Whether enforced by a government, or otherwise, the contract is thebasic building block of a free market economy. Over many centuries of culturalevolution has emerged both the concept of contract and principles relatedto it, encoded into common law. Algorithmicinformation theory suggests that such evolved structures are oftenprohibitively costly to recompute. If we started from scratch, using reasonand experience, it could take many centuries to redevelop sophisticatedideas like property rights that make the modern free market work [Hayek].
We can extend the concept of smart contracts to property. Smart propertymight be created by embedding smart contracts in physical objects. Theseembedded protocols would automatically give control of the keys for operatingthe property to the party who rightfully owns that property, based on theterms of the contract. For example, a car might be rendered inoperableunless the proper challenge-response protocol is completed with its rightfulowner, preventing theft. If a loan was taken out to buy that car, and theowner failed to make payments, the smart contract could automatically invokea lien, which returns control of the car keys to the bank. This "smartlien" might be much cheaper and more effective than a repo man. Alsoneeded is a protocol to provably remove the lien when the loan has beenpaid off, as well as hardship and operational exceptions. For example,it would be rude to revoke operation of the car while it's doing 75 downthe freeway.
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What about extending the concept of contract to cover agreement to aprearranged set of tort laws? These tort laws would be defined by contractsbetween private arbitration and enforcement agencies, while customers wouldhave a choice of jurisdictions in this system of free-market "governments".If these privately practiced law organizations (PPLs for short) bear ultimateresponsibility for the criminal activities of their customers, or needto insure lack of defection or future payments on the part of customers,they may in turn ask for liens against their customers, either in withcontractual terms allowing arrest of customers under certain conditions(eg if they commit acts specified as criminal by the PPL contract) or (morelikely for mobile world-traveling and virtual pseudonymous customers) smartliens against liquid assets such as bank accounts and investment portfolios.Smart liens over information, such as digital bearer securities, can beimplemented via secret sharing (two or more keys required to unlock theencryption). 2ff7e9595c
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