Nobel Prize-winning economist joins blockchain startup to fix smart contracts
forbes.com
forbes.com
edit: I'm not saying there is no value in systems of arbitration outside the traditional legal system, I'm saying that a blockchain is super wasteful and expensive relative to a centralized system that can accomplish the same guarantees because they share the same legal underpinning, i.e. the courts. There is no legal difference between a smart contract and word document.
Also, saying that there is no utility because in some edge cases, a traditional system is required, that's like saying a computer is useless because sometimes you need to have things on a paper.
These things are within, and subordinate to, the legal system.
Small point: They are not within. They are private arrangements in addition to the legal system. They are creations of contract between individuals and represent the wills of only those individuals. The legal system is created by legislatures and legal societies (bars), bound by ethical rules, and are representative of the people generally.
The distinction is important. People should not think that arbitration committees or VISA's dispute resolution process is in any way part of the legal system. The legal system belongs to the country, to the democracy. Arbitration services belong only to themselves.
You can sue anyone for any reason at any time, period. The degree to which you might succeed depends on laws. To the extent a contract demands arbitration it's because it is a contract, which is defined by the legal system. The system of arbitration depends on those laws to be effective, and the backstop for it is always the courts.
This isn't true in the reverse. Congress could outlaw or limit arbitration tomorrow. No arbitrator could dissolve Congress.
And that's where it all falls to bits. Without trusted oracles there is no way to get real world information onto the blockchain.
1. Person points to the fact that all existing blockchain implementations are wildly impractical, or logically impossible, or are just more convoluted and confusing versions of the current system with blockchain layered on top.
2. People point out that "there are people working on this problem" and not to worry.
3. A year or two passes.
4. Person points to the fact that all existing blockchain implementations are wildly impractical, or logically impossible, or are just more convoluted and confusing versions of the current system with blockchain layered on top.
When I say these things are 'being worked on', I don't mean they are abstract, purely theoretical ideas being discussed on github threads and dueling whitepapers. Many of them actually exist and are being used to safeguard funds and enforce contracts right now. I say it's being worked on because I don't think we have achieved the final vision of exactly the best ways of doing these things yet, it's an evolving process. Do not mistake that for a lack of progress.
The analog is Visa. What would ordinarily be a huge lawsuit is settled by a private commercial arbitration process--namely, a chargeback--in case of dispute.
Courts are tremendously expensive and burdensome. There is real economic value created when someone figures out how to move what would otherwise have to go to court, to a separate arbitration process that's perceived as "fair" by everyone involved. I'm not saying that's the right solution for everyone or everything, only that courts should be a last, not first, resort, in case of dispute.
Both of which, like every other extant thing, are subject to review by the courts if their actions make people sufficiently unhappy.
And, though now it's confusing, opaque, and unreliable, this system will be cheaper and more transparent because...
EDIT: I guess i'll respond to your edit with another edit. I understand your point, that you can say the same things using a traditional contract, but they don't have the same force. For example, the smart contract can automate and execute the disbursal of funds based on the attestation of some pre-defined oracle. While it's true that this oracle is not decentralized, it is now isolated and scoped. It's role is proscribed to solely this - attestation, and everything else is actuated around that oracle, in a secure and trustless way. I believe that the ability to circumscribe and scope responsibilities in a computational way has valuable benefits, insofar as it commoditizes and modularizes the processes involved. I think of it like a shipping container. Shipping containers commoditize and modularize shipping. Smart contracts commoditize and modularize adjudication.
However, since Augur is built on the Ethereum network, they didn't need to ask anyone's permission, and they don't ever need to have custody of anyone's funds. This is an example of 'permissionless innovation', to use the buzzword of the day. Permissionless innovation is understood to be one of the most important drivers of economic dynamism, and right now any sort of application that touches the financial sector is heavily burdened by the fact that our financial system is predicated on trust. Smart contracts solve that problem. This is a very subtle point, but it is extremely significant, in my opinion.
Which remains a process with human-based wiggle room.
You should read some of Larry Lessig's work on this topic. If every law was enforced strictly to the letter, the world would be a very different place than it is now. You would get a ticket for going 0.1 mph over the speed limit. You couldn't spend $1 over your credit limit on your card. Your landlord would penalize you for being 1 day late. Every cancellation policy at every hotel would always be rigidly enforced.
The point is lowering the cost in the common case while still providing recourse in exceptional circumstances. That, in my mind, is still a huge net positive.
