that's general useful. That's the reason why we have such complicated software licenses. But EvilCorp doesn't need smart contracts to send robots to steal your children. It will definitely use them if they're convenient, but they could just as easily go with the traditional human blood on dead trees contract that's ensnared many souls. Smart contracts add very little to their already efficient operation. But the people who can't afford to hire lawyers, bribe the police, and build robot armies will benefit a lot from enforceable contracts that don't require huge resources to enforce for purely digital transactions.
EublepharisRex 11y ago
Thanks for some fascinating contributions to this thread. I see both sides of the debate, and lean toward your side. But I also think both sides are probably wrong to speak as if we will have either one system or the other in the foreseeable future. I think it is more likely that government resources and law enforcement will exist alongside any trustless contract system, acting as a failsafe (or guarantor of exploitation, depending on your POV I suppose). Few contracts would be irreversible, and few holders of contracts would resist reversal, if physical violence from the state were brought to be bear, even if the issue had already been "settled" by software. I believe the reality is that Ethereum-style contracts would increase efficiencies in more routine, less controversial contracts and the state would remain the final recourse in more extreme cases. As some have said, 30 years down the road when machines are more intelligent, all bets are off. But for the foreseeable future, the state isn't going to wither away just yet. As far as people obfuscating with complex contracts, yes, of course they will do that. But the obvious implication is that a class of techno-jurists will have to arise to help advise users. Again, that's not much different than the current system of clueless folk consulting attorneys, and I imagine both systems would coexist for some time to come.