The Fine Print in Smart Contracts / Joshua S. Gans.

By:

Gans, Joshua S

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w25443.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: One of the purported benefits of blockchain technologies is the ability to house what have been termed 'smart' contracts. Such contracts are potentially self-executing depending on the state of information recorded on a blockchain ledger. This paper examines the capabilities of smart contracts from an economic perspective. It is demonstrated that by improving observability and reducing the costs of verification of contract obligation performance, the space of feasible contracts can be enlarged. Moreover, by providing commitments to various monetary payments, a blockchain can potentially create a foundation to house certain mechanisms that have been shown to overcome difficulties of contractual incompleteness. This is demonstrated using a simple international trade environment. Thus, even though smart contracts must respect the incentives of decision-makers in their obligations, they have the potential to use easily verifiable elements to create incentives to reduce hold-up and other contractual difficulties.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w25443 (Browse shelf(Opens below))	Not For Loan

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January 2019.

One of the purported benefits of blockchain technologies is the ability to house what have been termed 'smart' contracts. Such contracts are potentially self-executing depending on the state of information recorded on a blockchain ledger. This paper examines the capabilities of smart contracts from an economic perspective. It is demonstrated that by improving observability and reducing the costs of verification of contract obligation performance, the space of feasible contracts can be enlarged. Moreover, by providing commitments to various monetary payments, a blockchain can potentially create a foundation to house certain mechanisms that have been shown to overcome difficulties of contractual incompleteness. This is demonstrated using a simple international trade environment. Thus, even though smart contracts must respect the incentives of decision-makers in their obligations, they have the potential to use easily verifiable elements to create incentives to reduce hold-up and other contractual difficulties.