This is the heart of the problem with smart contracts. The theory is that the code is the law. There is no theft. There is no need to trust, authority, or arbitration.
Of course, this only works when the smart contracts perfectly meet a correctly defined spec and have no bugs.
Real life contracts sometimes turn out to have non-enforceable clauses within our legal framework, or may be entirely invalid if, for example, signed under pressure or false pretense.
Imagine if Goldman Sachs did this. A judge can say "look, you can follow our rules or we start seizing assets etc".
And when you're sitting around trying to be anonymous, well... you're doing everything on a public ledger, so now you're extremely restricted.
Hell, courts/legislative bodies could even go down the "force all miners within their jurisdiction to rollback an unwanted transaction". You think miners care enough to make a stand on this kind of stuff?
Unless you're going to like.... download your consciousness onto the blockchain you are still just as liable to being told by a court what to do as anything else.
US financial laws have been very useful for the gov't to be able to de facto give it worldwide jurisdiction in some areas, I think there would be relatively few qualms about continuing down this path. Especially if (for example) Robinhood and Coinbase were forced to follow along. At one point the "blessed" thing will become the only place you can really operate.
This would destroy the real-world value of this block, basically making it a digital equivalent of dirty money.
In practice, if using a smart contract as a contract, the way you'd use a paper contract, then two parties would sit down and negotiate; draft the negotiated agreement into the form of a smart contract; and then agree (signatures, handshake, multi-sig deployment, whatever) that "what the smart contract does — as executed by the network-consensus abstract machine — is our explicit mutual intent, and damn any statement by either of us to the contrary."
This is the same thing you're doing with a paper contract: by both signing it, you're agreeing that "what the paper contract says — as interpreted by a judge — is our explicit mutual intent, and damn any statement by either of us to the contrary."
Of course, nobody's actually using smart contracts as contracts. They're just using them as trusts/agents. For now.
But a smart contract used as a contract wouldn't have "bugs." It's a negotiated agreement; negotiated agreements have loopholes. And loopholes are perfectly legal. If you left one in, and your counterparty exploits it? Too bad for you. You should have run your contract through a better (code) lawyer.
See also: the DAO hard-fork that created Ethereum Classic.
> if a judge decides it's doing something illegal or unconscionable and issues injunctions to that effect
A judge can't tell a distributed network that has equal presence in countries with mutually-antagonistic economies what to do. They can at most ban the network's nodes from being operated in their country — but people in that country can still continue to use the network through a VPN.
Think of it like offshore gambling, except that it's 'offshore' respective to every country on Earth, and there's nowhere a sufficiently-motivated Navy can send a bunch of boats to shoot at it, either.
Much of the economic value of blockchains comes from the fact that they allow private citizens of countries that have no trade/treaty compatibility (e.g. countries actively at war with one-another), to have a basis for trust allowing them to enter into contracts with one-another. The basis for this trust is the virtual 'overlay' legal framework of "whatever the software the majority of node operators decide to install says, goes."
Of course, if you and I are both in America, and we enter into a smart-contract contract, then we're also entering into a civil legal contract evidenced by that smart contract (just like we're entering into a legal contract if we make a verbal "handshake agreement.")
But if we have a compatible legal framework to operate in, that grants our contract as valid†, then why would we even need a blockchain?
† (A common reason to not grant a civil contract as valid: because it's a contract for purchase of illegal goods. In such cases, you don't have a compatible legal framework to operate in, even if you're operating in the same country.)
The distributed network is to some degree a red herring here: in most cases, an unhappy judge would be issuing orders compelling behaviors from specific people (e.g. "you're going to send that $10M back to the person who had it"), and if that contradicts the code, too bad - do it some other way.
> Think of it like offshore gambling, except that it's 'offshore' respective to every country on Earth
Except it's not: if you're in Iraq and I'm in Brazil and we enter into a contract (as would be legally understood in either or both countries), we are now in a contract under the jurisdictions of both countries.
