Abstract The use of computer technology to automate the enforcement of law is a promising alternative to simplify bureaucratic procedures. However, careless automation might result in an inflexible and dehumanized law enforcement system driven by algorithms that do not account for the particularities of individuals or minorities. In this article, we argue that hybrid smart contracts deployed to monitor rather than blindly enforce regulations can be used to add flexibility. Enforcement is a suitable alternative only when prevention is strictly necessary; however, we argue that in many situations a corrective approach based on monitoring is more flexible and suitable. To add more flexibility, the hybrid smart contract can be programmed to stop to request the intervention of a human or of a group of them when human judgment is needed.
DAO Regulation and Legislation This article explores the contrast between traditional centralized corporate entities and Decentralized Autonomous Organizations (DAOs) in the U.S. financial regulatory landscape. While traditional entities operate with a centralized structure and clear managerial hierarchies, DAOs disrupt this paradigm with their decentralized, democratic, and digital nature, thanks to blockchain technology. DAOs face significant legal challenges due to their unique structures, including regulatory uncertainty and liability issues. The paper highlights the need for regulatory clarity and adaptation to accommodate the participatory structures of DAOs. It concludes that while existing financial regulations apply to DAOs, they often fall short due to DAOs' unique nature, necessitating an update in regulatory approaches to appreciate the specific virtues of DAOs and Legal Autonomous Organizations (LAOs). The evolving landscape of DAOs demands close observation and involvement from various stakeholders in the blockchain industry to address these regulatory challenges effectively.
Wyoming’s DAO Statutes - A Model for Wider Adoption This article examines the first American statutes that address the legal organizational structure of decentralized autonomous organizations (DAOs). In 2021, the state of Wyoming folded the cryptocurrency-based organizations into the state’s definition of limited liability company (LLC), a legislative move that almost immediately drew widespread attention and criticism, while prompting the introduction of mirrored legislation in other states. This article addresses Wyoming’s novel statutory framework, securities regulation in this context, the practicality of treating DAOs as LLCs, and the first DAO organized under this statutory regime.
Abstract We consider a situation in which two parties have concluded an efficient contract corresponding to one major bargaining solution. After the parties have agreed on one particular contract, an unanticipated shock may change the contract outcomes in a way that benefits one party but harms the other party. If this happens, they have the option to either stay with the original exchange contract or adjust some contract parameters such as the price. We propose a model to perform such adjustments automatically, to obtain the same bargaining solution as in the initial contract under the restriction that the new contract dominates the outcomes of the original contract. We study several bargaining solutions within this general framework. These bargaining solutions offer various sharing rules to distribute the benefit between the parties. To reflect practical considerations, we only consider adjustments made via one contract parameter (the price), while all other parameters result from the original contract and the random shock. To evaluate the efficiency of the proposed approach, we also compare it to a full re-negotiation scenario, in which all parameters can be modified within the boundaries resulting after the random shock. However, waiting and re-negotiation might be costly compared to the situation when the smart contract executes the adjustment automatically. Therefore, the automatic adjustment might be more efficient compared to the other types of contracts. We present several numerical examples and run large random simulations, which we also check statistically.
Smart contracts are programs running on blockchain. In recent years, due to the persistent occurrence of security-related accidents in smart contracts, the effective detection of vulnerabilities in smart contracts has received extensive attention from researchers and engineers. Machine learning-based vulnerability detection techniques have the advantage that they do not need expert rules for determining vulnerabilities. However, existing approaches cannot identify vulnerabilities when the versions of smart contract compilers are updated. In this paper, we propose OC-Detector (Opcode Clustering Detector), a smart contract vulnerability detection approach based on clustering opcode instructions. OC-Detector learns the characteristics of opcode instructions to cluster them and replaces opcode instructions belonging to the same cluster with the ID of the cluster. After that, the similarity between the contract under analysis and contracts in the vulnerability database is calculated to identify vulnerabilities. The experimental results demonstrate that OC-Detector improves the F 1 value of detecting vulnerabilities from 0.04 to 0.40 compared to DC-Hunter, Securify, SmartCheck and Osiris. Additionally, compared to DC-Hunter, the F 1 value is improved by 0.27 when detecting vulnerabilities in smart contracts compiled by different versions of compilers.
