EconPapers    
Economics at your fingertips  
 

Optimal Smart Contracts with Costly Verification

A. Mamageishvili and J. C. Schlegel

Working Papers from Department of Economics, City University London

Abstract: We study optimal smart contract design for monitoring an exchange of an item performed offine. There are two parties, a seller and a buyer. Exchange happens of-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.

Keywords: Smart Contracts; Deposit Design; Costly State Verification (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (91) Track citations by RSS feed

Downloads: (external link)
https://openaccess.city.ac.uk/id/eprint/22682/1/Dept_Econ_WP1913.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cty:dpaper:19/13

Access Statistics for this paper

More papers in Working Papers from Department of Economics, City University London Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,. Contact information at EDIRC.
Bibliographic data for series maintained by Research Publications Librarian ().

 
Page updated 2022-01-19
Handle: RePEc:cty:dpaper:19/13