Understanding smart contracts as a new option in transaction cost economics

Among different concepts associated with the term blockchain, smart contracts have been a prominent one, especially popularized by the Ethereum platform. In this study, we unpack this concept within the framework of Transaction Cost Economics (TCE). This institutional economics theory emphasizes the role of distinctive (private and public) contract law regimes in shaping firm boundaries. We propose that widespread adoption of the smart contract concept creates a new option in public contracting, which may give rise to a smart-contract-augmented contract law regime. We discuss tradeoffs involved in the attractiveness of the smart contract concept for firms and the resulting potential for change in firm boundaries. Based on our new conceptualization, we discuss potential roles the three branches of government – judicial, executive, and legislative – in enabling and using this new contract law regime. We conclude the paper by pointing out limitations of the TCE perspective and suggesting future research directions

Proof-theoretic Analysis of Rationality for Strategic Games with Arbitrary Strategy Sets

In the context of strategic games, we provide an axiomatic proof of the statement Common knowledge of rationality implies that the players will choose only strategies that survive the iterated elimination of strictly dominated strategies. Rationality here means playing only strategies one believes to be best responses. This involves looking at two formal languages. One is first-order, and is used to formalise optimality conditions, like avoiding strictly dominated strategies, or playing a best response. The other is a modal fixpoint language with expressions for optimality, rationality and belief. Fixpoints are used to form expressions for common belief and for iterated elimination of non-optimal strategies.Comment: 16 pages, Proc. 11th International Workshop on Computational Logic in Multi-Agent Systems (CLIMA XI). To appea

Contracts Ex Machina

Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Do smart contracts offer a superior solution to the problems that contract law addresses? In this article, we aim to understand both the potential and the limitations of smart contracts. We conclude that smart contracts offer novel possibilities, may significantly alter the commercial world, and will demand new legal responses. But smart contracts will not displace contract law. Understanding why not brings into focus the essential role of contract law as a remedial institution. In this way, smart contracts actually illuminate the role of contract law more than they obviate it

Component Based System Framework for Dynamic B2B Interaction

Business-to-business (B2B) collaboration is becoming a pivotal way to bring today's enterprises to success in the dynamically changing, e-business environment. Though many business-to-business protocols are developed to support B2B interaction, none are generally accepted. A B2B system should support different B2B protocols dynamically to enable interaction between diverse enterprises. This paper proposes a framework for dynamic B2B interaction. A B2B transaction is divided into the interaction part and business implementation part to support flexible interaction. A component based system framework is proposed,to support the B2B transaction execution. To support. dynamic B2B services, dynamic component composition is required. Service and component notions are combined into a composable service component. The composition architecture is also presented

Using the event calculus for tracking the normative state of contracts

In this work, we have been principally concerned with the representation of contracts so that their normative state may be tracked in an automated fashion over their deployment lifetime. The normative state of a contract, at a particular time, is the aggregation of instances of normative relations that hold between contract parties at that time, plus the current values of contract variables. The effects of contract events on the normative state of a contract are specified using an XML formalisation of the Event Calculus, called ecXML. We use an example mail service agreement from the domain of web services to ground the discussion of our work. We give a characterisation of the agreement according to the normative concepts of: obligation, power and permission, and show how the ecXML representation may be used to track the state of the agreement, according to a narrative of contract events. We also give a description of a state tracking architecture, and a contract deployment tool, both of which have been implemented in the course of our work.

Primitives for Contract-based Synchronization

We investigate how contracts can be used to regulate the interaction between processes. To do that, we study a variant of the concurrent constraints calculus presented in [1], featuring primitives for multi-party synchronization via contracts. We proceed in two directions. First, we exploit our primitives to model some contract-based interactions. Then, we discuss how several models for concurrency can be expressed through our primitives. In particular, we encode the pi-calculus and graph rewriting.Comment: In Proceedings ICE 2010, arXiv:1010.530