Thursday 11 November 2021

The role of law in smart contracts

My article, "スマートコントラクトと法の役割"(The Role of Law in Smart Contracts), came out from a Japanese journal last June. The text is attached to this post.

At the outset, I tried to dispel the confusion of "smart contracts" with legal contracts. That expression came to be used in the blockchain context after it first appeared in the Ethereum white paper. While the use of this catchy phrase seemed successful as a marketing ploy, the author of the white paper, Vitalik Buterin, later regretted adopting that term, saying that he should have used more boring and technical expression like "persistent scripts."

After clarifying the concept of "smart contract", I began my analysis with the private law issues arising from the hacking of a smart contract. Smart contracts are capable of storing crypto-assets and, since their code is open to be inspected, their bugs are also exposed. Due to these characteristics, smart contracts attract many hacking attempts.

I then proceeded to examine the possible criminal liability of the actors surrounding a smart-contract prediction market. A prediction market, though capable of offering socially useful functions, may be seen as a venue for gambling which would constitute a criminal offence under many legal systems.

I concluded this paper with discussions on the regulatory issues of Defi (decentralized finance) in some details. 

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