Blockchain Papers

Theodoros Stylianou

No abstract is available for this record.

Charlotte R. Young

Society is progressing at a rapid pace. As math and science evolve, new technologies begin to utilize these advances and create something novel. These technological changes are revolutionizing not only the science-oriented industries, but also the humanities. One such example falls within the legal arena. More specifically, the exciting advent of smart contracts and their use of technological changes are altering the way law is processed and practiced. However, as is often the case, new technological innovations spur certain growing pains. The implementation of smart contracts is proving no different. Some view the smart contract as the start of a more ideal society. With the aid of smart contracts and blockchain technology, machines can finally be equipped to fulfill some of the most basic human functions. Not only would business transactions always occur in a timely, seamless, and cost-effective manner, but also more mundane life tasks, such as ordering laundry detergent, could soon be done via smart contract technology. As exciting as these changes may be, smart contracts and the blockchain technology behind them are still immature. Before this legal phenomenon is widely accepted, there needs to be more advancement in not only the code that creates the technology, but also in the law and its regulations. As it stands today, smart contracts are most likely to be accepted only in part, and heavily tailored to meet each contracting party’s needs. This Note will start by giving an overview of the technology needed to implement smart contracts—blockchain technology—and an explanation of how smart contracts fit within the framework of a blockchain. Next, this Note will discuss some of the major issues smart contracts face. Such issues include: the need to translate natural language into computer code, the traditional concept of contracting in conjunction with the effect of smart contracts on traditional legal notions, and reoccurring enforcement issues. After discussing smart contracts and the current issues barring wide-spread acceptance, this Note will explore the future of smart contracts in the legal arena by analogizing such an electronic contracting change to the now-widely accepted electronic clickwrap agreements. Additionally, this Note will explore recently enacted state statutes that create favorable legal conditions for smart contracts and what impact, if any, these statutes may have upon federal legislation. Furthermore, this Note will analyze the lack of and potential need for regulations regarding smart contracts. In an attempt to make smart contracts acceptable, this Note will suggest future regulations focus on two components of smart contracts. As it will be discussed, regulations should require smart contracts to utilize a permissioned ledger and focus on ensuring the legal requirement of mutuality between the two contracting parties. Lastly, this Note will conclude that although the publicity surrounding smart contracts is exciting and innovative, this form of contracting is likely to remain in a controlled business environment with implementation under select circumstances.

Evgeniy Shishkin

We describe our efforts towards building a tool that automatically verify high-level functional properties of Ethereum smart contracts against its formal specification that can be given using four different methods: an invariant over contract state or three different types of trace properties. A model of runtime system, the source code of smart contract together with its specification is translated into SMT-solver formula and checked for counter example. We tested the method on simplified version of notorious TheDAO smart-contract, called MiniDAO. Our proof-of-concept tool was able to find a functional property violation of MiniDAO in just several seconds. We believe that the proposed method is indeed useful and deserves deeper investigation.

Adam J. Sulkowski

No abstract is available for this record.

Mykyta Sokolov

No abstract is available for this record.

Eva Micheler, Anna Whaley

No abstract is available for this record.

Seth Oranburg, Liya Palagashvili

No abstract is available for this record.

Eric Tjong Tjin Tai

Abstract: A classic legal problem is whether breach of contract may give rise to a remedy. Under common law this is discussed under the doctrine of excuses. Its civil lawequivalent is the attributability of causes of non-performance of an obligation, and its converse, force majeure. Despite the variety of approaches in various jurisdictions, the general outlines are roughly equivalent as far as translation into smart contracts is concerned: the main issue is what is the cause of non-performance and whether this cause can be attributed. Smart contracts can deal with the general outline of this structure, but may in practice only approximate the refinement that contract law offers. Themain problems are: determining the actual cause of the non-performance by means of automated oracles or the smart contract on its own (without relying on human judgment), dealing with multiple causality and impediments due to the creditor, determining attributability of the cause of non-performance. Smart contracts may offer no more than an approximation of the detailed rules of contract law, by hard-and-fast rules. This may suffice for certain categories of contracts, but may need additional effort to obtain a closer approximation of contract law rules where larger interests are concerned. The related doctrine of withholding performance is similarly difficult to realize appropriately in smart contracts. As regards hardship or unforeseen circumstances, it is best to disallow this in smart contracts,which leaves open the questionwhether partiesmight go to court for relief. The reliance on oracles furthermore opens a weakness to the automatic performance of smart contracts, due to possible liability of oracles for perceived incorrect assessment.

