ABSTRACT
Smart contracts govern transactions using the blockchain as the enforcing medium. They may be a cheaper form of governance of transactions compared to traditional contracts, the hierarchy of firms, and relational contracts. However, I argue that smart contracts do not eliminate transaction costs; rather, they can increase them, particularly when considering the issue of ex-post efficiency-enhancing adaptation. Thus, while smart contracts offer a new theoretical and practical way to govern transactions, they are not without challenges and limitations.
Vatiero, Massimiliano, The ‘Dark Side’ of Smart Contracts: A Contract Theory Perspective (July 25, 2024).
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