# Smart contracts `kaal:entity:smart-contracts` **Status.** derived This node is assembled mechanically from the 190 claims that carry the concept tag `smart-contracts`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself. ## Every claim under this term 190 claims across 59 works, 2017 to 2026. **2017** - [2922176-020](https://wulfkaal.github.io/claims/2922176-020) [predictive/asserted] -- Blockchain-based smart contracts in digital marketplaces are the technology most likely to extend and lead the decentralization of the relationship between businesses and their counterparties. > In particular, blockchain-based smart contracts in digital marketplaces are predisposed to extend and lead these decentralization changes. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, The ‘Unmediated’ and ‘Tech-Driven’ Corporate Governance of Today's Winning Companies (2017). SSRN: https://ssrn.com/abstract=2922176 - [2922176-035](https://wulfkaal.github.io/claims/2922176-035) [failure/evidenced] *(failure mode)* -- Fundamental flaws in the DAO's code allowed hackers to move one third of contributed funds to a subsidiary account, ending that initiative, but the flaws were in the implementation and do not defeat the DAO vision, which developers continue to rebuild. > The initial DAO did not end well, but DAO enthusiasts and coders are developing new structures to address the flaws of the existing DAO infrastructure. Fundamental flaws in the DAO code made it possible for hackers to transfer one third of the total contributed funds to a subsidiary account. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, The ‘Unmediated’ and ‘Tech-Driven’ Corporate Governance of Today's Winning Companies (2017). SSRN: https://ssrn.com/abstract=2922176 - [2922176-036](https://wulfkaal.github.io/claims/2922176-036) [definitional/argued] -- In a decentralized autonomous organization a series of smart contracts grants token holders voting rights, so the blockchain-based smart contract performs the function that articles of incorporation or bylaws perform in a conventional company. > A series of smart contracts granted token holders voting rights. In this respect, the blockchain-based smart contract mimics the role of articles of incorporation or bylaws. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, The ‘Unmediated’ and ‘Tech-Driven’ Corporate Governance of Today's Winning Companies (2017). SSRN: https://ssrn.com/abstract=2922176 - [2939127-013](https://wulfkaal.github.io/claims/2939127-013) [mechanism/argued] -- The counseling, deal making, matchmaking, gatekeeping, and enforcement roles historically performed by lawyers are increasingly performed by technology, and blockchain technology and smart contracting will accelerate that substitution. > However, the counseling, deal-making, matchmaking, gatekeeping, and enforcing roles are increasingly performed by technology.43 This trend is likely to accelerate in the near future, enabled by blockchain technology and smart contracting. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-018](https://wulfkaal.github.io/claims/2939127-018) [condition/argued] -- Smart contract arrangements involving several parties and greater complexity require the verifiable and unhackable system that blockchain technology supplies. > More complex smart contract arrangements in which several parties are involved require a verifiable and unhackable system provided by blockchain technology. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-019](https://wulfkaal.github.io/claims/2939127-019) [mechanism/argued] -- Smart contracting on a blockchain often makes conventional legal contracting unnecessary, because smart contracts emulate the logic of legal contract clauses. > Through blockchain technology, smart contracting often makes contractual legal contracting unnecessary as smart contracts often emulate the logic of legal contract clauses. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-024](https://wulfkaal.github.io/claims/2939127-024) [failure/argued] *(failure mode)* -- The world of blockchain and smart contracting has clearly not reached maturity, which is the first of several technological and legal limitations facing blockchain and smart contracts. > First, the world of blockchain and smart contracting has clearly not reached maturity yet. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-025](https://wulfkaal.github.io/claims/2939127-025) [mechanism/argued] -- Contrary to the widespread belief among legal professionals that code can only handle very simple transactions, blockchain enabled smart contracts generally do not require legal involvement across the spectrum of transactions. > While blockchain-enabled smart contracts generally do not require legal involvement across the spectrum of transactions, legal professionals often still believe that "code" in smart contracts can only deal with very simple transactions Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-026](https://wulfkaal.github.io/claims/2939127-026) [failure/argued] *(failure mode)* -- Because the legal origin of smart contracting is unsettled, lawyers may argue that smart contracts are void and unenforceable under the law even where the smart contract accurately reflects the parties' underlying agreement. > While smart contracts may reflect the underlying contract between parties, lawyers may argue that "smart contracts" are void and unenforceable under the law. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-027](https://wulfkaal.github.io/claims/2939127-027) [condition/argued] -- Contract law rules on formation, interpretation, conditions, and remedies require substantive adjustment before smart contracts can be accommodated. > Contractual legal rules regarding formation, interpretation, conditions, and remedies require substantive adjustments of smart contracts in contract law. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-030](https://wulfkaal.github.io/claims/2939127-030) [failure/evidenced] *(failure mode)* -- Fundamental flaws in the DAO's code let hackers move one third of its total funds to a subsidiary account, and that hack together with further technological limitations destroyed the DAO initiative. > Alas, things went terribly wrong with the DAO. Fundamental flaws in the DAO code enabled hackers to transfer one-third of the total funds to a subsidiary account.92 This hack in combination with additional technological limitations brought down the DAO initiative. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-031](https://wulfkaal.github.io/claims/2939127-031) [mechanism/argued] -- Because a series of smart contracts granted DAO token holders voting rights, the blockchain based smart contracts performed the function of articles of association or corporate bylaws, in an organization that had no directors, managers, or employees. > Because a series of smart contracts granted DAO token holders voting rights, the blockchain-based smart contracts imitated the role of articles of association or bylaws. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-037](https://wulfkaal.github.io/claims/2939127-037) [condition/argued] -- Advising on blockchain contracts requires that law students and lawyers become familiar with the technology and learn at least basic coding as it pertains to Ethereum smart contracts. > In order to advise on blockchain contracts, law students and lawyers have to become familiar with the technology and learn at least basic coding as it pertains to Ethereum smart contracts. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2939127-039](https://wulfkaal.github.io/claims/2939127-039) [predictive/argued] -- Future lawyers will have to distinguish blockchain based contracting from traditional legal contracting and advise clients on the optimal allocation between the two. > For instance, future lawyers will have to be able to distinguish blockchain-based contracting from traditional legal contracting and advise clients on optimal blockchain and non-blockchain contracting allocations. Mark Fenwick, Wulf A. Kaal, Erik P. M. Vermeulen, Legal Education in the Blockchain Revolution (2017). SSRN: https://ssrn.com/abstract=2939127 - [2959730-021](https://wulfkaal.github.io/claims/2959730-021) [condition/asserted] -- Complex smart contract arrangements involving several parties require a verifiable and unhackable system, which blockchain technology supplies. > More complex smart contract arrangements in which several parties are involved require a verifiable and unhackable system provided by blockchain technology. Wulf A. Kaal, Blockchain Applications and Fee Structure Developments in Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2959730 - [2959730-022](https://wulfkaal.github.io/claims/2959730-022) [mechanism/argued] -- Smart contracting on the blockchain often makes legal contracting unnecessary because smart contracts emulate the logic of legal contract clauses. > Through blockchain technology, smart contracting often makes legal contracting unnecessary as smart contracts often emulate the logic of legal contract clauses. Wulf A. Kaal, Blockchain Applications and Fee Structure Developments in Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2959730 - [2992962-003](https://wulfkaal.github.io/claims/2992962-003) [predictive/argued] *(failure mode)* -- If the jurisdictional means necessary for conflict resolution mechanisms covering Ethereum blockchain based smart contracting are absent, consumers will mistrust the new technology, and that mistrust can undermine the evolution of the blockchain based crypto economy. > Not having the required jurisdictional means necessary for conflict resolution mechanisms for Ethereum blockchain-based smart contracting, may invoke consumer mistrust in the new technology. This can then undermine the evolution of the blockchain-based crypto economy. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-011](https://wulfkaal.github.io/claims/2992962-011) [failure/argued] *(failure mode)* -- Uniform Law Commission style registration of virtual currency businesses may give courts more information about registered businesses, but jurisdiction over the parties to a smart contract remains largely elusive because smart contracting is distributed and global. > Courts may be able to obtain more information about registered businesses under the uniform laws but jurisdiction over the parties to a smart contract will still largely be elusive given the distributed and global nature of smart contracting. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-013](https://wulfkaal.github.io/claims/2992962-013) [failure/argued] *(failure mode)* -- Proving personal jurisdiction over smart contracting parties by physical presence, domicile or place of business, consent, or minimum contacts becomes impossible, because none of these elements are known of the parties to a smart contract. > To illustrate this point, proving personal jurisdiction by means of 1. Physical Presence, 2. Domicile/Place of Business, 3. Consent, and 4. Minimum Contacts becomes impossible as none of these elements are known of the parties in a smart contract. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-015](https://wulfkaal.github.io/claims/2992962-015) [condition/argued] -- Not all smart contracts are fully anonymous and untouchable by traditional jurisdictional means, because contracts with a physical performance element, such as peer to peer transportation, do not automatically anonymize the parties. > Not all smart contracts are fully anonymous and untouchable by traditional jurisdictional means. Some smart contracts will not automatically anonymize the parties because there is a physical element to such a consumer contract. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-016](https://wulfkaal.github.io/claims/2992962-016) [failure/argued] *(failure mode)* -- Breach of a smart contract is arguably not even possible, because the contract simply will not execute if a parameter is not fulfilled. > Arguably, breach of a smart contract is not even possible, the contract simply will not execute if a parameter is not fulfilled. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-017](https://wulfkaal.github.io/claims/2992962-017) [failure/argued] *(failure mode)* -- Because smart contracts are coded for computer programming rather than for a human observer, courts may not be able to hypothesize a reasonable human's interpretation of a given smart contract. > Because of the emphasis on code for computer programming (and artificial intelligence), courts may not be able to hypothesize a reasonable human's interpretation of a given smart contract. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-018](https://wulfkaal.github.io/claims/2992962-018) [failure/argued] *(failure mode)* -- To institute traditional remedies where a smart contract transaction disadvantages one of the parties, courts would have to change the blockchain, and that is computationally and practically impossible. > courts would have to change the blockchain in order to institute remedies in the traditional sense that could pertain to the smart contract in question. However, that scenario is computationally and practically impossible. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-021](https://wulfkaal.github.io/claims/2992962-021) [normative/argued] -- Because courts cannot effectuate resolutions to disputes arising from blockchain based smart contracts, blockchain based resolution mechanisms are the only possible recourse for smart contract disputes. > Therefore, blockchain-based resolution mechanisms are the only possible recourse for smart contract disputes. