Simple Contracts are Better Contracts: the Meltdown of the DAO

That's fair point.

""So I’ll start there, and imagine that there are semi-trusted ‘oracles’ that compete to be the most reliable and trustworthy verifiers of contracts. People involved in contracts choose N of them, and then require that contract conditions be validated by one or more of them before the contract pays out. Pick more than one so no single oracle can steal the contract’s funds, but less than N in case some of them go out of business or just aren’t around to validate contracts when it is time for the contract to pay out."

http://gavintech.blogspot.com/2014/06/bit-thereum.html

So you can "just" write contract in some language so that: - it will cover most of cases without human intervention - if there will be bug with code oracle will read (as human) content of terms to get idea about contract intent (basically dispute)

But it seems that good marketing and some really interesting technology can switch focus from asking basic question - "we are trying to solve existing business problem or just create cool tech?" And yet when i read blogposts about ethereum i see more and more complicated contraptions (ruby goldberg machines in fact) and reason why this whole thing is even build is not clear.

I don;t think lawyers could help with bugs, but their absence could be telling. Most of the lawyers I know wouldn't go anywhere near this sort of thing. A board of directors, or any other governing body, without any lawyers makes me suspect those that were asked fled the project. Or that the organizers deliberately didn't approach any lawyers because they knew what they would say. Anyone with a background in contracts, specifically dealing with contracts gone sour, would see red flags all over this concept.

> Contracts are agreements that are meant to be legally enforceable.

You have hit on an important point, but like most commentators here and elsewhere, you seem entirely to have failed to recognize its significance. In the American and English tradition of common law, a contract is an agreement made with the intention that it be subject to legal enforcement [0]. Not every agreement is meant to give its parties recourse to legal remedy, and hence not every agreement is a contract. That is, not every agreement is subject to contract law [1].

It is of little significance that people in the Ethereum community (or in the broader crypto-asset community) have taken to calling their programs "smart contracts"; the name signifies nothing. In the main, and particularly in the case of the DAO, it has been made clear, ad nauseum, that these programmatic agreements are not meant to be subject to legal enforcement; in short, it has been emphasized from the start, and at every intermediate step, that smart contracts are not contracts in the legal sense. Indeed, the major motivation for the development of programmatic agreements (i.e., "smart contracts"), has been to supplant enforcement de jure by enforcement de machina.

The law allows for agreements that do not have the force of law behind them, and naturally the law says little about such agreements. For this reason alone, absent separate provisions which purport to invoke legal enforcement of the intent behind the code that implements a smart contract, it is perfectly reasonable, legally speaking, to argue that prima facie these agreements are not subject to contract law.

Thus the independence of programmatic agreements from legal constraints is legally plausible; this is a very different situation from the legally absurd arguments put forth by some crypto-zealots that, for example, transfers of cryptocurrencies are not subject to laws restricting money transmission.

Now, might a judge decide that any particular programmatic agreement—or "smart contract"—is in fact a legal contract? And that therefore the judge, not the code, ultimately determines who gets what? Sure. Judges tend to decide that they get to decide, when there's any question about it. But it's not unreasonable to imagine that a judge might really say, "No, this is not a legally enforceable contract. It says so right on the box." And if that happens, then what the code says goes.

0. https://en.m.wikipedia.org/wiki/Intention_to_be_legally_boun...

1. Beyond the determination of whether the agreement is legally a contract, I mean. In particular, I mean to point out that a so-called "smart contract" might well be legally deemed not to be a contract at all, and therefore not subject to the provisions of contract law that give precedence to the parties' intent in the agreement over its literal interpretation. In other words, if a programmatic "smart contract" is not legally a contract, there is no legal reason that the law should favor any outcome other that what the code's execution ordains, or that the law should say anything on the subject at all.

I once read a story told by a young U.S. lawyer who happened to come from one of West European countries and thus had a specific cultural background. They were in the middle of finishing a deal and when he was re-reading the contract, he noticed that he made a typo and turned $1.5M they were to pay at some stage into $15M. And the contract was already signed! In horror he went to the business owner and confessed. It was a revelation to him when the owner took it very lightly and told him something like: "It's OK, I'll just phone them and we'll have this fixed."

(And it wouldn't stand a chance in court either, because a simple calculation would show this couldn't possibly be a right sum for a sane person to pay for whatever the contract was about.)

That's why smart contracts will be really lousy for things that traditional contracts are used for.

But on the other hand, there are some simple - yet important - things that can be implemented in smart contracts pretty easily. Say, futures, or stock options, or certain kinds of insurance. For these things smart contracts are great because they offer extremely cheap enforceability and speed.

This is a textbook blue ocean, or innovator's dilemma. The new tech is much worse than the old one in some cases (enforcing intent), but far better in some other ones (speed, enforceability, global access)