Hacker News Reader

Comment by mindcandy | Hacker News Reader

I’m not a smart contract dev, but here’s my understanding.

You have three fundamental tools to worth with: money, time and signaling consent. The only way to enforce consequences without lawyers is collateral.

So, you could have a contract that requires two months rent as a deposit to start. From there you can have simple rules: if the contract expires, the tenant gets the deposit back. At the end of the contract, the landlord can take up to 1 month’s rent from the deposit to cover damages. If the contract is canceled, the tenant does not get the second month-worth of deposit back. The contract is canceled if the rent is not paid on time or if the landlord + some notary-like third party sign off on cancellation. Etc...

View on HN

This smart contract has no way of knowing if/what the damages are, whether the rent was paid in cash, or whether a million other legal issues are happening.

For example, in most places, tenants may stop paying rent if their heat breaks in the winter and the landlord won't fix it promptly.

The central authority will always be human courts. Smart contracts can't observe or record anything except crypto, which makes them useless in 99% of contractual disputes.

Yes, you will always need humans to make human judgements but they don't need to be part of a court or central authority. With reputation and consensus incentive systems in place, these judgements can be made by trusted 3rd parties and feed back into the smart contract without the need for a single central authority.

The point isn't to get rid of humans or trusted 3rd parties. It's to get reduce the reliance on a single centralized entity that may be corrupt, inefficient, or malicious.

> It's to get reduce the reliance on a single centralized entity that may be corrupt, inefficient, or malicious.

This makes sense only in places with very corrupt legal systems.

But if the legal system is corrupt in favor of one side (let's assume it's the landlord), why would the landlord mutually agree to arbitration?

Please provide a very specific example of something that happens now that a smart contract would fix. I can't think of anything.

> Please provide a very specific example of something that happens now that a smart contract would fix. I can't think of anything.

They already did, asking again isn't going to get you the answer you want.

You described the renting market as having a high threshold for bias in order to be ineffective. I don't really think this is true, it's quite difficult in most states to go to court to seek damages for rental property. Even the eviction process is not straight forward and requires the participation of both a court and a marshal to serve notice. What smart contracts replace is a lot of the court mechanisms that are low hanging fruit. It takes some stress off of the system, but certainly not all, and that seems like it could be "good enough".

> They already did, asking again isn't going to get you the answer you want.

The person I was responding to gave only generalities.

> What smart contracts replace is a lot of the court mechanisms that are low hanging fruit.

What court mechanisms?

Let me give you a specific example.

I'm a landlord with a rental contract. In my state (as in many states), there are hundreds of statutes dictating the boundaries of this contract. There are also thousands of cases in common law that influence what I can and can't contract. For example, my tenant cannot contract away certain rights, even if they sign a legal document saying that they did it.

Scenario A: I use a smart contract stipulating that if there are damages, I can hold the security deposit.

Scenario B: I have a paper contract stipulating the same (although in many states there are statutes that say this, so the contract is just repeating existing law).

Now let's say I find "damage" and the renter disputes it.

How has the smart contract helped me? What difference did it make? In many situations, the smart contract enforcing itself without 100% understanding of the physical world or existing law would violate the law.

So that's how specific I'm asking you (or anyone) to be: give me a specific scenario where the smart contract enforces something in a reliable, efficient way that is significantly better/safer for either party.

> So that's how specific I'm asking you (or anyone) to be: give me a specific scenario where the smart contract enforces something in a reliable, efficient way that is significantly better/safer for either party.

And I'll doubt you'll get that specific of answers because those implementations are fairly new. You'll likely see proof of concepts developed to streamline or back up existing processes first, the underlying technology adjusted to fit the usecases, rinse, and repeat. All that to say, it's not going to holistically solve every problem for you up front, as the commenter pointed out.

What I can see is that it streamlines some of the mediation and court intervention processes. What our notable gains from that would be remain to be seen, but for my parents who are landlords that have had to evict tenants it could mean that simple cases don't require a court. Maybe they get some review by someone who would best be described as an auditor or mediator to check the outcome.