Due to the modern relevance of blockchain technology, smart contracts present both substantial risks and benefits. Vulnerabilities within them can trigger a cascade of consequences, resulting in significant losses. Many current papers primarily focus on classifying smart contracts for malicious intent, often relying on limited contract characteristics, such as bytecode or opcode. This paper proposes a novel, two-layered framework: 1) classifying and 2) directly repairing malicious contracts. Slither’s vulnerability report is combined with source code and passed through a pre-trained RandomForestClassifier (RFC) and Large Language Models (LLMs), classifying and repairing each suggested vulnerability. Experiments demonstrate the effectiveness of fine-tuned and prompt-engineered LLMs. The smart contract repair models, built from pre-trained GPT-3.5-Turbo and fine-tuned Llama-2-7B models, reduced the overall vulnerability count by 97.5% and 96.7% respectively. A manual inspection of repaired contracts shows that all retain functionality, indicating that the proposed method is appropriate for automatic batch classification and repair of vulnerabilities in smart contracts.
In this chapter, the authors give a theoretical overview of the landscape of decentralized autonomous organizations (DAOs) as the native organizational structure of Web 3. The authors place this new formation in the existing theoretical framework of transaction cost economics and new institutional economics analyzing their governance from economic and legal perspectives. They argue that DAOs are so-called hybrid organizations, which embrace features from the free market and from hierarchical organizations. DAOs show characteristics of hybrids such as pooling resources, coordinating operations by contracts and facing competition in their coordination. However, their changing nature imposes challenges in their identification.
Decentralized court finance and personnel management practices have been criticized for breeding extra-judicial interventions and corruption in China. Determined to advance law-based governance and to constrain recalcitrant local leaders, the Chinese leadership under Xi Jinping in 2014 rolled out reforms to centralize local court finance to the provincial level with the aim to sever local courts from local influence. Despite high expectations, implementation is at best partial. Close to half of all provinces have not accomplished the required changes, and more than half of all court expenditure continues, to date, to remain reliant upon local governments. The direct reason is that provincial governments lack sufficient and sustainable fiscal capacity to finance the operation of local courts without central assistance. Different interests between major stakeholders, namely the courts and the fiscal bureaus, also add to coordination problems and difficulties in reform implementation, in particular the tension between fiscal adequacy pursued by the judiciary and fiscal management efficiency stressed by finance bureaus.
A smart contract can be defined as a computer program, stored on a blockchain, which allows a transaction or an agreement—defined ex-ante—to be self-executed when some conditions are met, and without the need for a central authority to enforce it. Even if this new technology is very promising, it may face a challenge: the codified nature of smart contracts creates new types of disputes that require new mechanisms of dispute resolution, which are precisely based on the blockchain. The aim of this article is to analyze one of these emerging mechanisms, namely Kleros, which is a blockchain-based dispute resolution platform implying crowdsourced jurors whose incentives to make fair decisions are based on game theory. The Kleros case provides also a basis for a broader discussion on the future of the decentralized justice market.
When actions by one agent force another to deviate from their agreements with a third, “victim” turns into “injurer” in the chain’s subsequent steps. Should the chain’s initiator be responsible only for the direct harm they cause or also bear some of the indirect losses they trigger? Through an axiomatic approach, we characterize the class of fixed-fraction rules, which strike a balance between incentives for accident prevention on the one hand and fairness in terms of how liabilities are assigned on the other. Their simple design make the rules ideal for practical implementation through smart contracts, enabling automated conflict resolution. This paper was accepted by Manel Baucells, behavioral economics and decision analysis. Funding: J. Gudmundsson and J. L. Hougaard gratefully acknowledge financial support from the Carlsberg Foundation [Grant CF18-1112].
