This paper presents, to the best of our knowledge, the first formal mechanism design treatment of Quran 2:282 as a low-cost verification mechanism. It proves that the Quranic debt documentation mechanism drives the creditor's expected verification cost to zero in the costly state verification framework. It achieves this by creating ex ante evidence through writing and witnessing, and by introducing a dual deterrence system: a fixed internal moral cost and a detection-contingent legal penalty. The paper also offers two interpretative contributions. First, it shows that the Quranic witness rule is an early redundancy mechanism for error correction, anticipating the logic later formalized by Hamming (1950). Second, it proposes an economic reading of the terms safih, da'if, and the inability to dictate, arguing that the guardian who dictates with justice may be a qualified third-party verifier, not merely a relative.
Transparency and standing are two different things, and professional reliance was always built on the second. When an auditor, an independent expert, or a rating analyst signs a conclusion that others act on, what entitles the reliance is not that the reasoning could be inspected — it is that a disciplined producer, one with a licence to lose, reputational capital staked, liability that bites, formed under an oversight regime, stood behind it. When an AI produces the conclusion, that standing is vacated at the producing node while a signature keeps liability formally in place. The natural hope is that making the AI fully transparent and reconstructable repairs the loss. This formal companion shows it does not, and locates exactly why: transparency adds access, the missing thing is standing, and these lie on different axes. We model warranted reliance as a weakly increasing functional D(S, k; χ) of producer-stake S, owner-access k, and consequence-bearing conferral χ, against an entitlement-to-rely bar τ. The contribution is a diagnostic framework and one reusable tool — an antecedent, falsifiable closure-rule key that decides when a conclusion-class carries a transparency-proof standing residue, exhibited across four professional domains (fairness opinions, audit, ratings, due diligence). Within it the warrant deficit splits into a control component access-transparency strictly eases and a standing component it leaves invariant (Theorem 1). Against the sanction-based toolkit the paper supplies one general baseline result plus one conditional, domain-testable failure mode. Generally, every deterrence / gatekeeper-liability / observability lever enters as a product π·S, so at a stakeless producer (S = 0, χ = 0) each is zero for any detection probability (Theorem 2). Separately — and without the institutional reading of τ — a fault-taxonomy-dependent instrument, commonly implemented by pricing a validated fault-incidence rate, cannot be sized on faults outside its reference taxonomy; an aggregate-outcome-triggered instrument remains available and fails to discipline the residual only where the residual signal is non-contractible or no feasible producer action moves its distribution. Access cannot reach a residue that does not lie on the access axis; it closes only by restoring standing, as producer-stake or as a consequence-bearing conferral — the remedy, not transparency.
Decentralized autonomous organizations (DAOs) and AI-agent systems combine cryptographic execution with blockchain-based governance, yet observed organizations almost universally combine these mechanisms with a conventional legal entity—a foundation, statutory DAO form, or limited liability wrapper. I develop a stylized model in which token-holders jointly determine wrapper choice and governance concentration, generating multiple equilibria: an inefficient trap in which the wrapper coalition cannot form because no holder will absorb the front-loaded fixed cost alone, and an efficient wrapper equilibrium in which the coalition reaches scale and amortizesfixed costs effectively. The trap is an empirically grounded coordination problem rather than an analytical artifact, and a global-games selection argument identifies the threshold at which institutional design tips the system between equilibria. The framework reframes the CFTC v. Ooki DAO ruling, the Wyoming DAO LLC and DUNA statutes, and AI legal personhood debates as questions of equilibrium selection rather than of substantive cost allocation, and bounds the “Coasean singularity” claim that AI agents dramatically reduce transaction frictions.
Modern cloud-based AI training relies on extensive telemetry and logs to ensure accountability. While these audit trails enable retrospective inspection, they struggle to address the inherent non-determinism of deep learning. Stochastic operations, such as dropout, create an ambiguity surface where attackers can mask malicious manipulations as natural random variance, granting them plausible deniability. Consequently, existing logging mechanisms cannot verify whether stochastic values were generated and applied honestly without exposing sensitive training data. To close this integrity gap, we introduce Verifiable Dropout, a privacy-preserving mechanism based on zero-knowledge proofs. We treat stochasticity not as an excuse but as a verifiable claim. Our approach binds dropout masks to a deterministic, cryptographically verifiable seed and proves the correct execution of the dropout operation. This design enables users to audit the integrity of stochastic training steps post-hoc, ensuring that randomness was neither biased nor cherry-picked, while strictly preserving the confidentiality of the model and data.