Even being literally "offshore" doesn't really matter: almost every country will claim jurisdiction over its own citizens if they're not already under the jurisdiction of some other nation (by way of being on a ship registered under that nation's flag). You can't actually escape the law just by going out into the middle of the ocean.
I'm presuming here that the unhappy judge is on the other end, is the thing. There's no judge local to the person “in the wrong” who actually has cause to go after them. Only the judge in the other country does.
If I'm in Iraq and you're in Brazil, and I rip you off, and you have no idea who I am because I'm just some pseudonym on a darknet market, then sure, a Brazilian judge can write an order for "me" to pay the money back... but how are they ever going to enforce that? They don't even know who "I" am.
Let's say they at least know where I am (Iraq.) In a compatible-legal-frameworks situation, your judge could get an arrest warrant out, and nudge my country's police to try to do some ISP PRISM-ing to figure out who I am. Then your judge could try to get me extradited to Brazil to be tried.
But if Iraq and Brazil aren't on "good buddies who treat one-another's warrants in good faith" terms... then what's your judge going to do?
(To put this another way: if Edward Snowden ripped a bunch of private US citizens off before heading to Russia/Switzerland/wherever, would he have been any more likely to have been extradited sooner?)
> if you're in Iraq and I'm in Brazil and we enter into a contract (as would be legally understood in either or both countries), we are now in a contract under the jurisdictions of both countries.
In the case of actual offshore casinos, if you lose money to another person, you don't owe them money, because you never interacted with them directly. You played a game together; but while doing so, what was technically, legally happening was that you were interacting with the casino, and they were interacting with the casino. So, if anyone owes anyone money, then it's the casino that you owe money; and, separately, it's the casino that owes them money. (This is a large part of why casinos get you to trade your cash in for tokens, and then play games using the tokens. Everything that happens with the tokens, is "you interacting with the casino.")
You see this dynamic domestically in the form of e.g. car insurance. If you rear-end someone, you don't owe that person money. You owe your insurance provider money; your insurance provider owes their insurance provider money; and their insurance provider owes them money. Usually all different amounts! Because those are three different contractual agreements, being settled separately.
While it’s not necessarily the case that this is the body of case-law that would pertain if you send Dogecoin to someone in another country through your mutual memberships in some DEx, it’s not not necessarily the case, either.
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I think we’re getting off-track here, though. My original point wasn’t that a judge would be replaced by a network-consensus abstract machine. It’s that a network-consensus abstract machine is a valid replacement good for a judge, when you don’t have any compatible legal framework through which to access a judge. This is the good people are paying for when they pay crypto transaction fees: this fake robot judge, that—while worse than a real judge in almost all respects—is at least better than the nothing (i.e. the “send Western Union and pray your counterparty isn’t a Nigerian prince”) you get by default in international civil/contract-law dispute scenarios.
You are in for a world of hurt... that's not how this works. At all. https://en.wikipedia.org/wiki/Tort
https://en.wikipedia.org/wiki/Ricardian_contract
It's slightly different than what you describe, because the parallel contract is an actual contract: a written and binding agreement between multiple parties, which explicitly grants consent for some bit of software to govern a given business arrangement.
Most "smart contracts" aren't Ricardian contracts, though, they're just chunks of software running on a blockchain.
They probably should be though, because contract law applies to business whether a specific legal contract is drafted or not, and no, that implicit contract doesn't say "whatever the software does is fine".
Some cryptocurrency enthusiasts seem to think declaring "code is law" actually makes it so while this is pretty far from the truth.
And like in real life, you can refuse to tell where the money is hidden.
>unlike USD, the court can’t do something like garnish your wages to pay back a 10M settlement by taking some crypto out of your incoming transactions
You think so, do you? "The law is the because that's what the law says it is". It might not be possible now (and I'm not sure I believe that, you can garnish foreign wages) but it will be if the need arises.
"But the code" yeah, no, that's a silly argument that only applies to cyberspace and not the physical world you occupy
Yeah, and if you get paid in cash you can keep it secret to.
