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Blockchain use and smart contracts have a “dark side”, the researcher says

June 1, 2020

Blockchain technology crystallizes the rise of “algorithmic performance” that is increasing today a big challenge for traditional shapes state sovereignty, legal authority and government.

The same applies to the argument in a new publication in Oxford University blog this June 1st by Kevin Warbach, professor of business law and ethics at the Wharton School of the University of Pennsylvania.

Professor Warbach’s next book “After the digital tornado: networks, algorithms, humanity” will argue this Blockchain technology can lead to unintentional damage if its properties are not understood and addressed directly.

Blockchain use and smart contracts have a “dark side”, the researcher says
Blockchain use and smart contracts have a “dark side”, the researcher says

For Warbach, the immutability of blockchain registers and the use of intelligent contracts (self-executing software code) You have an implicit “dark side”.

Even if to overcome weaknesses of human or institutional intermediaries the alternative they create it has its own internal tensions:

“Contracts of any consequence are usually incomplete; This means that they do not state the results precisely for all possible scenarios. Smart contracts reinforce this incompleteness. They can only express their terms in state-of-the-art software codes, eliminating the discretion of human judges and juries. “

While traditional contracts “contradict” human obligations smart contracts with the legal force of the state Use automated decision making and applied through codes to build trust between the parties.

Trying to end a fallible human government could be “tempting,” he says. Too strong a belief in the “perfectly rational vehicle” of computer code to regulate imperfect behavior in the real world can have bad results without being clear who has the power to solve them:

“The dark side of immutability is that valid transactions in a blockchain cannot simply be undone, not that invalid or inadmissible transactions cannot be undone. Immutability creates the potential for catastrophic failure without clear remedial measures. “

More generally, blockchain technology should be treated as a government method positioned on the “edge of freedom and borders”, he writes.

The article concludes by recommending an approach that Warbach calls “a designed government.”

This means realizing that “the perfect immutability creates systems with unacceptable fragility “, This requires the systematic integration of management mechanisms (not retrospectively) if the technology continues to develop.

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