Smart Contracts and Consumers

Abstract

“Smart contracts” are a way of using computers to make contracts unbreakable. Contracting parties do not need to trust one another to perform or rely upon intermediaries to enforce performance. Performance is guaranteed. This is supposed to be a victory for the ordinary person—a clever socio-economic application of cryptography that strips power from companies and governments and gives it to consumers. But it turns out that less trust does not mean more freedom, or better bargains. The law of contract supports valuable relationships both by enforcing duties and by allowing parties to escape the consequences of ill-formed contracts and oppressive terms. Smart contracts remove these safeguards; consumers may be bound, inexorably and without recourse, to contracts that lack any virtue. The lesson of smart contracting is clear and urgent: when we design the future of commerce, we should direct our resources towards building, not emaciating, relationships of trust.