Blockchain: Blueprint for a New Economy

of the machine not feeling like

complying with the contract today, or

only partially complying (as long as it is

not broken). A smart contract similarly

cannot help but execute the prespecified

code. As Lessig reminds us, “code is

law” in the sense that the code will

execute no matter what. This could be

good or bad depending on the situation;

either way, it is a new kind of situation

in society that will require a heavy

accommodation period if blockchain-

based smart contracts are to become

widespread.

There are many considerations raised by

smart contracts and systems of

cryptographically activated assets with

regard to whether we need a new body

of law and regulation that distinguishes

between technically binding code

contracts and our more flexible legally

binding human contracts. 57 Contract

compliance or breach is at the discretion

of human agents in a way that it is not

with blockchain-based or any kind of

code-based contracts. Further, smart

contracts impact not just contract law,

but more broadly the notion of the social

contract within society. We need to

determine and define what kinds of

social contracts we would like with

“code law,” automatically and

potentially unstoppably executing code.

Because it could be nearly impossible to

enforce smart contracts with law as

currently enacted (for example, a

decentralized code swatch running after

the fact is difficult to control, regulate,

or sue for damages), the legal

framework is essentially pushed down to

the level of the contract. The endpoint is

not lawlessness and anarchy, but that

legal frameworks become more granular

and personalized to the situation. Parties

agreeing to the contract could choose a

legal framework to be incorporated into

the code. There could be multiple

known, vetted, “canned” legal

frameworks, similar to Creative

Commons licenses, such that users pick

a legal framework as a feature of a smart

contract. Thus, there could be a

multiplicity of legal frameworks, just as

there could be a multiplicity of

currencies.

Contracts do not make anything possible

that was previously impossible; rather,

they allow common problems to be

solved in a way that minimizes the need

for trust. Minimal trust often makes

things more convenient by taking human

judgment out of the equation, thus

allowing complete automation. An

example of a basic smart contract on the

blockchain is an inheritance gift that

becomes available on either the

grandchild’s eighteenth birthday or the

grandparent’s day of death. A transaction

can be created that sits on the blockchain

and goes uninitiated until certain future

events are triggered, either a certain time

or event. To set up the first condition—

the grandchild receiving the inheritance

at age 18—the program sets the date on

which to initiate the transaction, which

includes checking if the transaction has

already been executed. To set up the

second condition, a program can be

written that scans an online death

registry database, prespecified online

newspaper obituaries, or some other

kind of information “oracle” to certify

that the grandparent has died. When the

smart contract confirms the death, it can

automatically send the funds. 58 The

Daniel Suarez science-fiction book

Daemon implements exactly these kinds

of smart contracts that are effected upon

a character’s death.

Another use case for smart contracts is

setting up automatic payments for betting

(like limit orders in financial markets).

A program or smart contract can be

written that releases a payment when a

specific value of a certain exchange

good is triggered or when something

transpires in the real world (e.g., a news

event of some sort, or the winner of a

sports match). Smart contracts could

also be deployed in pledge systems like

Kickstarter. Individuals make online

pledges that are encoded in a

blockchain, and if the entrepreneur’s

fundraising goal is reached, only then

will the Bitcoin funds be released from

the investor wallets. No transaction is

released until all funds are received.

Further, the entrepreneur’s budget,

spending, and burn rate could be tracked

by the subsequent outflow transactions

from the blockchain address that

received the fundraising.

Blockchain 2.0 Protocol

Projects

There are many next-generation

blockchain technology development

projects that can be very loosely

gathered under the header of Blockchain

2.0 protocol projects (Table 2-2),

although this label is not perfect. The

intent of Table 2-2 is to list some of the

current high-profile projects, not to get

into the descriptive details of how the

projects differ technically or

conceptually.

Table 2-2. Sample list of Blockchain

2.0 projects (extended from Piotr

Piaseki,

http://bit.ly/crypto_2_0_comp)

Bitcoin 2.0 project

Project

name and URL

description

Ripple

Gateway,

https://ripple.com/

payment,

exchange,

remittance

network; smart

contract

system: Codius

Counterparty

Overlay

https://www.counterparty.co/

protocol for

currency

issuance and

exchange

Ethereum