Smart contracts, a revolutionary technology that offers a digital alternative to conventional contracts, are popular. Smart contracts also known as automated digital contracts are becoming common in various countries due to their efficiency and openness. Various national and global forums have agreed that smart contracts might alter contract enforcement and boost economic development in India. Given this, it’s crucial to understand the Indian Contract Act, (ICA) 1872 stance on smart contracts. ICA requires testing smart contracts for contractual validity before entering the uncharted seas of autonomous and anonymous digital contracting. This experiment raises many issues, especially given the law’s strict procedural structure. This article refutes the claim that smart contracts should be regulated by self-regulation. Rather author prefers a broad interpretation of substantive contractual law to harmonize smart contracts under the ICA, following common law’s flexibility. It is shown that smart contracts are built on the same principles as common law contracts and deepen our research in the framework of Indian law and precedent. Similar approaches from other countries support this perspective. Although many legislations require change, it is believed that a smart contract law is not needed. The paper concludes by proposing solutions to the potential obstacles that may arise due to present approach.
Francisco das Chagas Bezerra Neto, Jonathan Barros Vita
Contextualização: Este estudo investiga o uso de Non-Fungible Tokens (NFTs) como mecanismo de autenticidade de produtos, sob a perspectiva da Análise Econômica do Direito. A pesquisa está inserida no contexto do avanço tecnológico e suas implicações para a autenticidade e rastreabilidade de produtos, especialmente no mercado de luxo. A problemática abordada é a crescente necessidade de mecanismos eficazes para combater fraudes e falsificações, justificando a relevância do trabalho ao conectar essas questões com os objetivos de garantir maior transparência e proteção legal aos consumidores. Objetivo: O objetivo geral do estudo é analisar os efeitos da implementação de NFTs como método de autenticação de produtos no mercado criativo, enquanto os objetivos específicos incluem a avaliação dos impactos econômicos e legais dessa tecnologia, bem como a identificação dos desafios regulatórios e tecnológicos para sua adoção em larga escala. Metodologia: A metodologia adotada é de natureza qualitativa, com um estudo descritivo e hipotético-dedutivo. Os dados foram coletados a partir de fontes primárias, como documentos técnicos do Projeto Aura Blockchain, e secundárias, como trabalhos acadêmicos e relatórios do setor. A análise dos dados foi realizada com base nos princípios da Análise Econômica do Direito, associando os custos e benefícios do uso dos NFTs às estruturas jurídicas e econômicas. Resultados: Os principais resultados indicam que os NFTs têm o potencial de reduzir significativamente os danos econômicos causados pela falsificação, além de proporcionar maior proteção legal aos consumidores. No entanto, desafios como o custo de execução, obstáculos regulatórios e a aceitação social da tecnologia podem impactar sua adoção em larga escala. A pesquisa conclui que, apesar dos desafios, os NFTs representam uma inovação promissora para a autenticidade de produtos, com implicações significativas para a economia digital e a proteção da propriedade intelectual.
We analyze the vulnerability of decentralized autonomous organizations (DAOs) to speculative exploitation via their redemption mechanisms. Studying a game-theoretic model of repeated auctions for governance shares with speculators, we characterize the conditions under which -- in equilibrium -- an exploitative exit is guaranteed to occur, occurs in expectation, or never occurs. We evaluate four redemption mechanisms and extend our model to include atomic exits, time delays, and DAO spending strategies. Our results highlight an inherent tension in DAO design: mechanisms intended to protect members from majority attacks can inadvertently create opportunities for costly speculative exploitation. We highlight governance mechanisms that can be used to prevent speculation.
