What is Ethereum?

By what mechanism does Ethereum enable monopoly elimination? (sorry, I don't know too much about Ethereum)

The problem with detainment, collective detainment, sanctions, etc. is that the local conditions when a detainment occurs may be far from the theoretical situation. What if everyone around you believes that you should be detained, but you actually shouldn't (according to the theoretical 'rule')? You just threaten to "stop funding" them and they let you go? What is to stop them from escalating the violence? Nothing.

    Contracts that are mutually beneficial typically
    don't need to be enforced because they are not
    often broken.

What you are describing is a situation where neither party has an incentive to defect or default on the contract. And if that is the case then there was no need for a contract in the first place. For example, you and I agree to meet Friday night for dinner. This is a beneficial arrangement for both of us, neither of us need sign anything.

The purpose of contracts is to solve a game-theoretic problem: it is to our mutual benefit to cooperate in some way. But if we cooperate, then one of us can do even better by defecting. For example, it might be mutually beneficial for me to give you $1,000 today, and for you to give me 100 widgets on Thursday. But if I give you $1,000 today, you can do better than the original agreement by keeping the money and the widgets. So the only reason I would ever give you $1,000 is if there was some way to enforce that you give me 100 widgets. That can be by legal means, or technological means. The threat of punishment under a legal system is one traditionally effective way to incentivize you to hold your end of the bargain, and in many ways is at the very heart of what makes modern society work. A technological solution, that avoided law enforcement and judiciary systems, has the potential to be even better because there are obvious negative effects to having a large and over-reaching police force, for example.

TL;DR The enforceability of the contract is the whole point. The only reason you need a contract in the first place is because someone has an incentive to defect.

With most laws, there is the possibility of breaking them and maybe you have to face the consequences.

With this stuff, you won't be able to use the stuff for what it wasn't designed for. Stronger guarantees. It's like a car that slows down in a construction zone, and is unable to go any faster, instead of cops giving tickets. Like the 90 year old engineer guy behind the Venus project says in his interviews.

That can be useful. Not for everything, but for a whole lot. The current DRM stuff works like this.

I see both sides of the debate, and lean toward your side. But I also think both sides are probably wrong to speak as if we will have either one system or the other in the foreseeable future. I think it is more likely that government resources and law enforcement will exist alongside any trustless contract system, acting as a failsafe (or guarantor of exploitation, depending on your POV I suppose). Few contracts would be irreversible, and few holders of contracts would resist reversal, if physical violence from the state were brought to be bear, even if the issue had already been "settled" by software. I believe the reality is that Ethereum-style contracts would increase efficiencies in more routine, less controversial contracts and the state would remain the final recourse in more extreme cases. As some have said, 30 years down the road when machines are more intelligent, all bets are off. But for the foreseeable future, the state isn't going to wither away just yet.

As far as people obfuscating with complex contracts, yes, of course they will do that. But the obvious implication is that a class of techno-jurists will have to arise to help advise users. Again, that's not much different than the current system of clueless folk consulting attorneys, and I imagine both systems would coexist for some time to come.