OTOH, if your lifestyle reveals you have access go and are spending funds and not making required payments, courts can impose other consequences, up to and including imprisonment. But usually, seizing and selling off physical or reachable intangible property would be the first way to handle monetary debts. And, sure, crypto itself may be easy to conceal, but if you can’t use it to acquire anything tangible without sacrificing the safety, is it really usefully safe?
Also the verb is "garnisheed". They're not putting parsely on it :)
No, its “garnish”, past-tense “garnished”.
> They're not putting parsely on it :)
No, but its the exact same verb, just a different sense.
On the other hand, this feature is a motivation for centralists to take issues with public decentralized blockchains.
in my experience if you ever tried to tell a judge the code is the law you will be in for a world of hurt. Hope they don't read about it elsewhere either.
on edit: obviously in agreement with parent, just noting that the very concept of the code is the law introduced to a judge is going to elicit some very negative reactions.
In other words, it doesn't work.
What rubbish. You cannot claim "the computer let me do it" and expect to be let off for that. That's an extreme absurdity and is absolutely not how the law works.
Contrary to what a lot of people seem to think: Crypto is not "outside" the law in any way. It is a token of value (like FIAT currency) and there are plenty of laws that cover use cases from capital gains taxes to money laundering to, you guessed it, theft.
Relevant to this discussion is rules covering mistaken deposits to a bank account: recipients are obliged to return the assets, not shrug their shoulders and use the cash while they proclaim "Bank's fault; they're responsible!"
A very contrived example. Say a Smart Contract exists for a contractor to paint a boat cornflower blue and then get paid when the job is done, but the Oracle system says that the contractor messed up and painted it sky blue. It can be part of the Smart Contract in the event of some error that it can go to arbitration to some pre-agreed-to subject matter experts that both sides agreed to beforehand for a quick and reasonable resolution or fee.
This kind of thing can be planned for and made standard in smart contracts. It'll only happen if it saves businesses more time and money than it costs though, and many other question marks will be involved. I think it's very exciting conceptually though.
https://www.forbes.com/sites/jonathanponciano/2021/02/16/cit...
"If they didn't want you to do that then why did they put it in the game?"
Of course,
Merits aside, sidestepping the need for this is the whole point of blockchain.
Where big money is at stake most sensible judges will, or will /try/ to, look behind absolutist language in a contract (be it smart or not). Courts are very good at looking at contracts and asking what the parties intent was. They will ask things like "was it intended not to initialize this function?" They may then answer the question with, "No of course not, it was a bug. The person exploiting that bug knew that and cannot reap the benefit". Maybe, or maybe not: trying to guess what a judge will say is a mugs game, but my point is that saying it's a smart contract not operated humans renders it "Absolute Code-as-law" one can't interfere with is unlikely to fly.
What's the advantage if the result is the same system as before (lawsuits, courts, etc.) with added complexity of "smart contracts"?
Of course, it is not necessarily obvious that blockchain-powered smart contracts are the only way — or the best way — to achieve that automation and efficiency!
The entire point of proof-of-work is that it is inefficient, by design. Efficiency is counteracted: Advances in technology that lead to more efficient mining techniques directly mean the difficulty for the next block being adjusted up.
Operating on traditional databases (where automation is regularly implemented, too) is orders of magnitude more efficient. Because like most other things other than proof-of-work, those processes directly benefit from getting more efficient.
Of course, ethereum forked when a big hack happened, but it won't be forking for every hack, otherwise it's not really a reliable blockchain.
The main thing smart contracts bring to the table is a mechanism of enforcing contracts without government involvement or control. The contract gets enforced, period. The parties can be anonymous, it doesn't matter which country they're from, and so on.
Unfortunately, that's probably not going to be what occurs. Even today, there are constantly bugs discovered and fixed, some critical, that have been latent in systems for decades - as in since the last century.
The recent FragAttacks against WiFi systems come to mind.
If you can use courts, you have no reason to use "smart" contracts.
This explanation, much like its sibling "voluntary transaction" defense of market failures and economic coercion, sounds to me like a bully who hits their victim with their own arm, and then exclaims, "stop punching yourself!".