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Cloud crypto land

Schuster, Edmund-Philipp (2020) Cloud crypto land. Modern Law Review, 83. ISSN 0026-7961 (In Press)

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Abstract

The supposed disruptive and transformational potential of blockchain or distributed ledger technology (DLT) has received widespread attention in the media, from legislators, as well as from academics across disciplines, including law, over the past few years. While much of this attention revolved around the cryptocurrency Bitcoin (and its numerous cryptocurrency offshoots), many see the real promise of blockchain technology in its potential use for organising transactions in traditional assets, including shares and other securities, as well as for facilitating self-executing “smart contracts”, which replace vague and imprecise natural language with precise and unambiguous computer code. Focussing on non-currency applications of blockchain technology, I present a simple legal argument that seeks to demonstrate the impossibility of a meaningful blockchain-based economic system. I argue that features present in all major legal systems mean that real assets cannot be traded on blockchain-based systems, unless design choices are made which necessarily remove all advantages the technology offers over existing solutions. The same argument is shown to apply to so-called smart contracts. The paper further argues that there is no reason to expect legislators to change current legal principles in sufficiently dramatic fashion so as to carve out a space in which applications of blockchain technology can usefully be implemented, since the potential efficiency gains ascribed to blockchain technology are based on a flawed analysis of its costs and benefits. Legal and practical obstacles therefore mean that, outside its original and circumscribed realm of cryptocurrency, blockchain technology is highly unlikely to transform economic interactions in the real world. Instead, it is argued that – depending on the specific implementation – blockchain technology is either pointless or useless for transactions in traditional assets.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14682230
Additional Information: © 2020 The Author
Divisions: Law
Subjects: K Law > K Law (General)
Date Deposited: 21 Sep 2020 07:48
Last Modified: 13 Oct 2020 08:36
URI: http://eprints.lse.ac.uk/id/eprint/106595

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