BUSINESS could be such a breeze—if it weren’t for those pesky humans. Imagine contracts that enforce themselves and are not subject to interpretation by, for instance, rent-seeking lawyers. Or envisage autonomous corporations, made up of bundles of automatic agreements, which could send their investors dividends whenever profits reach a certain, specified level and not just when the board of directors has had a good lunch.

Such “smart contracts” are all the rage among futurist backers of the blockchain, the technology that underpins bitcoin, a digital currency. In simple terms, these are pieces of software that represent a business arrangement and execute themselves automatically under pre-determined circumstances. As well as making businesses more efficient, some see them as a way to bypass human decision-making altogether. Faster than you can say “techno-Utopia”, however, the idea has collided with reality.

Automating contractual relationships is an old dream. The term “smart contracts” was coined in 1994 by Nick Szabo, an American computer scientist and legal scholar. But the concept remained obscure for lack of the right...Continue reading