Smart contracts are not going to instantly replace government with a techno-libertarian utopia. They are going to make government, lawyer and bank services a lot less necessary. And, they are going to provide a lot of alternative services to people without access to effective government/financial services.

Smart contracts can’t observe anything but time, crypto and signaling from users/automated services. For disputes you need an independent third party to cast a deciding vote. A government judge is common option. But, you and I can agree to grant that vote to a non-government agent instead.

Legal rental contracts are non-trivial. A rental smart contract would similarly require more rules than we care to spell out here. But, “If the tenant and the notary both vote that there is bullshittery going on with the property, rent is suspended.” sounds like a reasonable thing to include.

> They are going to make government, lawyer and bank services a lot less necessary.

All the benefits of smart contracts are available with regular old software.

Why hasn't software destroyed these services already?

> “If the tenant and the notary both vote that there is bullshittery going on with the property, rent is suspended.” sounds like a reasonable thing to include.

Why do you need a smart contract for this? The tenant can do this right now without any software help or public ledger.

> “If the tenant and the notary both vote that there is bullshittery going on with the property, rent is suspended.”

First, I think the word you're looking for is arbitrator. Notaries don't resolve disputes.

Second, you've simply replaced a judge with a "notary", and left many questions unanswered. Who is this trusted 3rd party? How are they accountable? Can you appeal their judgements? Do they have an ongoing business relationship with one of the parties? And so on.

I suspect that by the time you've answered all those questions, and dealt with all the issues that arise that require human judgement, you'll have reinvented government. Or worse, digitized mandatory arbitration.

"They are going to make government, lawyer and bank services a lot less necessary."

Except when a third party finds bugs in the smart contract code and diverts the rent payments to themselves.

So, literally not better than an existing contract, but with the added complexity of coding it and having both the landlord and the tenant be programmers versed in esoteric languages to verify it.

That’s a super-bad-faith argument. Did you personally write the legal contract for the last place you were a tenant of without any involvement from a lawyer? No. Your landlord might have hired a lawyer. Mine used an off-the-shelf legal contract.

For common situations like rent, open-source contracts are inevitable. This will give people who could never afford lawyers (think 3rd world) access to much of the results middle class Americans take for granted.

Most countries include some kind of arbitration when something is disputed e.g was the damage caused by negligence or wear and tear? The smart contract can't settle disputes like this without a trusted party.

Yes. But, as elaborated elsewhere in this thread, the reputable dispute arbitrator does not have to be a government agent. In countries where government agents are installed through corruption and paid in bribes, handing the 3rd vote on who gets the Bitcoin to someone based on reputation rather than appointment is a great boon.

Ah yes. The tired old "3rd world countries".

Even in 3rd world countries you will need someone to understand programming and contracts to verify that the smart contract actually implements what you've agreed on.

So you're replacing "government agents installed through corruption" with "saints beyond reproach because smart contracts"?

" In countries where government agents are installed through corruption and paid in bribes"

And somehow this won't also end up artificially boosting the "reputation" of potential arbitrators?

(Or perhaps the government will make it clear that anyone who acts as an arbitrator without government authorization will spend a long time in a small cell.)

> Did you personally write the legal contract for the last place you were a tenant of without any involvement from a lawyer? No

When I was renting my apartment in Sweden, the contract was literally one page long. It was written in such a simple language that I could understand it even with a rudimentary knowledge of Swedish.

When I was buying my apartment, the contract was four pages long, and the language wasn't much harder.

Now, with an Ethereum contract I would have to learn an esoteric programming language, look at the contract's source code, verify that it actually corresponds to an actual contract that we already agreed to.

And all that even without getting into the question of who's going to enforce this contract, and how.

And don't forget, in many jurisdictions an "IOU $50" written on a napkin is a legally binding contract requiring zero lawyers.

My last lease contract was written in English, which I can read. If it was written in, say, Solidity (Ethereum programming language), I would have had to hire someone to read it for me, or sign it without understanding it. That was the point.

Reply on news.ycombinator.com