In this article, we propose a new form of decentralized autonomous organization (DAO) governance that uses a sequential auction mechanism to overcome the entrenched control issues that have emerged for DAOs by creating a regime of temporary contestable control. The mechanism avoids potential public choice problems inherent in voting approaches but at the same time provides a vehicle that can enhance and secure value that inheres to DAO voting and other DAO non-market governance procedures. It is robust to empty voting and is code feasible. The mechanism not only facilitates the ability of DAOs to meet their normative and operational goals in the face of diverse regulatory approaches, but also strengthens the case for creating a less burdensome but at least equally effective regulatory regime for DAOs that employ the mechanism. Designed to shift control to the party with the most promising business plan, at the same time, it deters value destruction by control parties, maximizes social surplus, and distributes that surplus in a way that tends to promote investment by other parties both at start up and on an ongoing basis.
As the development of Solidity contracts on Ethereum , more developers are reusing them on other compatible blockchains. However, developers may overlook the differences between the designs of the blockchain system, such as the Gas Mechanism and Consensus Protocol , leading to the same contracts on different blockchains not being able to achieve consistent execution as on Ethereum . This inconsistency reveals design flaws in reused contracts, exposing code smells that hinder code reusability, and we define this inconsistency as EVM-Inequivalent Code Smells . In this paper, we conducted the first empirical study to reveal the causes and characteristics of EVM-Inequivalent Code Smells . To ensure the identified smells reflect real developer concerns, we collected and analyzed 1,379 security audit reports and 326 Stack Overflow posts related to reused contracts on EVM-compatible blockchains, such as Binance Smart Chain (BSC) and Polygon . Using the open card sorting method, we defined six types of EVM-Inequivalent Code Smells . For automated detection, we developed a tool named EquivGuard . It employs static taint analysis to identify key paths from different patterns and uses symbolic execution to verify path reachability. Our analysis of 905,948 contracts across six major blockchains shows that EVM-Inequivalent Code Smells are widespread, with an average prevalence of 17.70%. While contracts with code smells do not necessarily lead to financial loss and attacks, their high prevalence and significant asset management underscore the potential threats of reusing these smelly Ethereum contracts. Thus, developers are advised to abandon Copy-and-Paste programming practices and detect EVM-Inequivalent Code Smells before reusing Ethereum contracts.
Os chamados smart contracts ou “contratos inteligentes” são uma inovação tecnológica difundida a partir do lançamento da plataforma Bitcoin em 2009 e, principalmente, da plataforma Ethereum em 2014. Em princípio, eles têm como propósito automatizar a execução das obrigações das partes em um negócio jurídico, de modo a diminuir o risco de seu inadimplemento e evitar a dependência de um terceiro de confiança (seja ele um árbitro, um juiz ou mero registrador dos dados referentes à transação celebrada). O potencial uso de smart contracts em vários setores econômicos desperta questionamentos sobre a adequação das normas do direito contratual tradicional para sua regulação. No presente trabalho, busca-se analisar dois pontos específicos sobre o tema, a saber: o momento de formação do negócio jurídico segundo a disciplina trazida pelo Código Civil brasileiro e as consequências de um contrato inteligente com objeto ilegal. O trabalho revisa amostra da literatura dedicada ao tema, tanto nacional quanto estrangeira, esta última sobretudo quando provinda de autores dos Estados Unidos da América e de Estados membros da União Europeia. O texto também questiona a adequação dos novos negócios ao marco normativo brasileiro sobre negócios.
In recent years, the Ethereum platform has witnessed a proliferation of smart contracts, accompanied by exponential growth in total value locked (TVL). High-TVL smart contracts often require complex numerical computations, particularly in mathematical financial models used by many decentralized applications (DApps). Improper calculations can introduce numerical defects, posing potential security risks. Existing research primarily focuses on traditional numerical defects like integer overflow, and there is currently a lack of systematic research and effective detection methods targeting new types of numerical defects. In this paper, we identify five new types of numerical defects through the analysis of 1,199 audit reports by utilizing the open card method. Each defect is defined and illustrated with a code example to highlight its features and potential consequences. We also propose NumScout, a symbolic execution-based tool designed to detect these five defects. Specifically, the tool combines information from source code and bytecode, analyzing key operations such as comparisons and transfers, to effectively locate defects and report them based on predefined detection patterns. Furthermore, NumScout uses a large language model (LLM) to prune functions which are unrelated to numerical operations. This step allows symbolic execution to quickly enter the target function and improve runtime speed by 28.4%. We run NumScout on 6,617 real-world contracts and evaluated its performance based on manually labeled results. We find that 1,774 contracts contained at least one of the five defects, and the tool achieved an overall precision of 89.7%.
