Potentials and Limitations of Smart Contracts: A Primer from an Economic Point of View - European Business Law Review View Potentials and Limitations of Smart Contracts: A Primer from an Economic Point of View by Enrico Seidel,Andreas Horsch,Anja Eickstädt - European Business Law Review Potentials and Limitations of Smart Contracts: A Primer from an Economic Point of View Enrico Seidel Anja Eickstädt 31 1

Smart contracts are an innovative contract type best described as digital and decentralized agreements which are stored on a blockchain. The automatisms included in blockchain-based smart contracts as well as their transparency and irreversibility contribute to their increasing popularity and made proponents of smart contracts suggest that they will replace traditional written contracts and become the (only) contract type in the long run. However, seminal problems prevail, including technical, legal, and also economic questions. This paper addresses the latter: Using theoretical approaches of New Institutional Economics, such as the theory of transaction cost or the theory of agency, it shows that smart contracts are no cure-all, but another (process) innovation of considerable, but not unlimited potential.

European Business Law Review