Visa isn't really a technology company. That's how they started, but these days, I think of them as more of a "facilitation platform" responsible for getting everyone into one legally sound network and defining common standards for things, everything from data interchange to how long customers have to request chargebacks, how long banks have to respond, what are valid reasons for revoking an authorization, etc.
An example of a blockchain/legal system hybrid is colored coins, where a token represents a real world asset. The legal system is required to enforce whatever contractual obligations are implied by that token. But it still adds value over a purely legal approach as at least ownership and transfer of it is transparent.
It adds dubious value over a shared database.
Equally pointless. What if I steal your private keys and authorize the sale of your house tokens to myself for dirt cheap?
The answer is that it doesn't matter what the blockchain says because it is the prerogative of the courts to resolve these disputes.
Nope.
If a normal contract isn't honoured you can go to a judge and ask him to enforce it in some way. It the judge agrees, his decision is then supposedly implemented by the state (police, sheriff of some other state agency) who somehow arranges for the value to be transferred to you - maybe by transferring the value from a bank account, or maybe by forcing the sale of assets. In reality, if you've gone through this process, you will know it's not easy or cheap to make it happen.
In smart contracts the judge is replaced by the mathematics behind the contract. There is no "getting a judge to agree" - it just happens. The actual transfer value is done by the block chain, but the value transferred is not money - it's in the virtual currency. Unlike getting to state officers to their thing the outcome is absolutely guaranteed, totally automatic and free or very close to it - you _will_ get your virtual currency.
The only nit is the value of the smart contract depends on virtual currency being worth money, otherwise it's all a bit meaningless. But if it is worth money something very real has happened - the smart contract has enforced its terms by moving money from them to you. And contrary to what you say, it didn't need help from the state, guns, or anything else beyond the block chain.
You were talking about smart contracts. My answer was about smart contracts I've seen deployed - things like the lighting network and Ethereum's ICO's. If you are saying using the blockchains to manage land-deeds will never work, well maybe you are right. As far as I am aware using a blockchain to directly manage the things you mention hasn't been made to work yet, and to be honest I don't see how it could be made to work.
But using a block chain indirectly to control some of these things seems possible. That's what Ethereum ICO's endeavour to do, and perhaps out there is an ICO out there that works now (I haven't been following). If so it works via the mechanism I described. The ICO turns the "thing" being controlled (CPU Cycles, storage, or whatever) into a tradable commodity which is another way it the flow of the commodity is controlled by money. As you must be aware successful virtual currencies control the flow of money, which in turns means they can be used to control the flow of the commodity. Smart contracts control flow of virtual currencies. QED - smart controls can control commodities.
None of this depends on governments, guns or violence. Instead it depends on there being a market. The reason the value in the virtual currency is secure is because there are lots of people willing to pay for it. The reason purchasing CPU Cycles is secure is because there are lots of people willing to sell you CPU cycles and so a vendor doesn't deliver CPU cycles the customers just move on, the vendor dies but the market continues on happily.
How this could be extended to land-deeds is, as you say, difficult to imagine. But claiming this means "Smart contracts are DOA" is just plain wrong - they work for lots of things, just not the examples you happened to be thinking about.
In my country, drafting contracts is hardly a problem. But if someone breaches your contract, good luck trying to get the law to act on it quickly enough
For two, smart contracts are code, and as such have to be more formally specified than a traditional english-language contract. This has benefits and also drawbacks, but for certain applications it may be useful.
The other solution is to be locally compliant. Cities are looking to use “blockchain” to issue “micro-bonds”. I’m sure you can draft legalese to refer to data on a blockchain. See blockchain notary services.
Hard to not take it with a grain of salt especially with the click bait title.
Here's a base contract 1.0.0 and you can fork it and add/subtract sections, change wording etc.
Is the distinction between it and other Nobel prizes useful here?
If it would've been a Nobel prize winner for peace there would be little signal attached to it regarding the economic quality of the block chain project.
Would you trust a Nobel prize in computing funded by Google?
It's a common argument, but unworldly, given that there are huge amounts of largely autonomous institutions that rely on single donors, may it be public or private money.
Would you trust a Nobel Peace Prize funded by an arms merchant?
Probably not a good idea.
It may not have been one of the original Nobel Prizes, but everyone who matters, including the prize-issuing organization itself, considers it to be one of the current Nobel Prizes. This is no different from, say, the Olympics--would you not consider snowboarding, boxing, weightlifting, wrestling, or volleyball (to name some of the most popular current events) to be Olympic events simply because they were not part of the first games in 1896? Conversely, should croquet and tug-of-war be considered Olympic sports even though they haven't been part of the games for over a century?