contract-law cryptocurrency smart-contracts
How does contract law apply to smart contracts?
<p>We quite frequently hear about some cryptocurrency company losing money because their software was exploited.  From example today we have <a href="https://twitter.com/QubitFin/status/1486870238591594497" rel="nofollow noreferrer">Qubit losing $80 million</a>:</p>
<blockquote>
<p>The protocol was exploited by;
0xd01ae1a708614948b2b5e0b7ab5be6afa01325c7
The hacker minted unlimited xETH to borrow on BSC.
The team is currently working with security and network partners on next steps.</p>
</blockquote>
<p>My understanding of what happened is that a smart contract was created by someone, accepted by Qubit and completed according to the rules created by Qubit.  However it did not have the result expected by Qubit, though presumably expected by the someone.</p>
<p>In general, where there is a difference in the understanding of a contract <a href="https://www.upcounsel.com/consent-contract-law" rel="nofollow noreferrer">it is the wording that is held to be valid</a>, rather than either parties understanding.  This will be familiar to many people, as companies frequently craft contracts in their interest and people do not read them.</p>
<p>In the case of a smart contract, where the actual meaning is in no doubt (as it is executed programmatically) but it is understood to mean something different by one of the parties, it it actually valid?  Ie. in such a case would the someone have legal ownership of the $80 million cryptocurrency that they were assigned upon the completion of the smart contract?</p>

<blockquote>
<p>In the case of a smart contract ... it it actually valid?</p>
</blockquote>
<p>The question is based on the misconception that the terms &quot;smart contract&quot; (technical term) and &quot;contract&quot; (legal term) directly relate or have much in common. <strong>They don't.</strong></p>
<p>If anything, smart contracts are essentially modern replacement for papers and signatures.</p>
<p>But paper contracts have never been contracts <em>themselves</em> either. They are merely <em>evidence</em> of the contracts, and this evidence is often not even necessary for the contracts to be valid: most contracts are not even required to be in writing.</p>
<p>So, the story in your example is just the 21st century's analogue of good old paper contract foul play like signature forgery, disappearing ink and so on.</p>
<p>Legally it is handled with no difference: investigate what happened, find out who intended what and judge what has to be done. Gavel bangs!</p>
