Affiliation:
1. Associate Professor of Economics, Department of Economics and Management (DEM) University of Trento Trento Italy
2. Professore Aggregato in Law and Economics Law Institute (IDUSI), Università della Svizzera italiana Lugano Switzerland
Abstract
AbstractSmart contracts govern transactions using the blockchain as the enforcing medium. They may be a cheaper form of governance of transactions compared to traditional contracts, the hierarchy of firms, and relational contracts. However, I argue that smart contracts do not eliminate transaction costs; rather, they can increase them, particularly when considering the issue of ex‐post efficiency‐enhancing adaptation. Thus, while smart contracts offer a new theoretical and practical way to govern transactions, they are not without challenges and limitations.