Coming Soon: Cryptolawyers?

Monday, August 03, 2015

There's a new attorney in town, and his name is "Etherium". At least that's what the founders of a new Bitcoin seem to think about combining cryptocurrency with a Turing-complete programming language in order to make "unbreakable" contracts.

Since most agreements involve the exchange of economic value, or have economic consequences, we can implement whole categories of public and private law using Ethereum. An agreement involving transfer of value can be precisely defined and automatically enforced with the same script.

Let's look at an example. You've built a website and someone wants to buy it for $5000 but they can only pay in March. In the traditional approach, you transfer control of the website and write down what's been agreed on a piece of paper. March arrives and it seems there has been some confusion. You assumed the contract meant this March but they insist they meant next March. Get ready to argue in court about the meaning of "March".
Let's set aside the simple expedient of specifying a year for the sake of argument. I will be the first to concede that this approach could work for some kinds of agreements, but the idea that a computer language can take care of very much of the problem of the ambiguity of language in legal contracts is bunk. For one thing, I doubt anyone designs web sites and then looks for a buyer. I am sure most of these are done on commission, and ... well, one need only peruse the web site Clients From Hell a bit to realize that there can be all kinds of debate about what constitutes the acceptable completion of a project. And, to remove that ambiguity, one would essentially have to design the whole web site in order to have an unambiguous definition of completion. Unfortunately, this would require a designer to do the work for free just to have a contract! And then there's still the matter of a client's ability to pay at the agreed-upon time. Get ready to argue in court, anyway.

At a bare minimum, I can't see how this idea can help anyone involved in work for which the full scope may not be knowable in advance. And, again, one would be amazed at how often some people can dispute the meanings of even common sense terms like color.

-- CAV


Jennifer Snow said...

I could see a use for this if it functions like a type of escrow. Say you order a stack of plates from somebody and agree to pay them $15. What happens now? Do they send the plates and you send the money once you receive them? Well, what if you claim later that you didn't receive the plates and refuse to pay? Are they going to sue you over $15? Or vice versa, what happens if they demand payment up front but never ship the plates?

So you go to this site where you can register the transaction and place the $15 in escrow--the money is there, it's already paid in full, it just isn't transferred to the seller. Then the plates-seller can register the shipment tracking with the site. When the package is delivered the escrow is fullfilled. Neither party of the transaction has a period when they can abscond with the goods or payment.

It's not a solution for all problems, but it does reduce some.

Gus Van Horn said...


Yes, I agree that there can be uses for this, and that's a better example than their site gave.



Jennifer Snow said...

I had a situation last year where something like this might have been useful--I engaged to edit a novel for an online friend. We agreed on a price and set to work. It was difficult and stressful for everyone involved (art generally is), and at the end the price was higher than anticipated because the book was longer than anticipated, so he asked to pay me in two installments (and I agreed). But the thing is, I'd already delivered my work. I just had to trust him that he'd pay me (which I did, and he did). But I've read quite a bit of Clients From Hell. I was lucky that I was familiar with the character of my client, but many times you don't have that luxury.