Smart Contracts, Real-Virtual World Convergence and Economic Implications

Abstract

Smart Contracts (SCs) are usually defined as contracts that are instantiated in computer-executable code that automatically executes all or parts of an agreement with the assistance of block-chain’s distributed trust technology. This is principally a technical description and results in an overly narrow focus. The goal of this paper is to provide an overview of the rapidly evolving multidisciplinary literature on Smart Contracts to provide a synthesis perspective on the economic implications of smart contracts. This necessitates casting a wider-net that ties SCs to the literature on the economics of AI and the earlier Industrial Organization literature to support speculation about the role of SCs in the evolution of AI and the organization of economic activity. Accomplishing this goal builds on a repurposing of the Internet hourglass model that puts SCs at the narrow waist between the real (non-digital) and virtual (digital) realms, serving as the connecting glue or portal by which AIs may play a larger role in controlling the organization of economic activity.