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The Limits of Smart Contracts

Author

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  • Jens Frankenreiter

Abstract

This essay investigates the potential of smart contracts to replace the legal system as an infrastructure for transactions. It argues that (contract) law remains relevant for most transactions even if they are entirely structured by way of smart contract. The reason for this is that the power of smart contracts to create and enforce obligations against attempts by the legal system to thwart their executionis limited. These limitations are most relevant for obligations to perform certain actions outside the blockchain, but also apply to other obligations contingent on facts outside the records stored on the blockchain.

Suggested Citation

  • Jens Frankenreiter, 2019. "The Limits of Smart Contracts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 175(1), pages 149-162.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2019-0021
    DOI: 10.1628/jite-2019-0021
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    Citations

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    Cited by:

    1. Giulio Caldarelli, 2022. "Overview of Blockchain Oracle Research," Future Internet, MDPI, vol. 14(6), pages 1-38, June.
    2. Giulio Caldarelli, 2023. "From Reality Keys to Oraclize. A Deep Dive into the History of Bitcoin Oracles," Papers 2302.07911, arXiv.org, revised Feb 2023.
    3. Giulio Caldarelli, 2020. "Exploiting Corporate Governance to Evaluate Blockchain Applications: A Comprehensive Framework," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 166-183.

    More about this item

    Keywords

    blockchain; cryptocurrency; tokens; smart contracts; distributed ledgers; Bitcoin; Ethereum; open source; contract law; regulability;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K24 - Law and Economics - - Regulation and Business Law - - - Cyber Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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