All agreements and contracts in the world have three distinct contractual types, social contracts, legal contracts, and smart contracts, with each providing an intrinsic and important layer in one whole system of commerce and distribution.
We introduce a new property that can distribute social, legal, and smart contracts into one cohesive whole system.
Of the most importance is the social contract––social contracts form the foundation from which legal and smart contracts can emerge. If a social contract is unable to form in a community––then legal or smart contracts should not be issued.
This allows the social contract to “vet” members of a community around a shared purpose and here is how it can work.
First, let’s define a few things about contracts.
Social contracts are friendly, flexible and flimsy––only as strong and dependable as the integrity of the individuals in a community.
Compare; dating is a type of social contract used today, whatever flexible terms people engaged in each other decide, it’s all just verbal communication and verbal agreement, relying on pure trust.
How important are social contracts with people you trust? Very. Some individuals are highly trustworthy and consistent; others flimsy, flakey, and undependable. Having strong social contracts with strong individuals is really the underlying governance of society and what influences all other types of contracts.
The idea of social contracts can be traced back to ancient civilizations, where unwritten rules and expectations were used to govern behavior and social relationships. It is likely predictable that social contracts would break down where social complexity would increase.
A social contract, dating––evolves into a legal contract, marriage. Likewise, a social contract, such as a purchase of goods, evolves into legal contracts as commerce.
The concept of legal contracts emerged in ancient Greece, Egypt and Rome, where social contracts become too flimsy, new “legal” contracts were seen as binding agreements that could be enforced in a court of law. Over time, the use of written contracts became more widespread, and contract law developed into a specialized area of legal governance.
We can see that legal contracts become more flimsy as society became more complex in the 20th-21st centuries, and to solve for this, new contract types emerged.
The concept of smart contracts is a more recent development, which emerged with the rise of blockchain technology and cryptocurrency. Smart contracts use computer code to automatically execute the terms of an agreement, without the need for intermediaries, i.e. law firms.
Overall, the evolution of contracts has been shaped by changes in technology, society, and legal systems. While social contracts have been used for centuries to govern social relationships, legal contracts and smart contracts are more recent developments that reflect changes in the way that people transact and do business.
All three types of contracts can co-exist, work alongside each other and distribute through a community marketplace called the “Bootstrapping Arts and Engineering” (BAE) marketplace.
Contract unification via CopyCake™
BAE has an innovation called “CopyCake™” which allows multiple contract types including social contracts to become bundled and distributed together, creating novel properties.
Through the BAE marketplace, CopyCake allows for legal contracts in the form of equity financing contracts and copyright royalty stream contracts to become distributive in a compliant fashion through a blockchain.
To accomplish this, artists on the BAE marketplace register their creative work with the US Copyright Office along with a blockchain address, which puts the smart contract location as a congruent component of the copyrighted work.
Copyright contracts are created by community artists whenever they create a body of work that can be sold, with the proceeds going to engineering startups.
The artists sell their creative work including the formal royalty stream for that creative work––and distribute the profits from the work on the blockchain directly towards the engineering startup technology companies.
When any given work of art is sold and distributed in BAE, the holder of the art work is awarded ownership of 66% of the Copyright Royalty Stream of the art they purchased. This means they will receive 66% of all sales against the copyrighted work, through sales of lithographs, serigraphs, special editions.
The startups act as equity companies, and pledge to match equity value to the copyright value of the registered work.
CopyCake™ Smart contracts allow Copyright contracts and equity contracts to become distributed as single contracts in a digital wallet, fully within compliance of US Securities.
Once registered, the smart contract becomes indistinguishable from the copyright contract and can be potentially matched to an equity contract in the digital wallet, such as a Reg A+ Security Token for example.
The BAE marketplace only sells artwork, specifically a very large art collection that follows a narrative theme. The proceeds from the sale of the art work are directed towards the engineering startups.
The collection is sold in three acts, with each scene containing unique one-of-a-kind works of art with unique distributive properties.
The first scene costs $120, and anyone who purchases it owns the retail side of the Scene Two contract, which costs $360 while making the following scene in the narrative story available.
Owners of the creative work become distributors in the narrative which allows them to own the retail side of the following contract, or 2/3rds of the purchase price.
When each scene sells, 1/3rd of the price is distributed to the engineering startups who have equity contracts, and the artist’s reward the distributor with formal copyright royalty stream ownership of the work of art they purchased.
This introduces the first novel distributive property of BAE, ownership is assigned after the owner sells an asset, whatever they sell they can paradoxically also own.
This distributed property, ⅓ to ⅔ produces a dynamic where 1x is distributed as 2x back to a wallet holder.
The necessity of a social contract to prevent abuse
What prevents such a system from being abused or used fraudulently? This is where the social contract comes into play.
When individuals are invited to participate in the BAE marketplace, they form a social contract that expresses enthusiasm for the shared purpose of the community and trust in the smart contract that distributes the funds from the sale of artwork. They learn that a “smart contract” will distribute twice the amount they put into the marketplace back into their wallet. What do they want to do with that return?
Only those who commit to the purpose of the community and agree in a “social contract” to distribute those funds back into the community are invited to purchase a formal legal contract (Copyright Royalty Stream) in the form of a “smart contract”.
In the context of the BAE marketplace, social contracts play an important role in maintaining momentum and fostering a sense of community among participants.
The BAE marketplace creates a decentralized “co-fund” where 1/3 of the funds from the sale of artwork goes towards engineering projects, and 2/3 goes towards community projects building on top of the engineering projects.
While the smart contracts ensure that the retail price of one scene will return twice that amount in the following scene, it is the social contract that creates trust among community members to put those funds towards the purpose of the community, and not turn it into a “flip” like day traders marketplaces.
The Co-Fund System
By combining smart contracts and social contracts, the BAE marketplace creates a decentralized “co-fund” system. The use of a co-fund in the BAE marketplace can help to build momentum in several ways.
First, it creates a sense of shared purpose and community among participants, as they are all working towards a common goal. This can help to maintain interest and enthusiasm for the marketplace over time.
Second, the use of a co-fund allows participants to pool their resources and invest in the acquisition of more scenes in the BAE marketplace. This can help to accelerate the growth of the marketplace and allow it to reach its goals more quickly.
Third, the use of a co-fund can help to preserve equity in the engineering startups involved in the marketplace. By using the 2/3 of the purchase price from the sale of artwork to fund the co-fund, participants can avoid diluting equity in the startups, while still contributing to the growth and success of the community.
Overall, the use of a co-fund in the BAE marketplace can help to build momentum by creating a sense of shared purpose and community, accelerating the growth of the marketplace, and preserving equity in the engineering startups involved. This can help to ensure the long-term success and sustainability of the marketplace.
In summary, the BAE marketplace is an example of how legal, social, and smart contracts can be used in combination to create novel dynamics useful for community funding and cooperation. Social contracts play a critical role in building trust and maintaining momentum, and the use of a co-fund can help to preserve equity in engineering startups while accelerating the growth of the marketplace.