Propósito. Las compraventas requieren el cumplimiento de una solemnidad para su perfeccionamiento, como lo contempla el literal segundo del artículo 1857 del Código Civil. En contraste, la promesa de compraventa, si exige una solemnidad, aunque más flexible, según lo establece el numeral primero del artículo 1611 del mismo código, ya que solo se exige literalidad. Esta última será objeto de la investigación, pues puede reproducirse en un smart contract. No se trata únicamente de transcribir una promesa en un ordenador, si no que va más allá, aplicando el sistema descentralizado del Blockchain; que permite igualmente la descentralización de la información, creando así un “BackUp” automático de los metadatos que ingresemos. Metodología: Inductiva – Cualitativa de Derecho Comparado. Resultados: Colombia posee un gran potencial jurídico en tecnología e innovación, como lo demuestra su historial normativo. Desde hace décadas, leyes como la 270 de 1996 y la 527 de 1999 han sido pilares fundamentales en la construcción de una Colombia digital. Sin embargo, no fue sino hasta la llegada de una pandemia mundial que se permitió la realización de negocios, contratos y trámites judiciales a través de las nuevas tecnologías. Aún más relevante, este contexto impulsó la creación de nuevos despachos y oficinas orientados a la innovación y la integración tecnológica en la vida cotidiana del país. Conclusiones: Al automatizar las obligaciones contenidas en una promesa de compraventa, disminuiremos los riesgos de posibles errores o delitos en los contratos. Asimismo, se evitan equivocaciones involuntarias que podrían surgir en estos acuerdos.
Contract management in construction law plays a critical role in mitigating risks, ensuring performance enforcement, and facilitating dispute resolution.The increasing complexity of construction projects, coupled with evolving regulatory frameworks, necessitates robust contract management strategies to address financial, operational, and legal risks.Poorly managed contracts often lead to cost overruns, project delays, and disputes, making it essential for stakeholders to adopt proactive measures in drafting, executing, and enforcing contractual obligations.This study examines key aspects of contract management in construction law, focusing on risk allocation, dispute resolution mechanisms, and performance enforcement strategies.Risk mitigation strategies, including well-defined contract terms, contingency planning, and insurance provisions, are explored to illustrate how parties can safeguard their interests.The research also highlights the effectiveness of alternative dispute resolution (ADR) methods, such as mediation, arbitration, and adjudication, in reducing litigation costs and project disruptions.Furthermore, contract enforcement mechanisms, including penalty clauses, performance bonds, and liquidated damages, are analyzed for their role in ensuring compliance and timely project completion.The study also evaluates the impact of digital transformation on contract management, particularly the use of smart contracts and blockchain technology to enhance transparency, efficiency, and dispute prevention.Through case studies and legal precedents, this research provides practical insights into how construction professionals, legal practitioners, and policymakers can optimize contract management practices.A comprehensive approach to risk management, dispute resolution, and performance enforcement is essential to maintaining legal compliance, ensuring financial stability, and improving project delivery in the dynamic construction sector.
Jan Corazza, Ivan Gavran, Gabriela Moreira, Daniel Neider
When blockchain systems are said to be trustless, what this really means is that all the trust is put into software. Thus, there are strong incentives to ensure blockchain software is correct -- vulnerabilities here cost millions and break businesses. One of the most powerful ways of establishing software correctness is by using formal methods. Approaches based on formal methods, however, induce a significant overhead in terms of time and expertise required to successfully employ them. Our work addresses this critical disadvantage by automating the creation of a formal model -- a mathematical abstraction of the software system -- which is often a core task when employing formal methods. We perform model synthesis in three phases: we first transpile the code into model stubs; then we "fill in the blanks" using a large language model (LLM); finally, we iteratively repair the generated model, on both syntactical and semantical level. In this way, we significantly reduce the amount of time necessary to create formal models and increase accessibility of valuable software verification methods that rely on them. The practical context of our work was reducing the time-to-value of using formal models for correctness audits of smart contracts.