María Claudia Solarte-Vásquez, Katrin Nyman-Metcalf

Abstract Smart contracting (SC) is a proactive proposal to operationalize the relational contract theory for the upgrade and improvement of legally relevant exchange. The dynamic institutional environment of the European Union (EU) is a suitable framework for this proposal. SC addresses the interests of the business management, law and information technology practices with a perspective of influence in digital exchange, communication processes and other human and human-machine interactions. This position paper restates the advantages of the concept by highlighting the practical transition pathway SC offers to moderate the growing haste towards the embeddedness of exchange in automated and distributed models. This theoretical contribution supports the systematization of the proactive and legal design research field, and explains the characterization, operationalization and specification of the SC concept.

Petra Krupičková

Článek se zabývá možností uzavření smluv formou kódu (algoritmu) zapsaného v rámci blockchainové databáze. Tyto smlouvy jsou označovány jako smart contract, i když samotný pojem smart contract byl poprvé použit již v roce 1997 na začátku internetové éry před blockchainem pro smlouvy samostatně vykonávající smluvní závazek skrze hardware či software. Blockchainová technologie dokázala překlenout některé nedostatky tehdejšího řešení a je předvídáno možné masovější využití možnosti uzavírání smluv touto formou. Cílem článku je nalézt odpověď, zda lze v rámci českého právního prostředí uzavřít smlouvu formou kódu a nastínit možné výzvy, které z této technologické možnosti mohou vyplývat v perspektivě českého práva.

Daniel Hellwig, Goran Karlic, Arnd Huchzermeier

This chapter looks beyond the novelty of self-executing ‘smart contracts’ in blockchain networks and explores developments against the background fact that commercial parties have, for centuries, used documentary credit to simulate autonomous performance. Blockchain-based smart contracts and documentary credit share three core functionalities which are essential to any effective autonomous performance, analogue or digital—they both (i) act through internalized media of exchange; (ii) operate as closed systems; and (iii) provide means of securing sufficient resources to guarantee contractual performance. Using these three functionalities as a framework, this chapter conducts a comparative analysis of mechanisms for effecting autonomous contractual performance in a commercial setting. From this comparison, a few hypotheses are drawn regarding the potential areas where smart contract technology is more likely to find fruitful application. In particular, the chapter considers potential limitations to applying smart contracts to scenarios beyond digital asset transfers, how dispute resolution mechanisms should be designed to complement (rather impair) the autonomous nature of contractual performance under smart contracts, and potential capital cost implications which might arise in some cases when parties seek to replace human intermediaries with smart contracts.

Richard Holden, Anup Malani

Two parties sign a contract but before they fully perform they modify the contract.Should courts enforce the modified agreement?The modification may enable efficient trade in response to changed circumstances, or one party may have made an efficient relationship-specific investment and then been held-up by the other.Courts have had difficulty tackling this problem because the facts required to discriminate between the two situations are non-verifiable.A private remedy is for the parties to write a contract that is robust to hold-up or that makes the facts relevant to modification verifiable.But implementing such remedies requires commitment to the provisions, i.e., they themselves are subject to non-compliance.Conventional contract technology, e.g., the use of liquidated damages, to ensure commitment are disfavored by courts and subject to renegotiation.Smart contracts written on blockchain ledgers may offer a solution.We explain the basic economics of these technologies.We argue that they can used to implement liquidated damages without court involvement and thereby obtain commitment to renegotiation design and revelation mechanisms.We address the hurdles courts may impose to use of smart contracts and argue that sophisticated parties' ex ante commitment to them may lead courts to allow their use as pre-commitment devices.

