>All that is needed is for the legal system to recognise blockchains as the canonical record of ownership of real assets.
Then theft via smart contract can't be theft because it acted on the canonical record of ownership. This also causes tons of other problems. What happens if someone loses access to their wallet? Now there's a house that simply can't ever be sold?
> There is no external trusted documentation that says what the intention of the code is.
No, if someone fraudulently updated a canonical record of ownership, then the legal system can provide remedies. If it were me, I'd write the smart contract to enable corrections in case of a legal decision but that's at the choice of whomever sets up the smart contract that provides the canonical record of ownership.
Same situation for if someone loses their keys. All these problems can be solved with appropriately written smart contacts.
OK, so ... which courts of which legal jurisdictions can correct which contracts? Are courts in Guinea-Bissau allowed to correct contracts between counterparties in the US?
This stuff is all normal when you're dealing with international contracts - it's not like nobody thought of doing international deals before satoshi.
Some of the answers do depend on the specifics of course. If the asset being traded is US real estate for example I would expect the smart contract to be set up so it requires a US court decision to correct the register.
My point is that there's an entire subbranch of the law, generally called private international law, that has been created to deal with conflict of laws and jurisdictional issues. You're implying that there are simple deterministic rules to determine those kinds of questions but in fact it's a meta-problem.
It sounds like we agree then. I'm not saying it's simple or deterministic, I'm saying it's not new and it's not made inapplicable just because the systems we're using have changed.
The problems that are raised as if they are uniquely issues to blockchain solutions are not in fact specific to blockchains at all. We can and should apply the same rules to blockchain transactions and smart contracts give us a fantastic way of encoding those rules. For example you can have a token that represents proof that you have been kycd by a particular authority and you can restrict transactions of particular assets to those between addresses holding one of those tokens.
Then theft via smart contract can't be theft because it acted on the canonical record of ownership. This also causes tons of other problems. What happens if someone loses access to their wallet? Now there's a house that simply can't ever be sold?