A Frino, Robert Gaudiosi, Robert I. Webb, Z. Ivy Zhou
ABSTRACT This study clarifies discrepancies in previous research on the contribution of regulated Bitcoin futures to price discovery, where conclusions have varied between futures leading over spot markets or vice versa. We identify potential reasons behind these conflicting findings, including the choice of price discovery measures, sampling frequencies, modeling windows, futures contracts, and spot exchanges. Using 1‐s sampling frequencies to accurately capture price discovery in the fast‐paced markets and accounting for substantial noise differences between spot and futures markets, we find that the futures market generally leads spot markets, though this price leadership exhibits daily fluctuations. Moreover, we observe a pronounced increase in the futures market's contribution to price discovery around macroeconomic surprises and Tether stablecoin minting tweets.
Nabeel Mahdi Althabhawi, Ra’ed Fawzi Aburoub, Mohamad Rizal Abd Rahman, Faris Kamil Hasan Mihna · 5 authors
While smart contracts enhance efficiency and transparency, they raise legal and technical issues. Smart contracts do not involve face-to-face negotiation or discussion, which contributes to difficulty in confirming that both parties agreed to the terms. Moreover, while smart contracts that encode the intention of the parties show up on the blockchain as digital signatures or as preprogrammed actions, this begs the question as to precisely whether this reflects their intention and mutual consent in the first place. Furthermore, the execution of offer and acceptance in an automated manner poses a challenge to the traditional principles of contract law, as it may rely on adhesion contracts that limit the opportunities for negotiation. Moreover, the verification of legal capacity of the parties identified under a pseudonym is another challenge in a decentralized blockchain environment, especially for cross-border transactions that set varying legal standards. Through a mixed-methods approach of thematic analysis of interviews and literature review, the research responds to these challenges, across practical and theoretical domains. Proposed solutions include biometric identification, digital identity schemes, and AI-assisted consent verification. The study recommends aligning traditional legal principles with technological advancements and fostering international collaboration to create robust frameworks, ensuring fairness and enforceability in smart contracts. This study concludes that a twin-track approach—combining technological improvements with regulatory adjustments—is critical for ensuring the fairness, enforceability, and reliability of smart contracts.
To explore the legal and philosophical implications of smart contracts, with a focus on their enforceability and the political significance of the “code as law” paradigm. This study adopts a narrative review approach using a descriptive analytical method to examine the intersection of law, technology, and political theory. Sources were selected from academic databases published between 2020 and 2024, encompassing legal scholarship, computer science literature, and political philosophy. Thematic analysis was used to synthesize key ideas related to legal enforceability, algorithmic governance, and the transformation of legal subjectivity in coded systems. The review highlights significant tensions between traditional legal norms and the deterministic nature of smart contracts. While smart contracts offer advantages in terms of automation and efficiency, they also lack the capacity to address ambiguity, context, and moral judgment. These contracts challenge core principles of legal theory, including consent, due process, and equitable remedies. Jurisdictions differ in their responses, ranging from proactive legal recognition to cautious regulatory experimentation. Hybrid models of enforcement and reliance on oracles demonstrate emerging attempts to bridge the gap between code and law. Smart contracts represent a disruptive force in the legal domain, necessitating critical reflection on the philosophical and institutional foundations of modern legal systems. Their adoption must be guided by a commitment to justice, democratic governance, and interdisciplinary oversight to ensure that legal innovation aligns with human values and ethical responsibility.
Abstract This chapter examines decentralized autonomous organizations (DAOs) through two theoretical lenses: the theory of the firm and Elinor Ostrom’s institutional analysis framework. It argues that DAOs’ diverse organizational structures preclude broad generalizations about their economic and institutional nature. Some DAOs implement hierarchical arrangements characteristic of firms, others adopt different organizational models. The use of smart contracts does not definitively determine whether DAOs should be classified as contractual, firm-like, or as hybrid arrangements. The chapter critically examines the concepts of autonomy and decentralization in DAOs, revealing them as aspirational rather than fully realized characteristics. This analysis contributes to the legal scholarly discourse by providing a nuanced understanding of DAOs’ organizational nature and challenging simplistic categorizations of these emerging entities. It also assists practitioners in analyzing and developing the structure of particular DAOs.