On contracts, "smart" or not

"Blockchain" as a technology has started getting popular with the seemingly improbable resilience and rise of Bitcoin.

Yet its popularity really skyrocketed after the successful launch of Ethereum and its "smart contracts". One has to admit that the very name is irresistible and an instant marketing hit. Smart contracts have been attracting lawyers to everything "blockchain" better than a pot of honey would attract cuddly stuffed teddy bears!

I admit I, too, instantly fell for "smart contracts" (cuddly teddy bear that I am). Yet with time, I started seeing, through the marketing snare laid out by their name, "smart contracts" for what they are: just basic pieces of code that are supposed to move "cryptoassets" between blockchain addresses when specific conditions are met ...

"What has that to do with contracts though?", I asked myself


Contracts rely on accountability

Though not a legal professional, I live in a world governed by laws and am able to understand legal concepts. Because this is what contracts are - concepts from the world of law.

In this world of ours - which, by the way, should be praised for creating propitious conditions for some people to become IT professionals and dedicate themselves to studying blockchain - "legal entities" enter into "agreements". "Legal entities" might mean individuals or organisations. And "agreements" often involve "moving assets" from one party in the agreement to the other when specific conditions are met ...

One fundamental difference between a simple "agreement" and a "contract" must be that the latter is enforceable. That means that the world of law has put in place institutions able to assess whether parties to a contractual agreement have kept their respective commitments and provide redress in the contrary ...

Implicit to that functionality is the ability to assign responsibility to well-defined legal entities. Id est the ability to hold accountable well-defined legal entities, whether individuals or organisations.

If you didn't respect a contract you have signed, the legal institutions will seek redress from you.

If a company has not fulfilled its obligations with respect to a contract it entered into, the legal institutions will seek redress from that specific company.

The ability to clearly assign who failed to do what should have been done is essential for the magic of contracts to be able to operate.

Public permissionless blockchains are incompatible with contracts

Think a little bit about the above: for agreements to be enforceable (which is the raison d'être of the contracts), accountability is a sine qua non.

"Social actors", whether individuals or companies or other types of organisations need to be linked, as unambiguously as possible, to their acts (or lack thereof).

On the other hand, the credo of Bitcoin, Ethereum and most other public permissionless blockchains is ... anonymity and privacy ... Protecting the anonymity of those holding the keys to a blockchain address is in the DNA of these networks. To what extent they actually manage to preserve anonymity is irrelevant in this context.

What matters is that they are built with the goal of protecting users from being held accountable.

The reasons for that are the history of the cypherpunk movement and provide some useful context. This lead to an interesting corollary: public permissionless blockchains have been created to provide essential tooling for defying the world of laws.

Thus "contracts" - objects of law - and public, permissionless blockchains such as Bitcoin and Ethereum are, alas, not "awkward companions". They are fundamentally rivals.

For "Smart contracts" on the public Ethereum blockchain to be integrated with our law-governed world, the Ethereum network needs to renounces its claim to being "censorship resistant", anonymous and privacy-enforcing. In other words, it has to betray its founding ethos. Failing that, using the word "contract" is misleading: absent personal accountability, the law cannot reliably enforce agreements.

Bringing blockchain to the law

It is my latest passion and I wrote already about it in my previous post: the "law abiding blockchain". Such a network has to be able to assign responsibility. Such a network needs to be operated and used by "law subjects", whether individuals or companies. Even if the identity of those operators is protected and not freely available to anyone, law enforcement needs to be able to access it under constitutionally sound circumstances.

It follows that the time is right for building new blockchain networks, alongside - but on different principles - than the public, permissionless precursors. Blockchains to be operated by law abiding companies and used by law abiding citizens - even though they are entitled to expect their privacy to be protected.

@lux-witness was moved to the splinter chain https://hive.blog.
For the time being, I'll experiment with posting on both steem and hive blockchains and watch the level of engagement on each.

Other posts you might enjoy:

Related posts:

Steem ecosystem

Blockchain, Crypto and Society


After reading all this now I understand and got a better hold to my opinion. Steemit is a brand and will have some value, the pirate chain has to be watched, but the future is steemit. Posting on both is also my way!

I'm glad you liked the post and hope you and your family are safe and in good health !

I love this kind of posts, nice! Hope all is well with you! Forget about Steem, it is now everything we don't want it to be...

Thanks @bubke. Hope you and your family are in good health.

I think the "Steemit" brand holds value and I assume Justin Sun is smart enough to realize what needs to be done in order to not let that value go to waste. There was a community around Steem. A community which, let's faced it, failed. That's why Justin Sun was able to get hold of the "Steemit" brand: the comunity was too weakened to be able to defend it.

That community - which failed on steem - went on to set up Hive. In order for Hive to thrive, the community needs to understand where and how it failed ... It still can, even if I don't see any sign of them even realising that it is their responsibility ...

So where does that leave us ? On Steem, Justin Sun shows no sign of comprehending what is happening ... on Hive the splinter faction blames it all on Justin ... not much to rejoice for ...

I don't think the community failed, I think Steemit failed and the reason we could not defend the chain was because of the unfair stack of Steemit and the scandalous selling off that stack.
The only reason i went never all in on Steem was the ninja mine of Steemit and the danger of the centralised nature following out of that. Now i am glad i never did but i tell you i go all-in on Hive, there is not one doubt in my mind about that. We need a decentralised uncensored social platform and i think nothing beats our community. We don't blame Justin, we blame Ned and Steemit, i honestly feel sorry for Justin. Steem has nothing to do with a blockchain anymore, you should be absolutely the first to realise that! Steemit is a name in the blockchain community, a name that has been burned and the blockchain community knows that, i really don't see any future there. Off course, Justin will get it on a few exchanges with a nice price pump but that is not what I am after, blockchain is a revolution, let's not support the money-driven actions that go against what the revolution is about, D E C E N T R A L I S A T I O N!!! Oh man, forget Steem, join us on Hive, seriously!
Much love!!!

Oh but I will join on Hive, don't worry ! :-)

It's just that my first impression was that it's a bit buggy (tried to publish using peakD and failed miserably). And the tools have not migrated yet - GINAbot will migrate on April 5 only ... Once the tool eco-system moves to Hive, it will be simply not convenient to continue using Steemit.

Coming back to the substance: absolutely, the failure of Ned and Steemit was the first step indeed. In the "centralized business world", Steemit would have simply gone under, never to be mentioned again except as a "case study" in MBA programs.

But in the blockchain world, the organizations are supposed to be more resilient because the community can step in. Especially with DPoS. Here the leadership was pretty much into the hands of the Top 20 witnesses, and it had been for a while. Ned had withdrawn after Steemfest 3, Eli Powell was invisible, totally absent ... the Top 20 had one year to steer the boat away from the iceberg ...

Yet what did they do ? HF 21 changing the cryptoeconomics (50-50, downvotes, superlinear, etc.) That was a HUGE strategic mistake.

Instead of focusing on "increasing the size of the pie", they focused on "better sharing of the pie". Never mind that the pie was shrinking as snow melts in spring ...

Let's face it: the Top 20 of Steem, now the Top 20 of Hive, might be exceptionally gifted IT experts (Anyx, gtg, Themarkymark, etc.) but they are really not up to notch on business strategy ... Hive will be going nowhere for as long as they will suffer from the Dunning-Kruger syndrome and believe that because they are smart at running computer systems they must also be capable of smart business decisions ...

salut Sorin , ma bucur sa te vad prin zona ;) sa fie bine ca sa nu fie rau :D

Salut Ovidiu, si eu ma bucur sa stiu ca inca mai esti pe aici :-) Numai bine !

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