Since the beginning of this century, information technologies have been characterized by impressive advancements that have offered us powerful tools such as distributed ledger technologies, blockchain, machine learning algorithms and smart contracts. Corporate law has not been immune from this rapid evolution; in 2014, the news that an algorithm named “Vital” had been appointed to a board of directors of a Hong Kong-based venture capital firm caused a sensation in the business environment and among corporate law scholars. In fact, this algorithm did not assume the legal role of a board member; rather it operated as an advisor of the board of directors aimed at protecting the firm from risky (as well as overpriced) investments. A similar use of technology at the board level has been noticed as a starting point from which it is conceivable (and desirable) to develop unique tools to overcome humans’ cognitive biases and improve board monitoring function as well as boost businesses’ productivity. The crucial role of Corporation Technologies in reducing agency costs and promoting the disintermediation of organizational structures has been further emphasised in connection with the corporate social responsibility discourse. In fact, the economist Milton Friedman’s traditional assumption that ‘the only social responsibility’ of the corporation is ‘to increase its profit so long as it stays within the rules of the game’ has been vigorously re-discussed. In the Anglo-American corporate debate, as well as in the European debate, the sustainability of businesses is among the top item in the agendas of leading corporations and policy makers, increasingly so after the pandemic has exposed the vulnerability of economic structures to systemic risks. In view of the intersection between corporate governance and sustainability, the international debate has identified shareholders’ long-term interests as a point of convergence of private business models and social and environmental values. In other words, private companies are invited to assume a societal role and to design appropriate strategies for managing their impact on the environment and the society as a whole. The colours of 21st -century corporate law are blue for corporate technologies and green for environmental policies. The prospect of algorithmic governance in contemporary corporate law systems could be a desirable tool as long as it serves to promote the sustainable development of firms integrating management models inspired by IEL general principles but not compromising their competitiveness.&nbsp;<br>
La presente obra se constituye como una aproximación a una temática tan amplia —y, a la vez, tan compleja— como la cultura de paz, la eficiencia procesal, la tutela judicial efectiva y la defensa de los colectivos vulnerables. Desde una perspectiva multidisciplinar, un total de 34 jóvenes investigadores en ciencias jurídicas de España, Colombia y Portugal, nos ofrecen análisis y reflexiones de un importante número de instituciones jurídicas como los derechos fundamentales, la Administración de Justicia, el proceso civil y penal, el arbitraje, la mediación, la justicia restaurativa, la defensa de los consumidores, la tutela del medio ambiente, la responsabilidad civil y la tutela de los colectivos vulnerables. Desde campos del conocimiento como el Derecho civil, el Derecho penal y la criminología, el Derecho administrativo, el Derecho laboral y el Derecho procesal, en esta obra se nos invita a adentrarnos en el examen de esas instituciones jurídicas —y de otras muchas más— desde sus concepciones clásicas hasta las modulaciones que han experimentado con la irrupción de los avances tecnológicos —y, especialmente, de la inteligencia artificial— en las relaciones personales y comerciales.
Technodeterminism determines the main task for civil law when solving issues related to blockchain technologies and smart contracts. This task is connected with the search for answers to the question of the need to amend civil legislation in order to adapt it to new technological challenges or about the possibility of effective application of existing legal norms to the regulation of innovative civil relations. In the doctrine, there is a hypertrophied attitude towards blockchain and smart contract technologies. The standing exists that due to smart contracts, trust in people is replaced by trust in the code. Eschatological predictions were made about the beginning of the end of classical contract law, about emergance of «contract law 2.0». The paper states that the digital code will not be able to replace reality in the field of contractual relations. The revolution in contract law has not happened. Instead of the «revolutionary path» highlighted by some authors, there is a gradual evolutionary development of ideas about a civil contract. The civilistic doctrine has responded to technological challenges by becoming rhizomorphic in its interdisciplinarity, trying to comprehend the legal phenomena associated with the digitalization of public relations. The «ideological core» of the civil doctrine, the «core» of the concept of the contract, remained untouchable. A legal smart contract has remained a speculative phenomenon from a parallel reality, a simulacrum. The Russian and foreign doctrines are dominated by the traditional interpretation of a civil contract, since the concept of a legal smart contract is not able to solve the problem of its incompleteness. From the perspective of futurological perspective, it can be assumed that the traditional approach to the contract will retain its significance, and the digital code will have only an auxiliary, servicing value for the contract.
Spanish Abstract: El presente estudio examina los smart contracts, la tecnología blockchain que los posibilita y la conexión del objeto del contrato mediante el Internet de las cosas. A estos efectos, se examinará doctrinalmente el concepto de smart contract, las aplicaciones de la tecnología blockchain en materia contractual, y la formación y ejecución del contrato, prestando especial atención al futuro papel del Internet de las cosas. English Abstract: This study examines smart contracts, the blockchain technology that makes them possible and the connection of the object of the contract through the Internet of Things. For this purpose, the concept of smart contract, the applications of blockchain technology in contractual matters, and the formation and execution of the contract will be examined doctrinally, paying special attention to the future role of the Internet of Things.