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-025](https://wulfkaal.github.io/claims/2992962-025) [design/argued] -- Coding regulatory conditions into smart contracts lowers regulators' cost of supervision and enforcement while substantially increasing their oversight, because a smart contract cannot execute unless all regulatory conditions and parameters are fully complied with. > Second, because smart contracts cannot execute unless all regulatory conditions and parameters are fully complied with, regulators lower their cost of supervision and enforcement while substantially increasing their oversight Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-026](https://wulfkaal.github.io/claims/2992962-026) [predictive/argued] *(failure mode)* -- The benefits of coding existing law into smart contracts are only temporary, because as smart contracting evolves over time fewer smart contracting solutions will have a real world equivalent. > The benefits of this hybrid approach are only temporary. As smart contracting evolves over time, fewer smart contracting solutions will have a real-world equivalent. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-027](https://wulfkaal.github.io/claims/2992962-027) [failure/argued] *(failure mode)* -- Without strong external pressure from existing regulatory structures and a distributed jurisdiction responsive to that pressure, the anonymity of smart contracting will ultimately undermine the coding of existing legal rules into smart contracts. > Without strong external pressures from existing regulatory structures and a distributed jurisdiction for crypto transactions that is responsive to such pressure, the anonymity of smart contracting will ultimately undermine the coding of existing legal rules into smart contracts. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-028](https://wulfkaal.github.io/claims/2992962-028) [condition/asserted] -- The first of the two core requirements the authors set for distributed jurisdiction is that the anonymity of blockchain based smart contracting be maintained as the technology evolves. > Our proposal in this paper for a distributed jurisdiction over blockchains has to fulfill two core requirements: 1. The anonymity of blockchain-based smart contracting has to be maintained as the technology evolves. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2992962-030](https://wulfkaal.github.io/claims/2992962-030) [mechanism/argued] *(failure mode)* -- Problems with smart contracts are inevitable because of subjectivity in human relationships, bounded rationality of coders and contracting parties, incomplete foresight, incomplete information, and opportunistic behavior. > Problems with smart contracts are inevitable because of the subjectivity in human relationship, bounded rationality of coders and contracting parties, incomplete foresight, incomplete information, and opportunistic behavior. Wulf A. Kaal, Craig Calcaterra, Crypto Transaction Dispute Resolution (2017). SSRN: https://ssrn.com/abstract=2992962 - [2998033-002](https://wulfkaal.github.io/claims/2998033-002) [mechanism/asserted] -- Smart contracting on blockchain platforms often makes legal contracting unnecessary, because smart contracts emulate the logic of legal contract clauses. > Through blockchain technology, smart contracting often makes legal contracting unnecessary as smart contracts often emulate the logic of legal contract clauses. Wulf A. Kaal, Blockchain Innovation for Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2998033 - [2998033-004](https://wulfkaal.github.io/claims/2998033-004) [failure/argued] *(failure mode)* -- Smart contracts face a legal enforceability risk: they may be attacked as void and unenforceable, because contract law rules on formation, interpretation, conditions and remedies were not written for coded agreements and require substantive adjustment. > lawyers may argue that "smart contracts" are void and unenforceable under the law. Contractual legal rules regarding formation, interpretation, conditions and remedies require substantive adjustments for smart contracts in contract law. Wulf A. Kaal, Blockchain Innovation for Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2998033 - [2998033-007](https://wulfkaal.github.io/claims/2998033-007) [failure/evidenced] *(failure mode)* -- The DAO failed because of fundamental flaws in its own code, which allowed hackers to move one third of its funds to a subsidiary account, showing that governance built entirely on smart contracts inherits the defects of its code. > Alas, things went terribly wrong with the DAO. Fundamental flaws in the DAO code enabled hackers to transfer one third of the total funds to a subsidiary account. Wulf A. Kaal, Blockchain Innovation for Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2998033 - [2998033-011](https://wulfkaal.github.io/claims/2998033-011) [failure/argued] *(failure mode)* -- Managers of funds that exist only as smart contracts in cyberspace, with no foreign or domestic domicile, cannot assume they are judgment proof; the more likely outcome is that they must comply with more regulations, not fewer, because every node location can trigger a jurisdiction. > However, managers cannot assume that they are judgment-proof. Instead, fund managers may be required to comply with more regulations not fewer. Wulf A. Kaal, Blockchain Innovation for Private Investment Funds (2017). SSRN: https://ssrn.com/abstract=2998033 - [2998097-040](https://wulfkaal.github.io/claims/2998097-040) [mechanism/argued] *(failure mode)* -- Blockchain technology enables managers to charge per-transaction fees, which undermines the existing 2 and 20 fee model, because it allows fully automated allocation of the correct fee to each executed trade without manual reconciliation or settlement. > Blockchain technology enables managers to charge per- transaction fees which undermines the existing 2/20 fee model. Wulf A. Kaal, Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016 (2017). SSRN: https://ssrn.com/abstract=2998097 - [3002908-017](https://wulfkaal.github.io/claims/3002908-017) [condition/asserted] -- Complex smart contracts involving several parties can only work if they rest on a verifiable and unhackable system, which is what blockchain technology supplies. > Complex smart contracts involving several parties need to rely on a verifiable and unhackable system provided by blockchain technology. Wulf A. Kaal, Marco Dell'Erba, Blockchain Innovation in Private Investment Funds - A Comparative Analysis of the United States and (2017). SSRN: https://ssrn.com/abstract=3002908 - [3002908-018](https://wulfkaal.github.io/claims/3002908-018) [mechanism/asserted] -- Smart contracting often makes legal contracting unnecessary, because smart contracts frequently emulate the logic of legal contract clauses. > smart contracting often makes legal contracting unnecessary as smart contracts often emulate the logic of legal contract clauses. Wulf A. Kaal, Marco Dell'Erba, Blockchain Innovation in Private Investment Funds - A Comparative Analysis of the United States and (2017). SSRN: https://ssrn.com/abstract=3002908 - [3002908-030](https://wulfkaal.github.io/claims/3002908-030) [empirical/evidenced] -- Larger European private fund advisers implement more conservative investment strategies, using blockchain technology predominantly to invest in and secure crypto assets. > The data seems to suggest that the larger European private fund advisers implement more conservative investment strategies and use the technology predominantly to invest in- and secure crypto assets. Wulf A. Kaal, Marco Dell'Erba, Blockchain Innovation in Private Investment Funds - A Comparative Analysis of the United States and (2017). SSRN: https://ssrn.com/abstract=3002908 - [3002908-031](https://wulfkaal.github.io/claims/3002908-031) [predictive/speculative] *(failure mode)* -- Because American funds lean on smart contracting, they have a better opportunity to launch disruptive blockchain implementations, but they may also experience a higher rate of failure from greater exposure to technological risk. > This may imply that American private investment funds will have a better opportunity to launch future disruptive implementations of blockchain technology, while at the same time they may experience a higher rate of failure, due to a greater exposure to technological risks. Wulf A. Kaal, Marco Dell'Erba, Blockchain Innovation in Private Investment Funds - A Comparative Analysis of the United States and (2017). SSRN: https://ssrn.com/abstract=3002908 - [3002908-040](https://wulfkaal.github.io/claims/3002908-040) [empirical/evidenced] -- American fund advisers use the smart contracting features of blockchain more frequently than European advisers, in order to build more advanced and innovative crypto businesses and business structures. > Whereas American fund advisers appear to more frequently use the smart contracting features of the technology to build more advanced and innovative crypto businesses and business structures via blockchain technology. Wulf A. Kaal, Marco Dell'Erba, Blockchain Innovation in Private Investment Funds - A Comparative Analysis of the United States and (2017). SSRN: https://ssrn.com/abstract=3002908 - [3067615-004](https://wulfkaal.github.io/claims/3067615-004) [mechanism/evidenced] -- Because Ethereum's decentralized platform incorporating smart contracts lets developers build applications directly on its blockchain, the majority of developers chose to write smart contracts on the Ethereum Virtual Machine rather than create their own blockchain technology, giving ICOs a uniform protocol. > Given these advantages, the majority of developers opted for writing smart contracts on the Ethereum Virtual Machine rather than creating their own blockchain Wulf A. Kaal, Marco Dell'Erba, Initial Coin Offerings Emerging Practices, Risk Factors, and Red Flags (2017). SSRN: https://ssrn.com/abstract=3067615 - [3071378-006](https://wulfkaal.github.io/claims/3071378-006) [mechanism/argued] -- Smart contracting often makes legal contracting unnecessary because smart contracts emulate the logic of legal contract clauses. > smart contracting often makes legal contracting unnecessary as smart contracts often emulate the logic of legal contract clauses.43 Wulf A. Kaal, Blockchain Technology and Race in Corporate America (2017). SSRN: https://ssrn.com/abstract=3071378 - [3071378-009](https://wulfkaal.github.io/claims/3071378-009) [failure/argued] *(failure mode)* -- Even where a smart contract reflects the underlying bargain between the parties, lawyers may argue that smart contracts are void and unenforceable under the law. > While smart contracts may reflect the underlying contract between parties, lawyers may argue that "smart contracts" are void and unenforceable under the law. Wulf A. Kaal, Blockchain Technology and Race in Corporate America (2017). SSRN: https://ssrn.com/abstract=3071378 - [3071378-040](https://wulfkaal.github.io/claims/3071378-040) [predictive/argued] -- Equality is a natural byproduct of the blockchain-driven evolution of the crypto economy, because the trust enhancing consensus model, smart contracting in anonymous networks, and DAOs together allow a more equal society to evolve. > Equality is a natural byproduct of the blockchain-driven evolution of the crypto economy. Blockchain's trust enhancing consensus model, smart contracting in anonymous networks, and DAOs allow for the evolution of a more equal society. Wulf A. Kaal, Blockchain Technology and Race in Corporate America (2017). SSRN: https://ssrn.com/abstract=3071378 **2018** - [3117224-008](https://wulfkaal.github.io/claims/3117224-008) [failure/asserted] *(failure mode)* -- ICO promoters can alter the smart contract to change the sales rules mid-course during the ICO. > Promoters can also change the smart contract to change ICO sales rules mid-course during the ICO. Wulf A. Kaal, Initial Coin Offerings The Top 25 Jurisdictions and Their Comparative Regulatory Responses (2018). SSRN: https://ssrn.com/abstract=3117224 - [3128900-022](https://wulfkaal.github.io/claims/3128900-022) [predictive/speculative] -- Validation experts could evolve from humans into smart contracts, which would allow validation itself to become automated. > For instance, experts could evolve from humans to smart contracts in order to allow for the automation of validation. Wulf A. Kaal, Decentralized Mechanical Turk Through Verified Reputation (2018). SSRN: https://ssrn.com/abstract=3128900 - [3227933-017](https://wulfkaal.github.io/claims/3227933-017) [definitional/asserted] -- A smart contract is a computer program code or protocol that automates the verification, execution, and enforcement of specific terms and conditions of a contractual arrangement. > a smart contract refers to a computer program code or protocol that automates the verification, execution, and enforcement of certain terms and conditions of a "contractual" arrangement. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933 - [3227933-018](https://wulfkaal.github.io/claims/3227933-018) [predictive/argued] -- Smart contracts will become more prevalent as the Internet of Things grows, because the more devices are connected to each other, the more smart contracts will be used to execute and enforce legal transactions. > Such smart contracts will become more prevalent in the growing world of the Internet of Things. As more devices are connected to each other, the more "smart contracts" will be used to execute and enforce "legal transactions." Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933 - [3227933-024](https://wulfkaal.github.io/claims/3227933-024) [predictive/asserted] -- There is great regulatory uncertainty around blockchain and smart contracts, especially in financial services, and legal frameworks globally will have to change to adapt to the growing use of the technology. > Finally, there is a great deal of regulatory uncertainty surrounding blockchain and smart contracts, especially in the financial services industry. Legal frameworks globally will have to change to adapt to the growing use of this type of new technology. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933 - [3227933-030](https://wulfkaal.github.io/claims/3227933-030) [empirical/evidenced] -- The DAO showed that a corporate-type organization can operate with no physical address, no directors, no managers and no employees, with its governance structure built entirely from software, code and smart contracts running on Ethereum. > Indeed, the DAO didn't have any directors, managers or employees. The governance structure was built with software, code and smart contracts that ran on the public decentralized blockchain platform, Ethereum. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933 - [3227933-032](https://wulfkaal.github.io/claims/3227933-032) [mechanism/argued] -- In a DAO, blockchain-based smart contracts granting token holders voting rights perform the function that articles of association or bylaws perform in a conventional corporation. > A series of smart contracts granted the holders of the tokens voting rights. In this respect, the blockchain-based smart contract mimicked the role of articles of association or bylaws. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933 - [3227967-021](https://wulfkaal.github.io/claims/3227967-021) [definitional/asserted] -- A smart contract is computer program code that enables the verification, execution and enforcement of specific terms and conditions of a contractual arrangement. > A smart contract is a computer program code that enables the verification, execution, and enforcement of specific terms and conditions of a contractual arrangement. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Legal Education in a Digital Age Why 'Coding for Lawyers' Matters (2018). SSRN: https://ssrn.com/abstract=3227967 - [3227967-022](https://wulfkaal.github.io/claims/3227967-022) [predictive/argued] -- Smart contract use scales with device connectivity: the more devices are connected to each other, the more smart contracts will be used to execute and enforce legal transactions, and they are already disrupting traditional legal assumptions, doctrines and concepts. > The more devices are connected to each other, the more "smart contracts" will be used to execute and enforce "legal transactions." There is no doubt that smart contracts are already disrupting traditional legal assumptions, doctrines, and concepts. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Legal Education in a Digital Age Why 'Coding for Lawyers' Matters (2018). SSRN: https://ssrn.com/abstract=3227967 - [3227967-023](https://wulfkaal.github.io/claims/3227967-023) [definitional/asserted] -- A decentralized autonomous organization is merely computer code with no directors, managers or employees, its governance structure built with software, code and smart contracts running on a public decentralized blockchain platform. > DAOs are "merely" computer code. They don't have any directors, managers or employees. The governance structure is built with and on software, code and smart contracts that ran on a public decentralized blockchain platform (in most cases Ethereum). Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Legal Education in a Digital Age Why 'Coding for Lawyers' Matters (2018). SSRN: https://ssrn.com/abstract=3227967 - [3227967-027](https://wulfkaal.github.io/claims/3227967-027) [predictive/argued] -- In a digital world trust can be embedded directly in software code, and recent interest in smart contracts suggests this will be a significant growth area in the near future. > In a digital world, trust can be embedded in software code. Recent interest in smart contracts suggests that this is going to be a significant growth area in the near-future. Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Legal Education in a Digital Age Why 'Coding for Lawyers' Matters (2018). SSRN: https://ssrn.com/abstract=3227967 - [3266953-014](https://wulfkaal.github.io/claims/3266953-014) [condition/argued] *(failure mode)* -- Smart contracts cannot by themselves carry human business interactions, because those interactions require flexibility in interpreting intent that is at odds with the merciless mathematical logic of smart contract code. > Human business interactions require a flexibility that is at odds with the merciless mathematical logic of smart contracts. Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953 - [3266953-015](https://wulfkaal.github.io/claims/3266953-015) [failure/argued] *(failure mode)* -- A pure code is law smart contract between anonymous parties creates a zero sum scenario in which each party is incentivized to deliver only the minimum that satisfies the rigid self executing terms, so this type of business ultimately degenerates. > This creates a zero-sum scenario where both parties are entirely incentivized to provide the minimum possible to fulfill the perfectly rigid self-executing contract. This type of business ultimately degenerates as people will spend extra effort to deliver the minimum acceptable products. Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953 - [3266953-016](https://wulfkaal.github.io/claims/3266953-016) [mechanism/argued] -- Putting the counterparties' reputation at stake reverses smart contracting's degeneration, because the opportunity to earn new valuable reputation tokens makes members act in ways that improve the platform over the long term rather than exploit short term arbitrage. > This effect changes if reputation of the counterparties is at stake. With the opportunity to create new valuable reputation tokens, members strive to act in ways which improve the platform for the long term instead of exploiting short-term arbitrage opportunities. Craig Calcaterra, Wulf A. Kaal, Gopinath Sivalingam, Reputation Protocol for the Internet of Trust - Conceptual Whitepaper (2018). SSRN: https://ssrn.com/abstract=3266953 **2019** - [3373393-020](https://wulfkaal.github.io/claims/3373393-020) [definitional/asserted] -- A blockchain guarantee means that a contract between principal and agent executes only if and when all contract parameters have been fulfilled by both parties and verified by a majority of miners or nodes in the system. > Blockchain guarantees include contract execution between principal and agent only if and when all contract parameters were fulfilled by both parties and verified by a majority of miners/nodes in the system. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-025](https://wulfkaal.github.io/claims/3373393-025) [mechanism/asserted] -- Smart contracts enabled by blockchain technology allow comprehensive, near error free, and zero transaction and agency cost coordination of agency relationships. > Smart contracts enabled by blockchain technology allow for the comprehensive, near error free, and zero transaction/agency cost coordination of agency relationships. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-026](https://wulfkaal.github.io/claims/3373393-026) [mechanism/asserted] -- Agency relationships embedded in smart contracts run exactly as coded, without any possibility of opportunistic behavior by the agent, and all contractual terms are public and fully transparent. > Agency relationships in smart contracts run exactly as coded without any possibility of opportunistic behavior of the agent. All contractual terms are public and fully transparent. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-032](https://wulfkaal.github.io/claims/3373393-032) [mechanism/argued] -- Once an optimization proponent has made a deal with the DAO, the deal is recorded in the blockchain and the proponent must deliver on the proposal or the contract is cancelled, which enforces performance without a supervisor. > once the optimization proponent has made a deal with the DAO, it's in the blockchain and the proponent is required to deliver on the proposal or her contract is cancelled. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-037](https://wulfkaal.github.io/claims/3373393-037) [failure/argued] *(failure mode)* -- As agency relationships become more complex, a backstop for human behavior becomes necessary, and the claim that smart contract agency relationships run exactly as coded with no possibility of agent opportunism is less likely to hold in complex agency relationships. > As agency relationships become more complex, a backstop for human behavior in agency relationships becomes necessary. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3373393-038](https://wulfkaal.github.io/claims/3373393-038) [failure/argued] *(failure mode)* -- Without a decentralized human backstop to code, the immutability of the blockchain and its cryptographic security systems may not be able to create truly transactional guarantees and trust between principals and agents. > Similarly, without a decentralized human backstop to code, the immutability of the blockchain and its cryptographic security systems may not be able to create truly transactional guarantees and trust between principals and agents in the integrity of their contractual relationship. Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393 - [3405401-003](https://wulfkaal.github.io/claims/3405401-003) [mechanism/asserted] -- Smart contracts make decentralized commerce between anonymous parties possible because they provide automated contracting that self executes and self regulates according to mathematical strictures. > Smart contracts allow anonymous parties to engage in decentralized commerce by providing automated contracting that self-executes and self-regulates according to mathematical strictures. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-004](https://wulfkaal.github.io/claims/3405401-004) [predictive/asserted] -- Smart contracts are evolving quickly, and that evolution will allow most business logic to be encoded in smart contracts over time. > Their evolution enables most business logic to be included in smart contracts over time. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-005](https://wulfkaal.github.io/claims/3405401-005) [mechanism/asserted] -- Smart contracts benefit business by simplifying and automating transactions, removing transaction costs, and creating certainty for counterparties, and they are inexpensive to run on a blockchain. > Smart contracts are intended to simplify and automate business, removing transaction costs and creating certainty for counterparties. They make business transactions fully secure and efficient. It is also inexpensive to run smart contracts on a blockchain. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-006](https://wulfkaal.github.io/claims/3405401-006) [mechanism/asserted] -- Automation in smart contracting reduces negotiation between counterparties to near minimal levels and removes almost all of the transaction costs typically associated with contracting. > Negotiation between counterparties is near minimal, transaction cost typically associated with contracting are almost entirely removed by the automation. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-007](https://wulfkaal.github.io/claims/3405401-007) [mechanism/asserted] -- The inherent mathematical logic of computerized code in smart contracts can clarify the parties' intent optimally, which increases certainty, creates efficiency, and thereby incentivizes commerce. > The inherent mathematical logic of computerized code in smart contracts can optimally clarify parties' intent. It also increases certainty and creates unparalleled efficiency which in turn incentivizes commerce. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-008](https://wulfkaal.github.io/claims/3405401-008) [mechanism/argued] *(failure mode)* -- Because the smart contract removes centralized guarantors and self regulates, only limited legal recourse remains available when execution of the contract terms goes wrong. > Most importantly, the smart contract removes centralized guarantors. The smart contract self-regulates. Only limited legal recourse is available if something goes wrong in the execution of the terms of the contract. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-009](https://wulfkaal.github.io/claims/3405401-009) [failure/argued] *(failure mode)* -- Despite their benefits, smart contracts are subject to significant limitations because human business interactions require a flexibility that is at odds with the merciless mathematical logic of smart contracts. > Despite the significant benefits of smart contracting for business and society, smart contracts are subject to significant limitations. Human business interactions require a flexibility that is at odds with merciless mathematical logic of smart contracts. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-010](https://wulfkaal.github.io/claims/3405401-010) [failure/argued] *(failure mode)* -- Smart contracting cannot ensure the flexibility in interpreting intent that human interaction requires, because smart contract code does not follow the same logic on similar terms as natural human language. > Human interaction requires flexibility in interpreting intent that cannot be ensured by smart contracting because smart contract code does not follow the same logic on similar terms as natural human language. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-011](https://wulfkaal.github.io/claims/3405401-011) [failure/argued] *(failure mode)* -- Smart contracts undermine the ability of counterparties to continue collaborating when unanticipated eventualities arise, because in most cases of unfulfilled parameters the smart contract will simply cancel out. > Smart contracts also undermine counterparties' ability to continue collaboration when unanticipated eventualities arise. In most cases of unfulfilled parameters, the smart contract will simply cancel out. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-012](https://wulfkaal.github.io/claims/3405401-012) [failure/argued] *(failure mode)* -- Human business interaction typically requires the possibility that each party may fulfill only a portion of an intended collaboration, a partial performance option that mathematically rigid smart contracts do not accommodate. > Human business interaction also typically requires the possibility that each party may fulfill only a portion of any intended collaboration. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-013](https://wulfkaal.github.io/claims/3405401-013) [condition/argued] -- The flexibility that human business requires will unlikely ever be attained in existing decentralized protocols unless a decentralized verification system is built into decentralized commerce. > flexibility in existing decentralized protocols will unlikely ever be attained unless a decentralized verification system is built into decentralized commerce. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-015](https://wulfkaal.github.io/claims/3405401-015) [failure/argued] *(failure mode)* -- Although smart contracting in decentralized systems is perceived as creating trust through preordained coded coordination without agency problems, decentralized commerce is equally afflicted with trust issues. > While smart contracting in decentralized system can be perceived as creating trust through mathematical and coded — preordained coordination without agency problems, several factors suggest that decentralized commerce via decentralized solutions is equally afflicted with trust issues. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-016](https://wulfkaal.github.io/claims/3405401-016) [failure/argued] *(failure mode)* -- Trust between counterparties in decentralized systems can only limitedly be assured by smart contracts, because the contract cannot verify the underlying qualities or future conduct of the parties. > Trust between counterparties in decentralized systems can only limitedly be assured by smart contracts. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-019](https://wulfkaal.github.io/claims/3405401-019) [failure/argued] *(failure mode)* -- In more complex smart contracts the counterparties cannot fully know whether the contract will do what it was programmed to do, or whether it will contain bugs or follow a logic the parties did not anticipate. > In other words, in more complex smart contracts, the counterparties to the contract cannot fully know if the contract will do what it was programmed to do and whether it will have bugs or otherwise follow another logic that was not anticipated by the parties to the contract. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-020](https://wulfkaal.github.io/claims/3405401-020) [failure/asserted] *(failure mode)* -- Even small and simple smart contracts often contain bugs that trigger unforeseeable consequences, so contract simplicity is not by itself a guarantee of correct execution. > Even small and simple smart contracts often have bugs that trigger unforeseeable consequences. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-029](https://wulfkaal.github.io/claims/3405401-029) [mechanism/argued] -- Decentralized reputation verification systems enable mathematically rigid smart contracts to become more adjustable to the needs of business, with reputation verification serving as the backstop for smart contracting. > Decentralized reputation verification systems enable mathematically rigid smart contracts to become more adjustable for the needs of business. Reputation verification becomes the backstop for smart contracting. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-030](https://wulfkaal.github.io/claims/3405401-030) [design/argued] -- The rigorous code is law standard associated with smart contracting can be upheld while still gaining flexibility, because reputation verification operates at the level of smart contract template verification rather than altering contract execution. > While the rigorous standard of "code is law", associated with smart contracting, can be upheld, reputation verification enables smart contract template verification. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-031](https://wulfkaal.github.io/claims/3405401-031) [mechanism/argued] -- Validated smart contract templates increase trust for counterparties and remove the need for costly back testing and experimentation with smart contract templates. > Validated templates of smart contracts increase trust for counterparties. The validation removes the need for costly back-testing and experimentation with smart contract templates. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3405401-034](https://wulfkaal.github.io/claims/3405401-034) [design/argued] -- The required review of counterparty history is possible through a platform that creates reputation for both parties and for the smart contract itself, so reputation must attach to code as well as to persons. > This is possible through a platform that creates reputation for both parties and for the smart contract itself. Wulf A. Kaal, Decentralized Commerce – A Primer on Why Decentralized Reputation Verification Systems Are Needed (2019). SSRN: https://ssrn.com/abstract=3405401 - [3406323-022](https://wulfkaal.github.io/claims/3406323-022) [condition/argued] *(failure mode)* -- People will not enter into long term smart contracts without a stable currency to refer to, since no renter and landlord will gamble future wealth on a lease that may halve or double in value in any given month. > Finally, people will not enter into a long-term smart contract unless they have a stable currency to refer to. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-026](https://wulfkaal.github.io/claims/3406323-026) [failure/argued] *(failure mode)* -- Legacy insurers will not underwrite smart contracts that sit outside the traditional legal framework, and even if they eventually enter the DApp market their actuarial risk assessment methods may be only partially compatible with rapidly evolving decentralized products. > Most legacy insurance companies will not consider underwriting a smart contract that is not subject to the traditional legal framework. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-030](https://wulfkaal.github.io/claims/3406323-030) [mechanism/argued] -- Smart contracts enable anonymous parties to engage in decentralized commerce because automated contracting self-executes and self-regulates according to mathematical strictures, removing the need for agency and intermediaries almost entirely. > Smart contracts allow anonymous parties to engage in decentralized commerce by providing automated contracting that self-executes and self-regulates according to mathematical strictures. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-031](https://wulfkaal.github.io/claims/3406323-031) [mechanism/argued] -- Smart contracts remove centralized guarantors and self-regulate, with the consequence that only limited legal recourse is available if execution of the contract terms goes wrong. > Most importantly, the smart contract removes centralized guarantors. The smart contract self-regulates. Only limited legal recourse is available if something goes wrong in the execution of the terms of the contract. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-032](https://wulfkaal.github.io/claims/3406323-032) [failure/argued] *(failure mode)* -- Smart contracts fail to accommodate human business interaction because code does not follow the same logic on similar terms as natural human language, so the flexibility in interpreting intent that human dealings require cannot be ensured. > Human interaction requires flexibility in interpreting intent that cannot be ensured by smart contracting because smart contract code does not follow the same logic on similar terms as natural human language. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-033](https://wulfkaal.github.io/claims/3406323-033) [failure/argued] *(failure mode)* -- Smart contracts undermine the parties' ability to continue collaborating when unanticipated eventualities arise, because in most cases of unfulfilled parameters the contract will simply cancel out rather than allow partial performance. > Smart contracts also undermine counterparties' ability to continue collaboration when unanticipated eventualities arise. In most cases of unfulfilled parameters, the smart contract will simply cancel out. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-034](https://wulfkaal.github.io/claims/3406323-034) [condition/argued] -- The flexibility that human business requires will unlikely ever be attained in existing decentralized protocols unless a decentralized verification system is built into decentralized commerce. > the needed flexibility in existing decentralized protocols will unlikely ever be attained unless a decentralized verification system is built into decentralized commerce. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3406323-036](https://wulfkaal.github.io/claims/3406323-036) [design/argued] -- Decentralized reputation verification is the backstop for smart contracting: it makes mathematically rigid smart contracts more adjustable for business needs and validates smart contract templates, which raises counterparty trust and removes the need for costly back-testing. > Decentralized reputation verification systems enable mathematically rigid smart contracts to become more adjustable for the needs of business. Reputation verification becomes the backstop for smart contracting. Wulf A. Kaal, Decentralization - A Primer on the New Economy (2019). SSRN: https://ssrn.com/abstract=3406323 - [3409548-015](https://wulfkaal.github.io/claims/3409548-015) [condition/argued] *(failure mode)* -- Smart contracts face a legal origin problem: lawyers may argue that they are void and unenforceable, and contract law rules on formation, interpretation, conditions and remedies require substantive adjustment before smart contracts fit within it. > While smart contracts may reflect the underlying contract between parties, lawyers may argue that "smart contracts" are void and unenforceable under the law.65 Contractual legal rules regarding formation, interpretation, conditions and remedies require substantive adjustments for smart contracts Kaal, Financial Technology and Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3409548 - [3409548-016](https://wulfkaal.github.io/claims/3409548-016) [empirical/evidenced] -- The legal limitations on smart contracts are slowly disappearing through state legislation, as shown by Arizona's 2017 law making smart contracts fully enforceable and Delaware's parallel Blockchain Initiative proposals. > Such limitations are slowly disappearing. For instance, Arizona passed a law in early 2017 that makes smart contracts fully enforceable under Arizona law.67 Delaware is looking into similar rules proposed in the Blockchain Initiative. Kaal, Financial Technology and Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3409548 - [3409548-021](https://wulfkaal.github.io/claims/3409548-021) [failure/argued] *(failure mode)* -- A fund constituted purely through smart contracts on the Ethereum blockchain may have no domicile, foreign or domestic, which makes jurisdiction over blockchain transactions a genuine problem for the funds that use the technology. > Some private investment funds may exist through the combination of smart contracts on the Ethereum blockchain.85 Such funds may not have a domicile either foreign or domestic. Kaal, Financial Technology and Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3409548 - [3411110-029](https://wulfkaal.github.io/claims/3411110-029) [mechanism/argued] -- The SEC's reasoning against the Bitcoin ETF does not transfer to blockchain based private investment funds such as those built on Melonport, because such funds trade a diverse array of cryptocurrencies and reach a much more limited and accredited audience, which curtails investor risk. > Moreover, the audience of a Melonport-type fund is much more limited and curtails the risk to investors. Wulf A. Kaal, Samuel Evans, Blockchain-Based Securities Offerings (2019). SSRN: https://ssrn.com/abstract=3411110 - [3411897-027](https://wulfkaal.github.io/claims/3411897-027) [failure/argued] *(failure mode)* -- People will not enter into long term smart contracts without a stable currency to refer to, because the current level of cryptocurrency volatility does not lend itself to consumption. > Finally, people will not enter into a long-term smart contract unless they have a stable currency to refer to. The current level of volatility in cryptocurrencies does not lend itself to consumption. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-030](https://wulfkaal.github.io/claims/3411897-030) [failure/asserted] *(failure mode)* -- Most legacy insurance companies will not consider underwriting a smart contract that is not subject to the traditional legal framework, which leaves sophisticated smart contracts without the insurance they require. > Most sophisticated smart contracts will require a form of insurance/underwriting to offset the risks of possible failure. Most legacy insurance companies will not consider underwriting a smart contract that is not subject to the traditional legal framework. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-032](https://wulfkaal.github.io/claims/3411897-032) [failure/argued] *(failure mode)* -- Human business interactions require a flexibility that is at odds with the merciless mathematical logic of smart contracts, so smart contracting cannot ensure the flexible interpretation of intent that human interaction requires. > Human business interactions require a flexibility that is at odds with merciless mathematical logic of smart contracts. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-033](https://wulfkaal.github.io/claims/3411897-033) [failure/argued] *(failure mode)* -- Smart contracts undermine counterparties' ability to continue collaborating when unanticipated eventualities arise, because in most cases of unfulfilled parameters the smart contract will simply cancel out rather than allow partial performance. > Smart contracts also undermine counterparties' ability to continue collaboration when unanticipated eventualities arise. In most cases of unfulfilled parameters, the smart contract will simply cancel out. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-034](https://wulfkaal.github.io/claims/3411897-034) [condition/argued] -- The flexibility that human business requires will unlikely ever be attained in existing decentralized protocols unless a decentralized verification system is built into decentralized commerce. > While more sophisticated smart contracts over time can fulfill some of these human business requirements, the needed flexibility in existing decentralized protocols will unlikely ever be attained unless a decentralized verification system is built into decentralized commerce. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3411897-037](https://wulfkaal.github.io/claims/3411897-037) [design/argued] -- Decentralized reputation verification systems make mathematically rigid smart contracts more adjustable for the needs of business by serving as the backstop for smart contracting. > mathematically rigid smart contracts to become more adjustable for the needs of business. Reputation verification becomes the backstop for smart contracting. Wulf A. Kaal, Decentralization - Past, Present, and Future (2019). SSRN: https://ssrn.com/abstract=3411897 - [3441904-011](https://wulfkaal.github.io/claims/3441904-011) [mechanism/argued] -- Inexpensive open source smart contracts eliminate a major motivation for creating a firm under Coase's transaction cost theory, because they enable trustworthy transactions of any size with minimal transaction cost and high transaction security. > Inexpensive open-source smart contracts eliminate a major motivation for creating a firm under Ronald Coase's transaction cost theory. Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904 - [3441904-012](https://wulfkaal.github.io/claims/3441904-012) [mechanism/argued] -- Barzel's rationale for the firm, the added efficiency of a centralized production monitoring agency, becomes largely irrelevant under efficient smart contracting, because the smart contract performs the production monitoring function and largely removes agents. > is also largely irrelevant with efficient smart contracting as the smart contract performs the production-monitoring function and largely removes agents. Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904 - [3441904-028](https://wulfkaal.github.io/claims/3441904-028) [failure/argued] *(failure mode)* -- The notion that smart contract agency relationships run exactly as coded with no possibility of agent opportunism is less likely to hold in complex agency relationships, so a decentralized human backstop to code becomes necessary as those relationships grow more complex. > The notion that agency relationships in smart contracts run exactly as coded without any possibility of opportunistic behavior of the agent is less likely to uphold in complex agency relationships. Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904 - [3441904-031](https://wulfkaal.github.io/claims/3441904-031) [failure/argued] *(failure mode)* -- The cost of translating coded contractual intent into natural language has the potential to become overwhelming for the existing centralized legal infrastructure, because coded intent may be unclear and natural language intent often cannot be used for interpretation. > Coded contractual intent may be unclear and natural language intent can often not be used for interpretation. Wulf A. Kaal, Blockchain-Based Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3441904 **2020** - [3606663-013](https://wulfkaal.github.io/claims/3606663-013) [failure/asserted] *(failure mode)* -- ICO sale terms are not fixed at launch: promoters can alter the smart contract to change the sales rules mid course during an offering, a risk factor for retail investors that has no analogue in a registered offering. > Promoters can also alter the smart contract to change ICO sales rules mid-course during an ICO. Kaal, Digital Asset Market Evolution (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3606663 - [3652481-017](https://wulfkaal.github.io/claims/3652481-017) [failure/evidenced] *(failure mode)* -- Under current securities laws, DAOs governed solely by smart contracts are restricted in their ability to pool assets and generate profit, because those laws limit their ability to fund ecosystem development and deploy capital efficiently. > Under current laws, DAOs solely governed by smart contracts are restricted in their ability to pool assets and generate profit because securities laws limit their ability to fund ecosystem development and deploy capital efficiently. Wulf A. Kaal, Decentralized Autonomous Organizations – Internal Governance and External Legal Design (2020). SSRN: https://ssrn.com/abstract=3652481 - [3709041-039](https://wulfkaal.github.io/claims/3709041-039) [failure/argued] *(failure mode)* -- The cost of legal services traditionally creates an unfair advantage in the law based on wealth, an inequity that blockchain based smart contract programs for streamlined alternative dispute resolution are designed to address. > Traditionally, the cost of legal services often create an unfair advantage in the law based on wealth. Kaal, Blockchain Technology for Good (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709041 **2021** - [3782192-037](https://wulfkaal.github.io/claims/3782192-037) [definitional/asserted] -- The autonomous element of a DAO comes from its governance system being programmed through smart contracts, which makes a DAO ultimately democratic rather than relying on a benevolent dictator to correct course during black swan events. > The autonomous aspect of a DAO stems from its programmed governance system through smart contracts. A DAO is ultimately democratic, instead of having a benev- olent dictator behind the scenes to efficiently correct course during black swan events. Craig Calcaterra, Wulf A. Kaal, Introduction to Decentralization (2021). SSRN: https://ssrn.com/abstract=3782192 - [3782198-027](https://wulfkaal.github.io/claims/3782198-027) [normative/argued] -- Contrary to the common engineering view that automated processes remove regulation, the purpose of smart contracts is to deliver much more fine grained regulation and more control, not less. > In fact, the purpose of smart contracts is to give much more fine-grained regulation, more control, not less. Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198 - [3782198-039](https://wulfkaal.github.io/claims/3782198-039) [failure/argued] *(failure mode)* -- Ethereum is Turing complete in theory but cannot practically match even a cheap smartphone, because everything stored on the blockchain must be stored redundantly on thousands of nodes forever, so decentralized smart contract computation is necessarily primitive compared with centralized Web 2.0 services. > However, Ethereum is not practically capable of mimicking the power of even the cheapest smartphone. The storage limit is currently extremely small, because anything stored in the blockchain needs to be stored redundantly on thousands of nodes for all time in the future. Craig Calcaterra, Wulf A. Kaal, Contemporary Decentralization (2021). SSRN: https://ssrn.com/abstract=3782198 - [3782201-008](https://wulfkaal.github.io/claims/3782201-008) [mechanism/argued] -- Blockchain based guarantees remove agency costs because principals become less essential for monitoring agents, which addresses the inherent agency problems in modern finance and corporate governance. > Blockchain-based guarantees remove agency costs because principals are less essen- tial for monitoring agents, which addresses the inherent agency problems in modern finance and corporate governance. Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201 - [3782201-022](https://wulfkaal.github.io/claims/3782201-022) [predictive/argued] -- The killer app for the decentralized economy is the DAO, a company governed autonomously by smart contracts and organized without any single permanent governing authority or concentrated ownership, whose existence would justify the other decentralized overhead tools. > We are still waiting for a single application, a killer app for WebZ. What will be the killer app for the decentralized economy? The answer is a DAO. Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201 - [3782201-035](https://wulfkaal.github.io/claims/3782201-035) [failure/argued] *(failure mode)* -- The hope of most Web3 engineers that overhead institutions can be automated away until they vanish is largely misplaced, because business contracts are not getting simpler as technology becomes more sophisticated. > Decentralized oracles will eliminate the need for any original investigation from independent media. Automated systems will eliminate the middleman. These hopes are largely misplaced. Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201 - [3782203-004](https://wulfkaal.github.io/claims/3782203-004) [failure/asserted] *(failure mode)* -- Protocol centralization, meaning rigid and immediately enforced rules such as those executed by smart contracts, leads to instability unless it is implemented wisely. > However, protocol centralization leads to instability if it is not implemented wisely. Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203 - [3782203-017](https://wulfkaal.github.io/claims/3782203-017) [failure/argued] *(failure mode)* -- However rules are formalized in a realistic setting, there exist strategies that follow the rules yet subvert the intentions of the framers, so legal strategies will always be available that profit an individual adversary at the expense of the group. > This leads to the intuition that however rules are formalized in a realistic situation, there are strategies which follow the rules, but still subvert the intentions of the fram- ers. There are legal strategies that profit the individual adversary at the expense of the group. Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203 - [3782203-022](https://wulfkaal.github.io/claims/3782203-022) [normative/argued] *(failure mode)* -- Despite its alluring simplicity, the Code is Law credo taken as an absolute is not an efficient solution for business, because unintended consequences of contracts arise in almost every business arrangement. > Despite how alluring the simplicity of the Code-is-Law credo is, that extreme pu- ritanical line is not an efficient solution for business. Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203 - [3782203-025](https://wulfkaal.github.io/claims/3782203-025) [design/argued] -- A Code is Law assumption remains necessary for machine-scale commerce, because the multiplicity of options in a dynamically changing market demands instantaneous legal enforcement without waiting for a centralized human response. > The multiplicity of options in a dynamically changing market demands instantaneous legal enforce- ment without waiting for a centralized response of human interjection. Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203 - [3782203-037](https://wulfkaal.github.io/claims/3782203-037) [mechanism/argued] -- Automating exclusion of cheaters through smart contracts makes punishment credible and removes the infinite regress of traditional enforcement, where members would have to police those who failed to police those who failed to police cheaters. > Algorithms can be written which exclude members who cheat from hav- ing access to their market. Punishment for cheating becomes automated and there- fore credible. Free riding in policing can at least partly be eliminated by automation. Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203 - [3782205-003](https://wulfkaal.github.io/claims/3782205-003) [empirical/asserted] -- Prototypes exist for only two of the eight required institutions, decentralized currency in Bitcoin and distributed computation for smart contracts in Ethereum, and most of the rest are still missing. > Engineers have managed to prototype two of the solutions: decentralized cur- rency (Bitcoin) and the distributed computing needed to make smart contracts (Ethereum). We're still missing most of them. Craig Calcaterra, Wulf A. Kaal, Eight Institutions for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782205 - [3782205-019](https://wulfkaal.github.io/claims/3782205-019) [design/asserted] -- The executive policing functions of business and government should be automated through smart contracts in order to prevent corruption. > The executive policing functions of our business and government should be auto- mated to prevent corruption. Craig Calcaterra, Wulf A. Kaal, Eight Institutions for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782205 - [3782210-042](https://wulfkaal.github.io/claims/3782210-042) [failure/argued] *(failure mode)* -- Self-executing, self-regulating smart contracts between anonymous parties in an open system create a near perfect zero-sum situation unless the DAO also includes reputation. > Self-executing, self-regulating smart contracts between anonymous parties in an open system, create a near perfect zero- sum situation—unless your DAO also includes reputation. Craig Calcaterra, Wulf A. Kaal, The Importance of Reputation for the Evolution of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782210 - [3782214-011](https://wulfkaal.github.io/claims/3782214-011) [design/argued] -- A decentralized network needs a constitution that separates powers into a legislative system which updates the constitution, an executive system which enforces it, and a judicial system which resolves the disputes that inevitably arise. > We need a constitution which outlines the powers of the legislative, executive, and judicial sys- tems of the decentralized network. The legislative system updates the constitution itself. The executive system enforces the constitution. The judicial system handles in- evitable disputes. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782214-014](https://wulfkaal.github.io/claims/3782214-014) [mechanism/argued] *(failure mode)* -- When currency is the entire proximal goal of a transaction, all participants naturally behave as selfishly as possible and exploit any opportunity for individual profit at the group's expense, which makes cash profit a bad immediate incentive for both business and government. > If the entire proximal goal of a transaction is currency, all participants will naturally be- have in the most selfish manner possible, exploiting any opportunity for individual profit at the expense of the group. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782214-015](https://wulfkaal.github.io/claims/3782214-015) [failure/argued] *(failure mode)* -- Rigid code is law smart contracts over fungible currency are built to guarantee irreversible, unreviewable, self executing outcomes, which is a poor match for business because business ventures very rarely proceed exactly as imagined at the outset. > Further, rigid "code is law" smart contracts involving fungible currency exchanges are designed to guarantee irreversible, unreviewable, programmed self-execution. Very rarely does any business venture proceed exactly as imagined from the begin- ning. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782214-016](https://wulfkaal.github.io/claims/3782214-016) [failure/argued] *(failure mode)* -- Rigid code is law contracts must become extremely complex to cover the eventualities of real business situations, and bugs or hacks can never be certainly precluded in any programmable contract. > Moreover, rigid "code is law" smart contracts will need to be extremely complex to account for the many possible eventualities of practical business situations. The insurmountable reality is that bugs or hacks can never be certainly precluded in any programmable contract. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782214-031](https://wulfkaal.github.io/claims/3782214-031) [failure/argued] *(failure mode)* -- Code is law smart contracts deliver a genuine leap in efficiency and clarity through digital self execution, but their supposed self regulation will always ultimately fall short, which is why an appeals capacity is necessary in any business deal. > While code-is-law smart con- tracts give a technological leap in efficiency and clarity, with efficient digital self-exe- cution, their supposed self-regulation will always be ultimately lacking. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782214-032](https://wulfkaal.github.io/claims/3782214-032) [design/argued] -- To preserve the efficiency of a self executing code is law smart contract, the appeals process must be built into the code itself, with triggers either party can engage that freeze the encumbered assets and transfer partial powers of disbursement to a third party arbiter. > To maintain the efficiency of the self-executing code-is-law smart contract, the appeals process must be built into the code. Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214 - [3782216-011](https://wulfkaal.github.io/claims/3782216-011) [design/argued] -- Applying Web3 technology to chit funds replaces the foremen and their commission with smart contracts, which eliminates the risk that a foreman absconds with the fund. > First, smart contracts replace the foremen and their d% commission, eliminating the risk of a foreman absconding with the fund. Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216 - [3782217-006](https://wulfkaal.github.io/claims/3782217-006) [mechanism/argued] *(failure mode)* -- A DAO that relies on a centralized oracle will eventually be exploited, because the people controlling the oracle will become aware of their power over automated contract triggers and, given the competitive nature of capitalism, are right to take advantage of it. > Eventually, the people who have the relevant power in the centralized oracle will become aware of the power they have over the DAO. Eventually there will be an opportunity to exploit that information. Craig Calcaterra, Wulf A. Kaal, The Importance of History In Decentralization (2021). SSRN: https://ssrn.com/abstract=3782217 - [3782220-012](https://wulfkaal.github.io/claims/3782220-012) [failure/argued] *(failure mode)* -- Automating insurance away with smart contracts risks a race to the bottom, because foregoing insurance is more efficient in the short term for an individual, yet the resulting rare unprotected tragedies can chill the entire system. > we must avoid a race to the bottom. It's more efficient in the short term for an individual to forego any insurance, so some will outcompete others if they are lucky enough to avoid rare tragedies. But the rare unprotected tragedies can chill the entire system. Craig Calcaterra, Wulf A. Kaal, The Importance of Transcendental Unifying Values for Decentralization (2021). SSRN: https://ssrn.com/abstract=3782220 - [3799320-020](https://wulfkaal.github.io/claims/3799320-020) [definitional/argued] -- Because a series of smart contracts grants DAO token holders voting rights, those smart contracts take the place of articles of association or bylaws and of the entire precedent system that a jurisdiction based legal structure would otherwise supply by default. > Because a series of smart contracts grants DAO token holders voting rights, the blockchain-based smart contracts imitates the role of articles of association or bylaws and the entirety of a precedent system that would otherwise be provided by default in a jurisdiction-based legal structure. Wulf A. Kaal, A Decentralized Autonomous Organization (DAO) of DAOs (2021). SSRN: https://ssrn.com/abstract=3799320 - [3799320-040](https://wulfkaal.github.io/claims/3799320-040) [design/argued] -- Weighted keys are preferable to NFTs for reputation accounting because the smart contract itself holds the weights and each smart contract may require a different weight for the same key. > Weighted keys are preferable to NFTs because the smart contract itself holds the weights and each smart contract may require a different weight for a given key Wulf A. Kaal, A Decentralized Autonomous Organization (DAO) of DAOs (2021). SSRN: https://ssrn.com/abstract=3799320 - [3808852-015](https://wulfkaal.github.io/claims/3808852-015) [definitional/argued] -- Decentralized autonomous organizations epitomize organizational decentralization because the first DAO, built purely on code and smart contracts with no incorporation, physical address, or headquarters, entirely removed all traditional control mechanisms employed by principals in agency relationships. > Launched in May 2016, the first DAO was set up as an organization based purely on code and smart contracts. It did not have a conventional corporate structure, no incorporation, and had no physical address or headquarter. Wulf A. Kaal, Decentralization and Feedback Effects (2021). SSRN: https://ssrn.com/abstract=3808852 - [3808873-019](https://wulfkaal.github.io/claims/3808873-019) [mechanism/argued] *(failure mode)* -- As code proliferates as law, the democratic legitimacy of coded legal arrangements is increasingly called into question, because private actors have assumed governance tasks traditionally belonging to democratically elected sovereign states and may circumvent democratically legitimized governments. > Given the proliferation of code as law, the democratic legitimacy of coded legal arrangements are increasingly called into question. Through code, private actors have created governance tasks that were traditionally the responsibility of democratically elected sovereign states and state actors. Wulf A. Kaal, Decentralization Neutralizers (2021). SSRN: https://ssrn.com/abstract=3808873 - [3808873-042](https://wulfkaal.github.io/claims/3808873-042) [design/argued] *(failure mode)* -- A decentralized human backstop to code is a core and often overlooked infrastructure requirement, because without it the immutability of the blockchain and its cryptographic security may not create genuine transactional guarantees or trust between principals and agents in the integrity of their contractual relationship. > Without a decentralized human backstop to code, the immutability of the blockchain and its cryptographic security systems may not be able to create truly transactional guarantees and trust between principals and agents in the integrity of their contractual relationship. Wulf A. Kaal, Decentralization Neutralizers (2021). SSRN: https://ssrn.com/abstract=3808873 - [3949098-023](https://wulfkaal.github.io/claims/3949098-023) [design/argued] -- Best efforts underwriting in the DAOIC is implemented as a smart contract accountability system: a member's capital commitment is encumbered as a deposit and released to the token opportunity only after the reputation staking pool decides, and funding occurs only on a majority upvote. > Such deposit will only be released and directly transferred to the token opportunity when the RNFT staking pool has made a decision on the token opportunity. Funding only happens in the case of a majority upvote. Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098 - [3949098-036](https://wulfkaal.github.io/claims/3949098-036) [design/argued] -- The DAOIC pools no assets: the smart contract releases each member's deposit directly to the project after validation pool approval, and returns on purchases are likewise not pooled but paid pro rata to members in proportion to their reputation token holdings. > releases the deposit directly to the project. No pooling of assets takes place. The ROP from each deal is also not pooled but rather paid out pro rata to the DAOIC members in proportion to their RNFT holdings. Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098 - [3981021-012](https://wulfkaal.github.io/claims/3981021-012) [mechanism/asserted] -- DAOs are truly global borderless entities that coordinate agency relationships and limit liabilities via smart contracts, which is what positions them to address the identified flaws in the charitable giving process. > DAOs have the potential to address the above identified flaws in the charitable giving process. DAOs are truly global borderless entities that coordinate agency relationships and limit liabilities via smart contracts. Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021 - [3981021-040](https://wulfkaal.github.io/claims/3981021-040) [design/asserted] -- Matched or treasury assets are held in the smart contract and released only if the candidate shows satisfactory evidence of expected distribution, and once upvoted the assets are distributed via milestone votes that each require evidence of fulfilled donative intent. > e. Once the project gets upvoted under 1.d. above, the assets will be distributed via milestone votes. In each milestone, the candidate has to provide evidence of fulfilling donative intent and allocation of assets in accordance with the project parameters. Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021 - [3995709-018](https://wulfkaal.github.io/claims/3995709-018) [failure/asserted] *(failure mode)* -- Delays in legacy code reviews, which can be exacerbated by digital asset market conditions, can impact development and may require complete rewriting of contracts because the underlying protocol may have upgraded core libraries during the review. > This can get exacerbated by market conditions in the digital asset market. These significant delays can impact development and may require complete rewriting of contracts because the underlying protocol may have upgraded core libraries during the code review. Wulf A. Kaal, How DAOs Optimize Open-Source Code Reviews and Create Open-Source Standards (2021). SSRN: https://ssrn.com/abstract=3995709 **2022** - [4015908-026](https://wulfkaal.github.io/claims/4015908-026) [design/argued] -- DAO governance over token launch wallets can assure that no single individual exercises rights over the token launch wallet and becomes a single point of failure or abuse. > DAO governance over token launch wallets can assure that no single individual exercises rights over the token launch wallet and becomes a single point of failure/abuse. Wulf A. Kaal, Fair Token Launch (2022). SSRN: https://ssrn.com/abstract=4015908 - [4015908-029](https://wulfkaal.github.io/claims/4015908-029) [design/argued] -- Technology platforms can make launch abuses less likely by mandating fair auctions in which tokens are released only in tranches, offering a limited number of tokens for a limited number of days, which makes rug pulls overall less likely. > During such fair auctions, the tokens that are listed on the fair launch platforms may only be released in tranches, which makes rug pulls overall less likely. Such token tranche listings may offer a limited number of tokens for a limited number of days. Wulf A. Kaal, Fair Token Launch (2022). SSRN: https://ssrn.com/abstract=4015908 - [4033886-014](https://wulfkaal.github.io/claims/4033886-014) [failure/argued] *(failure mode)* -- Redemption contracts, the traditional price commitment device for privately issued money, lack credibility, whereas pre programmed smart contracts deliver an enforceable and secure quantity commitment instead. > Such redemption contracts lack credibility.31 In contrast, the pre-programmed smart contract's enabled by cryptocurrencies facilitate an enforceable and secure quantity commitment.32 Wulf A. Kaal, Samuel Evans, Hayley Howe, Digital Asset Valuation (2022). SSRN: https://ssrn.com/abstract=4033886 - [4067783-020](https://wulfkaal.github.io/claims/4067783-020) [mechanism/argued] *(failure mode)* -- Smart contracts that govern fungible currency exchanges are engineered for irreversible, unreviewable, programmed self execution, and that design makes the business structure of web3 more rigid. > Yet, smart contracts involving fungible currency exchanges are designed to guarantee irreversible, unreviewable, programmed self execution. As such, they create a more rigid structure for business in web3. Wulf A. Kaal, DAO Fallacies (2022). SSRN: https://ssrn.com/abstract=4067783 - [4067783-021](https://wulfkaal.github.io/claims/4067783-021) [failure/argued] *(failure mode)* -- Code is law fails as a complete business ordering because business ventures very rarely proceed exactly as written in smart contract code: real business relationships are far messier and more multivalent than a series of smart contracts can predict. > In reality, very rarely does any business venture proceed exactly as planned in smart contract code because the reality of business relationships is far more messy and multivalent than can be predicted by a series of smart contracts. Wulf A. Kaal, DAO Fallacies (2022). SSRN: https://ssrn.com/abstract=4067783 - [4067783-022](https://wulfkaal.github.io/claims/4067783-022) [condition/argued] -- Effective business dealing requires that counterparties have confidence a fair resolution will occur when transactions do not develop as planned, which purely self executing code cannot supply. > To do business effectively, counterparties need confidence that a fair resolution will occur when transactions do not develop as planned. Wulf A. Kaal, DAO Fallacies (2022). SSRN: https://ssrn.com/abstract=4067783 **2023** - [4529715-023](https://wulfkaal.github.io/claims/4529715-023) [failure/argued] *(failure mode)* -- Blockchains cannot access off-chain data, and resolving this by using centralized oracles nullifies the advantages of decentralized systems while creating major security risks such as bribing and intimidation. > There is something known as the oracle problem, which is the fact that blockchains themselves can't access off-chain data. Using centralized oracles nullifies the advantages of decentralized systems, and are major security risks (such as bribing, intimidation, etc.) Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715 **2024** - [4685567-033](https://wulfkaal.github.io/claims/4685567-033) [mechanism/argued] -- The smart contracts underlying the impact certificate marketplace prohibit and make technically impossible the extension of favors to individual donors, so unlike Impact 1.0 and 2.0 the highest pledging donor cannot obtain special considerations or better terms. > The smart WEB3 contracts that power the operations of the impact certificate marketplace prohibit and make impossible the extension of favors to individual donors. Wulf A. Kaal, Impact Investing Innovation - From Impact 1.0 to 3.0 (2024). SSRN: https://ssrn.com/abstract=4685567 - [4685567-035](https://wulfkaal.github.io/claims/4685567-035) [design/argued] -- Impact 3.0 can replace the political compromise and years of lobbying that Impact 2.0 standardization required with WEB3 precedent setting in weighted directed acyclical graphs, in which a smart contract itself becomes the standard. > Where standardization in Impact 2.0 required political compromise and years of lobbying, Impact 3.0 can use new WEB3 forms of standardization via precedent-setting in weighted 107 directed acyclical graphs. In this system, a smart contract can become the standard. Wulf A. Kaal, Impact Investing Innovation - From Impact 1.0 to 3.0 (2024). SSRN: https://ssrn.com/abstract=4685567 - [4734750-002](https://wulfkaal.github.io/claims/4734750-002) [predictive/evidenced] -- The smart contract industry is still projected to grow to several billion dollars over the next decade even though security audit costs and exploit losses are substantial, so vulnerability costs slow but do not halt industry growth. > the smart contracts industry is still estimated to grow to several billion dollars in the next decade Wulf A. Kaal, Code Review DAO (2024). SSRN: https://ssrn.com/abstract=4734750 - [4734750-003](https://wulfkaal.github.io/claims/4734750-003) [empirical/evidenced] -- Losses from smart contract vulnerabilities are large and growing, with 2021 losses alone estimated at 680 million dollars and cumulative global losses estimated at over 6 billion dollars. > In 2021 alone total financial loss from smart contract bugs was estimated at $680 million Wulf A. Kaal, Code Review DAO (2024). SSRN: https://ssrn.com/abstract=4734750 - [4796714-015](https://wulfkaal.github.io/claims/4796714-015) [mechanism/argued] *(failure mode)* -- When decentralization at the Layer 1 level is compromised, the autonomy of the smart contracts deployed on that chain is compromised by affiliation, so smart contracts are corruptible in the current design and cannot reliably serve as neutral instruments of ethical AI governance. > When the decentralization of Layer 1 blockchains is compromised, the autonomy of smart contracts is inherently jeopardized, undermining their effectiveness as tools for ethical AI governance. Wulf A. Kaal, AI Governance (2024). SSRN: https://ssrn.com/abstract=4796714 - [4855607-019](https://wulfkaal.github.io/claims/4855607-019) [mechanism/argued] -- In traditional federated learning environments the reliability of updates arriving from various nodes is hard to establish; web3 smart contracts and consensus mechanisms can automate that verification at the point of aggregation. > In traditional FL environments, ensuring the reliability of updates from various nodes can be challenging. Web3's smart contracts and consensus mechanisms can automate the verification of updates from participating nodes Wulf A. Kaal, How AI Models are Optimized Through Web3 Governance (2024). SSRN: https://ssrn.com/abstract=4855607 - [4855607-027](https://wulfkaal.github.io/claims/4855607-027) [design/argued] -- Because annotating large datasets is labor intensive and expensive, smart contracts that reward community members with tokens for annotation are needed to sustain a steady flow of high quality labeled data for deep learning. > Annotating large datasets is labor-intensive and expensive. Using smart contracts, web3 can incentivize community members to annotate data by rewarding them with tokens. This system ensures a steady flow of high-quality labeled data, crucial for training deep learning models. Wulf A. Kaal, How AI Models are Optimized Through Web3 Governance (2024). SSRN: https://ssrn.com/abstract=4855607 - [4855607-036](https://wulfkaal.github.io/claims/4855607-036) [mechanism/asserted] -- Web3 systems provide inexpensive community based smart contract dispute resolution, and these mechanisms minimize legal cost while increasing both the certainty of outcomes and the protections available to stakeholders. > Web3 systems are particularly good at inexpensive community based smart contract dispute resolution. Through these dispute resolution mechanisms web3 systems minimize legal cost while increasing certainty of outcomes and stakeholder protections. Wulf A. Kaal, How AI Models are Optimized Through Web3 Governance (2024). SSRN: https://ssrn.com/abstract=4855607 - [4900878-028](https://wulfkaal.github.io/claims/4900878-028) [design/argued] -- Programmable tokens and smart contracts give quantum economics an experimental testbed, so contested phenomena such as preference reversal can be modeled with quantum decision theory and then empirically validated and refined rather than argued in the abstract. > Tokenomics provides a practical framework for implementing and testing these models through programmable tokens and smart contracts, allowing for empirical validation and refinement of quantum economic theories. Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878 - [4900878-029](https://wulfkaal.github.io/claims/4900878-029) [design/argued] -- DeFi protocols automate financial transactions through smart contracts, cutting out intermediaries and increasing transparency, and those same features let quantum economics build models that are self executing and adaptable to real time data, overcoming implementation problems that defeat traditional economic models. > These features can be utilized in quantum economics to develop models that are both self-executing and adaptable to real-time data Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878 - [4900878-030](https://wulfkaal.github.io/claims/4900878-030) [mechanism/asserted] -- The zero space structure of smart contracts produces a form of quantum transaction entanglement, in which transactions execute instantaneously and uniformly across the network regardless of the physical distance between the wallets involved. > The zero-space structure of smart contracts in blockchain technology enables a form of quantum transaction entanglement. Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878 - [4900878-031](https://wulfkaal.github.io/claims/4900878-031) [definitional/asserted] -- In blockchain transactions the signing function, performed by wallets holding cryptographic keys, is separate from execution, which occurs inside the smart contract, so tokens are never physically held in the same locality as the keys and the smart contract acts as the intermediary executing predefined rules. > This separation ensures that the tokens themselves are not physically held in the same locality as the keys. Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878 - [4900878-032](https://wulfkaal.github.io/claims/4900878-032) [mechanism/asserted] -- Because the blockchain is a distributed ledger existing simultaneously across all nodes, physical space is effectively eliminated within the network, and a triggered smart contract executes its code across the entire network instantaneously without regard to where wallets or keys are located. > This distributed nature effectively eliminates the concept of physical space within the network. Wulf A. Kaal, Quantum Economy and Tokenomics (2024). SSRN: https://ssrn.com/abstract=4900878 - [4900880-037](https://wulfkaal.github.io/claims/4900880-037) [mechanism/argued] -- Encoding compliance and operational procedures in smart contracts removes discretionary human steps from execution, which minimizes human error and bias and raises the reliability and integrity of economic interactions. > By automating compliance and operational procedures through smart contracts, DAOs can minimize human error and bias, thereby enhancing the reliability and integrity of economic interactions. Wulf A. Kaal, Quantum Economy and the Future of Work (2024). SSRN: https://ssrn.com/abstract=4900880 - [4900880-038](https://wulfkaal.github.io/claims/4900880-038) [design/asserted] -- Compensation inside a DAO can be programmed to pay out automatically against predefined criteria such as task completion, performance metrics, or contribution, which cuts administrative overhead and makes distribution timely and consistent. > Compensation can be programmed to be distributed automatically based on predefined criteria, such as task completion, performance metrics, or contribution to the organization. This automation reduces administrative overhead and ensures timely and fair distribution of rewards. Wulf A. Kaal, Quantum Economy and the Future of Work (2024). SSRN: https://ssrn.com/abstract=4900880 - [4941807-019](https://wulfkaal.github.io/claims/4941807-019) [mechanism/argued] -- Smart contracts can automate compliance with regulatory requirements and ethical guidelines: for example, a smart contract can enforce privacy law directly by controlling an AI system's access to personal data according to predefined rules. > They can be used to automate compliance with regulatory requirements and ethical guidelines. For instance, smart contracts can automatically enforce privacy laws by controlling AI's access to personal data based on predefined rules. Wulf A. Kaal, AI Governance Via Web3 Reputation System (2024). SSRN: https://ssrn.com/abstract=4941807 - [5254152-006](https://wulfkaal.github.io/claims/5254152-006) [mechanism/asserted] -- Smart contracts, as self executing contracts with terms written directly into code, remove the need for intermediaries, which lowers costs and raises trust among participants. > Smart contracts, self-executing contracts with terms directly written into code, eliminate the need for intermediaries, reducing costs and increasing trust among participants. Wulf A. Kaal, DAO Market Meta Analysis 2024 (2024). SSRN: https://ssrn.com/abstract=5254152 - [5254152-007](https://wulfkaal.github.io/claims/5254152-007) [mechanism/asserted] -- In insurance, smart contracts that automate verification and settlement reduce administrative costs and increase both the speed and the accuracy of claims processing. > Blockchain technology ensures transparency in claims processing, with smart contracts automating verification and settlement. This reduces administrative costs and increases the speed and accuracy of claims processing. Wulf A. Kaal, DAO Market Meta Analysis 2024 (2024). SSRN: https://ssrn.com/abstract=5254152 **2025** - [5095633-024](https://wulfkaal.github.io/claims/5095633-024) [mechanism/argued] -- Smart contracts that release payment automatically once preset quality thresholds are met reduce human error, cut administrative overhead, and accelerate data-labeling cycles relative to intermediated payment processes. > smart contracts automatically release payments to contributors once preset quality thresholds are met, thereby decreasing the risk of human error, reducing administrative overhead, and accelerating data-labeling cycles. Wulf A. Kaal, Artificial Intelligence The Final Frontier (2025). SSRN: https://ssrn.com/abstract=5095633 - [5245185-035](https://wulfkaal.github.io/claims/5245185-035) [design/argued] -- Smart contract governance reduces the potential for human error and guarantees consistent application of governance protocols, features often lacking in purely AI driven supervision, although consensus delays may occur. > reduces the potential for human error, and guarantees a consistent application of governance protocols—features that are often lacking in purely AI-driven supervisory models, though consensus delays may occur. Wulf A. Kaal, How can we Best Monitor AI Agents (2025). SSRN: https://ssrn.com/abstract=5245185 - [5454054-002](https://wulfkaal.github.io/claims/5454054-002) [design/asserted] -- LER should be built as a bifurcated architecture: voucher-based rewards for equities held in brokerage accounts, and programmable on-chain reward units for tokenized equities. > LER employs a bifurcated architecture: voucher-based rewards for brokerage-held equities and programmable, on-chain reward units for tokenized equities. Wulf A. Kaal, Liquid Equity Rewards (2025). SSRN: https://ssrn.com/abstract=5454054 - [5454054-020](https://wulfkaal.github.io/claims/5454054-020) [mechanism/argued] -- For tokenized stocks, smart contracts can verify ownership and holding periods directly from blockchain ledgers and trigger voucher airdrops without intermediaries, which lowers operational costs and increases LER scalability. > For tokenized NASDAQ stocks, smart contracts can query blockchain ledgers to verify ownership and holding periods. This triggers voucher reward airdrops without intermediaries. Whic, in turn, reduces operational costs and enhances LER scalability. Wulf A. Kaal, Liquid Equity Rewards (2025). SSRN: https://ssrn.com/abstract=5454054 - [5554218-001](https://wulfkaal.github.io/claims/5554218-001) [mechanism/argued] -- Smart contracts disrupt the foundational principles of contract formation in both common and civil law jurisdictions, specifically offer and acceptance, consideration, and enforceability, because their automated and immutable execution lacks the flexibility that law derives from human negotiation and judicial oversight. > smart contracts disrupt foundational principles of contract formation, such as offer and acceptance, consideration, and enforceability, due to their automated, immutable execution, which lacks the flexibility of law, which is based on human negotiation and judicial oversight. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-004](https://wulfkaal.github.io/claims/5554218-004) [condition/argued] -- National courts and national law cannot be excluded from smart contract disputes, because almost all legal systems grant contracting parties an emergency or exorbitant jurisdiction whenever a party can show it would otherwise have no forum in which to bring its action. > The jurisdiction of a national court and the application of national law to disputes arising from smart contracts cannot be excluded because almost all legal systems provide the parties to contracts with an emergency jurisdiction Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-005](https://wulfkaal.github.io/claims/5554218-005) [failure/argued] *(failure mode)* -- Posting cryptocurrency to escrow like smart contracts is often uneconomic compared with traditional financial instruments, and this inefficiency undermines the practical utility of smart contracts as a vehicle for consideration, especially in high value or long term agreements. > posting cryptocurrency to escrow-like smart contracts is often uneconomic compared to traditional financial instruments.10 This inefficiency challenges the practical utility of smart contracts as a vehicle for consideration, particularly in high-value or long-term agreements. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-006](https://wulfkaal.github.io/claims/5554218-006) [failure/argued] *(failure mode)* -- Physical goods cannot be fully governed by code, so contracts requiring tangible performance need external mechanisms to verify compliance, and smart contracts may therefore fail to satisfy the consideration requirement in such contexts. > Unlike digital assets, physical goods cannot be fully governed by code, requiring external mechanisms to verify compliance with contractual terms. This limitation suggests that smart contracts may struggle to fulfill the consideration requirement in contexts requiring tangible performance, Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-007](https://wulfkaal.github.io/claims/5554218-007) [failure/argued] *(failure mode)* -- Because blockchain based contracts are immutable, they cannot be altered by judicial order, which creates enforceability problems whenever a dispute arises outside the scope of the code, such as defective performance or unforeseen circumstances. > The immutability of blockchain-based contracts means they cannot be altered by judicial order, creating enforceability challenges when disputes arise outside the code's scope, such as defective performance or unforeseen circumstances. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-008](https://wulfkaal.github.io/claims/5554218-008) [failure/argued] *(failure mode)* -- The adaptability of common law to smart contracts is strained when the coded mechanism itself violates a legal norm, as with smart contracts that enable automatic collateral repossession contrary to the Uniform Commercial Code's restrictions on strict foreclosure. > However, this adaptability is strained when smart contracts, such as those enabling automatic collateral repossession, violate legal norms like the UCC's restrictions on strict foreclosure. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-009](https://wulfkaal.github.io/claims/5554218-009) [condition/argued] -- Unless the scope and permissible transactions of smart contracts are bounded by law, smart contracts risk being held unenforceable in jurisdictions that prioritize statutory compliance over technological innovation. > Without such boundaries, smart contracts risk being deemed unenforceable in jurisdictions that prioritize statutory compliance over technological innovation. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-024](https://wulfkaal.github.io/claims/5554218-024) [failure/argued] *(failure mode)* -- The deterministic execution of smart contracts rigidly enforces coded terms and thereby incentivizes participants to exploit loopholes for immediate gain, because no mechanism exists to adapt the rules contextually. > Conversely, smart contracts' deterministic execution rigidly enforces coded terms, incentivizing participants to exploit loopholes for immediate gain, as there is no mechanism to adapt rules contextually. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-031](https://wulfkaal.github.io/claims/5554218-031) [design/argued] -- The Universal Digital Law Codex should require smart contracts to carry clear, human readable terms alongside their coded protocols, so that the parties' assent to automated terms satisfies the common law standard of mutual understanding. > For example, UDLC mandates that smart contracts incorporate clear, human-readable terms alongside coded protocols, ensuring that parties' assent to automated terms meets the common law standard of mutual understanding. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-032](https://wulfkaal.github.io/claims/5554218-032) [design/argued] -- The Universal Digital Law Codex addresses the economic inefficiency of consideration by embedding dynamic compliance mechanisms that let smart contracts adapt to market conditions such as cryptocurrency price fluctuation or delays in physical delivery. > UDLC tackles economic inefficiencies in consideration by embedding dynamic compliance mechanisms within smart contracts. These mechanisms allow contracts to adapt to market conditions, such as fluctuations in cryptocurrency value or delays in physical delivery, Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-035](https://wulfkaal.github.io/claims/5554218-035) [design/argued] -- Embedding choice-of-law protocols directly within smart contracts gives clarity on the governing law and reduces the risk of conflicting interpretations across jurisdictions. > By embedding choice-of-law protocols within smart contracts, UDLC provides clarity on the governing law, reducing the risk of conflicting interpretations. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5554218-038](https://wulfkaal.github.io/claims/5554218-038) [design/argued] -- Smart contracts should incorporate clauses that trigger human review in cases of ambiguity, which secures equitable outcomes analogous to judicial discretion and counters the rigidity of deterministic execution. > For instance, smart contracts can incorporate clauses that trigger human review in cases of ambiguity, ensuring equitable outcomes akin to judicial discretion. Furrer Andreas, Wulf A. Kaal, Universal Digital Law Codex (UDLC) Building the Legal Infrastructure for the Digital Era (2025). SSRN: https://ssrn.com/abstract=5554218 - [5583610-004](https://wulfkaal.github.io/claims/5583610-004) [mechanism/argued] -- LER produces shareholder loyalty by using smart contracts to distribute consumptive utilities such as merchant vouchers or platform credits, so retention is encouraged without imposing any lock-up on the shareholder's liquidity. > LER employs smart contracts to distribute consumptive utilities, such as merchant vouchers or platform credits, fostering shareholder loyalty without imposing liquidity constraints. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5583610-021](https://wulfkaal.github.io/claims/5583610-021) [mechanism/argued] -- The fourth Howey prong fails because LER accrual is automated by smart contract and driven by the shareholder's own decision to keep holding, leaving the issuer's role ministerial rather than entrepreneurial. > LER voucher rewards are driven by stockholders' efforts in maintaining stock ownership for a certain time period. LER accrual is automated via smart contracts and does not rely on LER's ecosystem, merchants, or issuers' managerial efforts. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5583610-025](https://wulfkaal.github.io/claims/5583610-025) [mechanism/argued] -- Smart contract delivered, time-based vouchers counter activist-induced price dips by giving shareholders a reason to hold through the trough, and they do so without the trading lock-ups that restrict liquidity. > Delivered via smart contracts, these incentives encourage shareholders to resist selling during activist-induced stock price dips, without restrictive stock trading lock-ups that limit trading flexibility. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5886342-009](https://wulfkaal.github.io/claims/5886342-009) [design/argued] *(failure mode)* -- Where the Codex or the applicable law is applied largely automatically, the human understanding of the rule prevails over the outcome produced by that automated application, so automated execution never becomes the final authority on meaning. > In interpreting UDLC and Applicable Laws, the hu- man understanding shall prevail over the outcome Furrer Andreas, Wulf A. Kaal, Stephan D. Meyer, Universal Digital Law Codex (UDLC) (2025). SSRN: https://ssrn.com/abstract=5886342 - [5886342-010](https://wulfkaal.github.io/claims/5886342-010) [design/argued] *(failure mode)* -- When an encoded legal status or act is disputed, the code is read against the party who selected the programme or determined the manner of coding, because the other party had no influence over it; the Codex names this in dubio contra programmatorem. > interpreted in favour of the Party who has had no in- Furrer Andreas, Wulf A. Kaal, Stephan D. Meyer, Universal Digital Law Codex (UDLC) (2025). SSRN: https://ssrn.com/abstract=5886342 - [5886342-021](https://wulfkaal.github.io/claims/5886342-021) [condition/asserted] -- Pledging a digital object requires the pledgor to hand over digital control, either to the pledgee, to a third party, or to a digital program capable of exercising that control, so the security interest is perfected by control rather than by filing. > (2) In order to pledge a Digital Object, the pledgor shall transfer the Digital Control to either the pledgee, a third party, or a digital program capable of exercising Digital Control. Furrer Andreas, Wulf A. Kaal, Stephan D. Meyer, Universal Digital Law Codex (UDLC) (2025). SSRN: https://ssrn.com/abstract=5886342 - [5886342-028](https://wulfkaal.github.io/claims/5886342-028) [design/asserted] -- Terms expressed in code, such as those inside a digital contract, are legally valid and enforceable even when they are not provided in natural language. > ital Contract, are legally valid and enforceable even Furrer Andreas, Wulf A. Kaal, Stephan D. Meyer, Universal Digital Law Codex (UDLC) (2025). SSRN: https://ssrn.com/abstract=5886342 - [5886342-032](https://wulfkaal.github.io/claims/5886342-032) [condition/asserted] -- A DAO is formed on the basis of a DAO Agreement setting out its terms and rules, and that agreement may consist of digital contracts, of written documents, or of a combination of the two. > (1) A DAO shall be formed on the basis of a DAO Agreement, which sets out the relevant terms and rules of the DAO in question. This agreement may consist of Digital Contracts, written documents, or a combination of the two. Furrer Andreas, Wulf A. Kaal, Stephan D. Meyer, Universal Digital Law Codex (UDLC) (2025). SSRN: https://ssrn.com/abstract=5886342 **2026** - [6655138-005](https://wulfkaal.github.io/claims/6655138-005) [failure/argued] *(failure mode)* -- HDCA is a successful translation of repeated-game cooperative equilibria into smart-contract form, so its defect lies not in the execution layer but in the absence of a generation layer. > The architecture is, in this sense, a successful translation of repeated-game cooperative equilibria into smart-contract form (Calcaterra and Kaal 2018). Its limitation is not in the execution layer but in the absence of a generation layer, which Part IV develops formally. Wulf A. Kaal, Possibility Loops An Operational Architecture for Computative Economics in Agent Coordination Systems (2026). SSRN: https://ssrn.com/abstract=6655138 ## Verify Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. 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