Usefulness and Dangers of Smart Contracts in Consumer and Commercial Transactions

The public debate about smart contracts, meant as self-help remedies grounded on distributed ledger technology, is filled with alarms and high expectations. They have been praised by the tech community as infallible software able to carry out the whole contractual cycle, from formation to enforcement. Conversely, several legal scholars have raised concerns regarding both smart contracts inability to reflect relational aspects of contract governance and the augmented complexity generated by the translation of an agreement into computer code. By building on the extant literature and avoiding any premature enthusiasm, this article focuses the discussion on the potential areas which could effectively benefit from smart contracts implementation. Firstly, it argues that smart contracts might be a viable tool to tackle effectively consumers inertia in triggering and enforcing their kinds of rights which are standardized and easily verifiable. Secondly, smart contracts have the potential to foster commercial relationships by lowering down transaction costs arising from lack of trust between merchants. Thus, smart contracts are likely to provide better alternatives to traditional tools of business practice, such as letters of credit and escrow agreements. Lastly, the article points out that, while businesses already have commercial incentives to implement smart contracts on their own, when it comes to consumer protection, regulators shall take the lead by testing, through regulatory sand-boxes, smart contracts potential.