J. Maria Glover

This year marks the fiftieth anniversary of the adoption of Federal Rule of Civil Procedure Rule 23, and with it, the advent of the modern class action. As the fiftieth anniversary approached, many scholars, including myself, said that class actions were dead, dying, or headed for a zombie state. Many of the Supreme Court’s recent class action cases all but confirmed that view. In just the last six years, the Supreme Court ratcheted up the requirements for class certification under Rule 23 in Wal-Mart Stores v. Dukes and Comcast v. Behrend, increasing the cost and difficulty of obtaining certification. And, in a series of cases, the Court permitted the use of class action prohibitions in arbitration contracts, thus eliminating a swath of class actions and, often, the underlying claims themselves. The Court’s language in these cases also tracked stock arguments against the class action, leaving the distinct impression that the Roberts Court was on a mission to diminish or destroy the class action procedure. But a funny thing happened on the way to the funeral: just as the obituaries for the class action were being written, the Supreme Court issued a series of decisions that breathed new life into it. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II) and Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, the Court reaffirmed the fraud-on-the-market theory, a critical tool in securities class actions. In Tyson Foods v. Bouaphakeo, the Court vindicated the use of statistical proof to satisfy Rule 23 requirements, distancing itself from strong suggestions in prior cases that individualized proof requirements would doom class certification. And the language in these cases tracked stock arguments in favor of class actions. To paraphrase Mark Twain, the rumors of the class action’s death now seem greatly exaggerated. But the Court’s class action decisions raise a new and perhaps more vexing question. If the Court is not fully intent on destroying the class action, what drives its seemingly disparate decisions? Do they reflect an anti–class action agenda losing steam, as Professor Coffee has suggested? Was the unbridled anti–class action agenda an illusion to begin with? Or is there a deeper explanation for these decisions? Part I of this Article demonstrates that the Court’s “pro–class action” decisions cannot be easily reconciled with their “anti–class action” counterparts through traditional means—neither through straightforward applications of Rule 23, nor precedent, nor particular case facts. But Part II posits that the Court’s seemingly disparate class action cases can still be rationalized. To do so, however, one must look past the procedural veneer and consider the underlying substantive rules and remedial regimes at stake. Indeed, a key question presented in each case—notwithstanding what appears in the petitions for writs of certiorari—is whether the Court will embrace an interpretation of a substantive rule that has the effect of facilitating the availability of the class action. The Court’s ultimate answer reflects a composite judgment about the substantive rule at issue and its implications for the availability of the class action device. Accordingly, to the extent one insists that procedural rules are, or ought to be, transsubstantive—that, “in form and manner of application, [they do] not vary from one substantive context to the next”—the Court’s class action jurisprudence might actually be deemed “non-transsubstantive.” This Article’s thesis has numerous implications—for separation of powers, judicial lawmaking power, federalism, the role of precedent, notions of transsubstantive procedure, procedural theory, and the nature and legitimacy of the judicial role, among others. The limitations of the Article format permit consideration in Part III of just two: First, the implications for the nature and scope of the federal courts’ procedural and substantive lawmaking powers under the Rules Enabling Act [hereinafter Enabling Act]. And second, related implications for the nature and legitimacy of the judicial role in “procedural” opinions.

Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen

No abstract is available for this record.

Kevin M. Clermont

The law speaks clearly on the standards of proof, but listeners often misunderstand its words. This article tries, with some common sense, to explain how the law expects its standards to be applied, and then to show how the law thereby avoids such complications as the conjunction paradox. First, in accordance with belief function theory, the factfinder should start at zero belief. Given imperfect evidence, the factfinder will end up retaining a fair amount of uncommitted belief. As evidence comes in, though, the factfinder will form a belief in the truth of the disputed fact but also form a disbelief, or a belief in the fact’s falsity. At the close of evidence, the standard of proof requires only comparing belief and disbelief. For example, the civil standard, rather than asking whether a fact more likely than not happened according to traditional probability theory, asks whether the factfinder believes the fact more than the factfinder believes that the fact did not happen. The burdened party need not push proof above 50% by dispelling the phantoms of every possibility, while the opponent need not generate a competing version of truth but can instead rely on denial to demand that the burdened party generate a belief.Second, belief and disbelief being nonadditive partial truths, the mathematical result is that one cannot combine beliefs by traditional probability theory, as by using the product rule designed for conjunction of betting odds. Instead, one must use multivalent logic, including its rule that conjoined likelihood equals the likelihood of the least likely element. Linking the elements in a chain tells a story that is as likely as its weakest link. Consequently, if each element of a claim or defense passes the standard of proof, the conjunction of elements will pass the standard of proof. The conjunction paradox thus vaporizes for factfinding, just as the law has always maintained. The law has found the way to decide in accord with our best knowledge of the facts.

Eric Tjong Tjin Tai

No abstract is available for this record.

James Hazard, Helena Haapio

Modern economies are held together by innumerable contracts. However, current contracts are neither machine-readable nor easily human-readable. The Ricardian Contract paradigm of parameters, prose and code posits a hybrid model of automation and conventional legal text. This paper connects recent work on design criteria for 'Smart Contract Templates' with prose objects and prototype inheritance demonstrated at CommonAccord. Templates authored and shared as prose objects can become the basis for automation, codification, commentary, big data analysis and graphic presentations.

G Jaccard

This paper gives an overview on smart contracts and assess their legal relevance. The first part, explains the notion of smart contract and provides simple examples of it. In the second part, we propose a legal analysis of smart contract. First, we explore how smart contracts can be relevant in the eyes of the law. Then we differentiate and assess smart contract with regards to their types. And finally, we look at chosen problematic of smart legal contracts.

