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Assuming the third party made a mistake or (more in line with smart contracts) if the escrow was set up in a way were the pay out was just with relation to the escrow terms but wasn't in line with the contract terms between the 1st and 2nd party they'd be likely to get redress.
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Just because the account gets payed to one party by the third party doesn't mean that the second party couldn't sue the first for the money back. The same argument could be made about an escrow account. That entails replicating many functions like user account management, that aren't necessary for an application like Uniswap that piggybacks off the credible neutrality of a decentralized consensus layer like Ethereum. That's primarily because Coinbase runs inside a silo'd network. A smart contract exchange like Uniswap can process about the same amount of volume as a centralized exchange like Coinbase, but the difference is that Uniswap only needs about 50 employees, whereas Coinbase needs 5000. When you put an automated transaction system on-chain, you drastically increase the advantages of both, because you're embedded in an open application network with credible neutrality. (Near) fully automated transactions are 1) orders of magnitude more efficient, 2) expose general purpose composability where one automated system can be predictably inter-connected with another.
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That's still a huge win, because it means we don't have to have our lawyers email redlines back and forth every time we want to trade an S&P index futures contract. That doesn't mean that automated systems are pointless, because 99.9% of the transactions aren't exploits. If you blatantly exploit a vulnerability in those systems, then courts will generally punish you. But the other 99.99% of the time, it's a much more efficient system than using written contracts to handle normal, everyday outcomes.Įven without blockchains or smart contracts, we already have automated systems that execute transactions based on algorithmic rules. Yes, we may still have to invoke courts for the 0.01% of transactions that are clear exploits. Smart contracts are simply a way to automate transactions in a way that's efficient, transparent, and credibly neutral. Smart contracts don't have to exist outside the judicial system. > I don't see how they can exist without a judicial system.
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The only way smart contracts end up being used for non-trivial purposes is if they are made explicitly subordinate to the existing legal infrastructure in ways that will gum up the works, or if smart contracts are subject to mandatory formal verification possibly including game theoretic 2nd order effects. These meta rules don't have equivalents in smart contract systems, which makes them brittle. The legal system has a similar principle of not being liable for conduct that predates a ruling or law that forbids it, but it also has the principle of agreements being interpreted according to common sense understanding by a person with ordinary skill, and where skill differences exist between them the non-expert's interpretation is the one given precedence. The problem with smart contracts isn't that there are bugs, but that buggy results are final with little to no recourse, by design, unless you get everyone to agree to hard fork the chain (rolling the "bad" transactions back and eplacing the buggy contract) and/or the implementation (if the bug was in the platform rather than the contract). The legal system has failure modes that are just as easily exploitable, but humans can intervene and reverse the failure, make people whole, etc.