While the general employment of smart contracts has seen growing interest lately, its application in the legal domain raised several concerns . One of the main issues is that these contracts are often written in computer code, thus are difficult to understand for the average person: this could undermine their enforceability before national courts . \nThe present work proposes an approach for solving this lack of transparency: we shall compare and employ declarative programming languages that have already proven to bring helpful advantages when writing smart contracts , such as Logical English and LPS, both based on Prolog, as well as domain-specific imperative languages, such as Stipula , that allow for the codification of a smart legal contract both understandable for the average person and readable by the machine. \nWe will give an outline of the interplay between natural language and programming languages, and show how the lack of understanding reflects on the current employment of smart legal contracts. Fundamental to our reasoning will also be the distinction between B2B and B2C contractual relationships, where the EU principles of clarity and understandability of contract terms come into the picture. Moreover, we believe that uncertainty on whether the contract will execute the code as intended by the parties will negatively impact the trust that people place in such technology. \nWe will demonstrate a methodology for writing smart legal contracts in such a way as to improve both the understanding of their contents, by providing a direct transposition in code of the relevant clauses; and the intelligibility of their execution, by implementing the clauses directly, with no further coding required. This shall be done through Logical English, a programming language in which code is represented using a controlled form of the English language. Our intention is to showcase how to build trust in smart legal contracts, moving through a brief literature review of the proposed solutions, following with a demonstration of the drafting of the contract in a computable language understandable by legal experts and citizens alike. We shall utilize a running example to compare the methods we have applied, looking at the advantages, disadvantages and their effect on the overall explainability of the program. \nTo conclude, we shall compare our results with the desired effect on transparency and see how these may help the general goal of bridging natural language and computer code, especially as far as consumer contracts are concerned. We shall test whether it is possible for the consumer to contribute to the execution process, moving from the written text directly to the computable code, thus strengthening the connection between the contracts and the automation. To reach a common standard, and employ this technology in the legal field, it is necessary to link all parties more closely, be they businesses, consumers, or legal professionals, by providing a way for all to communicate directly with the Smart Legal Contract.
The aim of this study is to examine the issues of inserting smart contracts into our operative contract law. In this context, I am examining the positive and negative effects of this technological achievement on contract law, as well as its potential dangers. Smart contracts, like traditional contracts, require the consensus of the parties at the time the contract is concluded. The only difference is that the performance of the contract in the case of a smart contract is completely independent of the parties. This attribute could lead to the potential outcome that the application of performance and breach of contract rules in the Hungarian Civil Code–and as well in other continental civil codes–, could become inapplicable due to the lack of possibility of breaching the contract.
Blockchain and distributed ledger technologies are considered as transformative for corporate governance and enabling decentralized autonomous organizations (DAOs) that challenge hierarchical structures. However, legal, governance, and liability issues surround DAOs. Despite the aim for decentralization, practical implementation often reveals centralized elements. The chapter also explores blockchain’s impact on traditional corporations, emphasizing improvements in share issuance, trading, and decision-making. Blockchain can also address custody chain problems, enhancing transparency in securities and stock ownership. Yet, transitioning to blockchain, exemplified by ASX CHESS Replacement, is complex. While blockchain holds promise in fostering shareholder and stakeholder rights, a nuanced assessment of limitations and practicalities is crucial. More classical alternatives like secure and transparent centralized systems should also be considered in corporate governance.
Federico Ast, William R. George, Jamilya Kamalova, Abeer Sharma · 5 authors
Decentralized justice is a novel approach to online dispute resolution based on blockchain, crowdsourcing and game theory for adjudicating claims in a neutral and efficient way. Since the launch of the first decentralized justice platform in 2018, the field has attracted wide interest both from practitioners and academics in Web3 and dispute resolution. The decentralized justice approach is based on the ideas of decentralization, economic incentives and a claim to fairness in its decisions. At the current stage of development, decentralized justice is facing a number of technical, market, legal and ethical challenges for further development. This paper provides a review of the short history of decentralized justice, addresses a number of recurrent topics and lays down a path for future exploration.
Brian Kernighan, a computer scientist, wrote the first "Hello, World!" program in 1972 for the language B to be used internally at Bell Labs. Brian wrote a manual titled A Tutorial Introduction to the Language B to demonstrate how to use B's language. From there, this popular text spread quickly. It was used in a Bell Laboratories memo in 1974, as well as The C Programming Language in 1978. "Hello, World!" remains popular to this day. It became a standard for new programmers for their first program. This particular piece of code proves your code syntax, compiles, and executes to consistently produce the desired output. "Hello, World!" offers the code in more than 60 programming languages.
Alan Moreira Lopes, Jurandir Peinado, Fernando Ressetti Pinheiro Marques Vianna, Francis Kanashiro Meneghetti
This article seeks to identify the main factors in adopting smart contracts and the way these factors are known and taken into account by Brazilian companies. Thus, we conducted 30 interviews among Brazilian businesses. Results confirmed the existence of an alignment among the perspectives of the characteristics, benefits and adoption factors for smart contracts. Also, it was possible to conclude that the practice of smart contracts is still incipient in Brazil, and the prospects for applying them in companies have been spurred by the health restrictions put in place by the combat against COVID-19.