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Date
2019-07-29Type
- Working Paper
ETH Bibliography
yes
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Abstract
We study optimal smart contract design for monitoring an exchange of an item performed offline. There are two parties, a seller and a buyer. Exchange happens off-chain, but the status update takes place on-chain. The exchange can be verified but with a cost. To guarantee self-enforcement of the smart contract, both parties make a deposit and the deposits must cover payments made in all possible final states. Both parties have an (opportunity) cost of making deposits. We discuss two classes of contract: In the first, the contract only interacts with the seller, while in the second, the contract can also interact with the buyer. In both cases, we derive optimal contracts specifying optimal deposits and verification policies. Show more
Publication status
publishedExternal links
Journal / series
SSRNPages / Article No.
Publisher
Social Science Research NetworkSubject
Smart contracts; Deposit design; Costly state verificationOrganisational unit
03729 - Gersbach, Hans / Gersbach, Hans
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ETH Bibliography
yes
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