Using Smart Contracts for Crime

One major limitation of the aforementioned smart contracts is that they can also facilitate the mediation of illegal activities among distrustful criminal parties. Indeed, Bitcoin (and other decentralized frameworks such as Ethereum [21]) eliminate the need for trusted third-party intermediaries to conclude such contracts.

This would clearly render illegal activities and smart contracts established using Bitcoin and similar blockchain technologies harder for law enforcement agencies to trace/detect. While traditional approaches require the intervention of third- parties (which could be regulated and/or coerced by law enforcement agencies), Bit- coin does not necessarily require any third-party and minimizes interaction between criminal parties. This problem is even further exacerbated since Bitcoin inherently supports pseudonymity, which is an appealing property for criminal activities.

This problem was outlined by Juels et al. in [22]. More specifically, the authors show that criminal smart contracts (CSCs) for leakage of secrets are efficiently realizable in existing decentralized contracts. Additionally, the authors demonstrated that authenticated data feeds, another anticipated feature of smart contract systems, can facilitate CSCs for real world crimes. This indirectly motivates the need for policy safeguards to prevent the abuse of smart contracts.

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