Carl F. Cranor, Adam M. Finkel

Abstract Regulatory agencies in the United States and Europe have well‐deserved reputations for fixating on the total benefits and costs of proposed and final regulatory actions, without doing any more than anecdotally mentioning the subpopulations and individuals who may bear disproportionate costs or reap disproportionate benefits. This is especially true on the “cost” side of the cost–benefit ledger, where analysts exert little effort to even inform decisionmakers and the public that the costs of regulations might be distributed either regressively or progressively. Many scholars and advocates have observed that regulation can increase the efficiency of market outcomes, but caution about its untoward (or suboptimal) effects on equity. Here, we argue that without considering distributional information about costs and benefits, regulatory policies in fact can also cause violence to notions of efficiency , for two reasons: (i) society cannot hope to approach Pareto‐efficient outcomes without identifying those who must lose so that others can gain more; and (ii) because the harm experienced by involuntary risks and by imposed regulatory costs is likely non‐linear in its magnitude (at the individual level), efficiency is, in fact, a strong function of the shape of the distribution of these effects. This article reviews evidence about the distribution of regulatory costs and benefits, describes how agencies fail to incorporate readily available distributional information, and sketches a vision for how they could analyze costs and benefits to promote more efficient regulatory choices and outcomes.

Alec D. Walen

The standard of proof in criminal trials in many liberal democracies is proof beyond a reasonable doubt, the BARD standard. It is customary to describe it, when putting a number on it, as requiring that the fact finder be at least 90% certain, after considering the evidence, that the defendant is guilty. Strikingly, no good reason has yet been offered in defense of using that standard. A number of non-consequentialist justifications that aim to support an even higher standard have been offered; all are morally unsound. Meanwhile, consequentialist arguments plausibly support a substantially lower standard — in some cases so low as to undermine the idea that punishment is what is at stake. In this paper, I offer a new retributive justification that supports excluding the instrumental benefits of punishment from the balance that sets the standard. The resulting balance supports a standard arguably in the ballpark of the customary understanding of BARD: a standard requiring that the fact finder have a high, though not maximally high, degree of confidence that the defendant is guilty.

Louis Kaplow

The optimal stringency of the burden of proof is characterized in a model in which relaxing the proof burden enhances deterrence but also chills desirable behavior. The result are strikingly different from those in prior work that uses a simpler model in which individuals only choose whether to commit a harmful act (so only deterrence is at stake). Moreover, the qualitative differences between the optimal rule and the familiar preponderance of the evidence rule—and related rules that look to Bayesian posteriors—are great, much more so than revealed by prior work.

Samir D. Parikh

Bankruptcy proceedings tend to involve civil disputes where nothing more than money is at stake. In such instances, the application of the preponderance-of-the-evidence standard of proof offers the greatest utility and is aligned with the comparatively minimal importance society places on purely monetary disputes. However, bankruptcy courts are not viewed as typical civil courts. Rather, many view these courts as “courts of equity” and this perception serves as a crutch which many bankruptcy judges use in advocating the application of the clear-and-convincing standard of proof to customary civil disputes. These actions distort the accepted risk allocation schemes implicit in standards of proof; the consequence of which often is inequitable results. A lack of direction by the Supreme Court is a key factor in this process failure. The Court has addressed the application of standards of proof infrequently and, when it has, the holding has been narrowly tailored. In 1990, the Court issued a ruling in Grogan v. Garner, 498 U.S. 279 (1991), that appeared to provide guidance. Unfortunately, as of late, the ruling has been misinterpreted by a number of courts and has led to additional confusion on an issue that was already elusive. In my article, I propose a new, comprehensive normative approach to determine which standard of proof is applicable in disputes involving debtors in possession under the Bankruptcy Code. My approach is based on a coextensive reading of applicable Supreme Court precedent that honors the narrow basis on which many of these rulings are made. I urge use of an approach that will engender greater uniformity on this fundamental issue. Further, I analyze some key forms of relief available under the Bankruptcy Code in which courts have advocated the application of the clear-and-convincing standard of proof but failed to provide any explanation for this action. By applying my approach, I evaluate bankruptcy case law and isolate instances where bankruptcy courts impermissibly distort accepted risk allocation schemes. Finally, I attempt to show that some unexplained applications of the clear-and-convincing standard of proof are justified.

Claire A. Hill

Complex business contracts are notoriously difficult to write and read. Certainly, when litigation arises, courts scarcely have an easy time interpreting them. Indeed, contracts don't look at all as though they are written to tell a court what the parties want. Why can't smart, well-motivated lawyers do a better job? My article argues that they rationally don't try. I argue for a view of contracting in which parties aren't principally trying to set forth an agreement for a court to enforce. Rather, by leaving inartful language and ambiguity in the agreement, parties are bonding themselves not to seek precipitous recourse to litigation. The agreement entered into provides each party with grounds to bring a lawsuit if it so desires. Thus, if one party sues, the other party will virtually always have grounds to countersue. The complex transacting community has a norm against litigation in any event; bonding encourages and bolsters this norm, as well as norms of appropriate conduct throughout the contracting relationship. The contracting process, and the contract that results, thus serves importantly to create the parties' relationship and to set the stage for dispute-resolution consistent with preserving the relationship, as well as to keep available the backstop of enforcement if needed.

Rocco Macchiavello

No abstract is available for this record.