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ABSTRACT: All contracts are necessarily incomplete. The inefficiencies of bargaining over every contingency, coupled with humans' innate bounded rationality, mean that contracts cannot anticipate and address every potential eventuality. One role of law is to fill gaps in incomplete contracts with default rules. Emerging technologies have created new, yet equally incomplete, types of contracts that exist outside of this traditional gap-filling legal role. The blockchain is a distributed ledger that allows the cryptographic recording of transactions and permits "smart" contracts that self-execute automatically if their conditions are met. Because humans code the contracts of the blockchain, gaps in these contracts will arise. Yet in the world of"smart contracting" on the blockchain, there is no place for the law to step in to supply default rules-no "legal intervention point." The lack of a legal intervention point means that law on the blockchain works in a fundamentally different way from law in the corporeal world. Business organizational law provides a prime example of how the law uses default rules to fill gaps in an incomplete contract and how the law works differently in the blockchain context.
I. Introduction
In 2016, a decentralized autonomous organization ("DAO") launched on Ethereum, a platform that permits layering programs called "smart contracts" on top of a cryptocurrency.1 This DAO was "decentralized" because no one person or entity controlled it; it was "autonomous" because it ran itself, and it was an "organization" of a type the world had not seen before. More of a "virtual venture capital fund" than a corporation, the 2016 DAO (as I will term this particular DAO) sold tokens in cyberspace that entitled the holders to certain voting rights, including the right to vote on proposals for projects that the DAO would fund.2
The 2016 DAO might sound like unintelligible science fiction, but businesses organized in the virtual world of the blockchain have raised millions of dollars over the past eighteen months using this platform.3 For purposes of this introduction, all the reader needs to understand is that blockchain technology permits "smart contracts" that allow coders to layer on top of currency exchanges particular conditions under which those exchanges will occur.4 In other words, these contracts are self-executing. The Ethereum blockchain can record not only "X paid Y...