Blockchain-based governance fails---no agreement or compliance

The second problem is more severe. In fact, there is an inherent tradeoff between efficiency afforded by a smart contract and the flexibility that the language of ambiguous contracts provides.82 Smart contracts are fully efficient only if they can execute automatically. To that end, they must be ‘complete contracts’ 83 – specifying all possible contingencies upfront. Even if this was feasible, it would be costly for complex issues, thus increasing the cost of ex ante contract design. More importantly, complete contracts may not be collectively desirable. Governance actors may not want to be collectively bound by a formal treaty provision if circumstances change unexpectedly.84 Indeed, many international agreements include escape clauses, treaty reservations, non-legally binding provisions, and procedural standards that need further interpretation. This is not accidental but a deliberate design choice by states which desire flexibility, especially when uncertainty about the state of the world is high.85

Where blockchain transactions require enforcement in the real world, the blockchain is as ineffective as conventional international law if powerful states renege on their promises in the absence of a world government. And even where execution is possible as in the case of on-chain events, the strength of guaranteed execution might actually turn into a weakness: states anticipating guaranteed punishment for reneging might be unwilling to make ambitious commitments in the first place. This implies that state commitments under smart contracts will likely be trivial, or participation in blockchain-based governance would be limited to states that are willing to comply or that expect to comply with contract obligations.86