Smart Contracts: Tales of Trust and Certainty

Abstract

Given the continuing fascination with “magic computers” and “self-executing code,” it is necessary to re-examine the promises – and premises - of technology-driven improvements to transacting practices purportedly introduced by smart contracts. Contrary to the popular narrative, smart contracts do not eliminate the need for trust and are technically incapable of guaranteeing performance. The fascination with clear and unbreakable rules that are executed by code obfuscates the fact that such rules may be suboptimal and may incorrectly represent what was agreed. It also obscures the fact that it is impossible to write perfect code. Being in plain view and impossible to modify, changes nothing in this regard. Trust and certainty do not magically emerge from immutability or transparency. Regulatory efforts in this area must be based on facts, not fairy tales.