# On the Scales of Private Law: Nano Contracts

Canonical page: https://works.battleoftheforms.com/papers/ssrn-4631897/

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NANO CONTRACTS 11/14/2023 2:12 AM
ON THE SCALES OF PRIVATE LAW:
NANO CONTRACTS
FORTHCOMING:
37 HARVARD JOURNAL OF LAW & TECHNOLOGY (2024)
Yonathan A. Arbel
Contracts are falling in scale. New contracting trends and technologies
facilitate the formation of smaller scale contracts that have extremely short
duration, stakes, and scope. These nano contracts embody ephemeral
interactions of minuscule value interactions that were so far outside the
law and away from explicit markets, governed only by social norms.
The rise of nano contracts can unlock new transaction types,
opportunities to build wealth, and reduce dependence on private ownership.
Yet they also carry important risks, and their small scale makes them difficult
to effectively regulate. At the limit, nano contracts collapse private law
boundaries between property, torts, and contract, and would require a
rethinking of the basic private law categories. This Article offers the first
comprehensive study of these Lilliputian agreements, examining their
potential while attending to questions of enforceability, market creep, and
disparate impact. The analysis reveals the essential, if neglected, role of scale
in private law, and how it can and should inform jurisprudence and policy.
Cite as: Yonathan A. Arbel, On the Scales of Private Law: Nano
Contracts, 37 HARV. J. L & TEC. __ (Forthcoming, 2024)
 Associate Professor of Law, University of Alabama, School of Law. I appreciate the helpful
comments of Jasmine Abdel-Khalik, Samuel Becher, Jonathan Choi, Chris Dharozal, Leah
Fowler, Michael Gilbert, Shane Greenberg, Dave Hoffman, Rich Hynes, Mark Lemley, Jean
Powers, Aaron Perzanowski, Wyatt Pless, David Schwartz, Lior Strahilevitz, Henry Smith,
Andrea Tosato, and Christopher Yoo. The Article was selected based on blind review to the
Northwestern Law & Stem workshop. For research support, I thank Dylan Cox, and Gilberto
Gomez.

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Table of Contents
I. INTRODUCTION ...................................................................................... 3
II. A PEDESTRIAN THOUGHT EXPERIMENT: NANO CONTRACTS AND THE FOURWAY STOP ....................................................................................... 8
III. FUNDAMENTALS OF NANO CONTRACTS: PLATFORMS, PROTOCOLS, AND
LEGAL TECHNOLOGY ...................................................................... 11
A. Scale and Contract Evolution ....................................................... 12
B. Nano Contracts as a Technology .................................................. 16
1. Practical Constraints that Nano Contracts Must Meet .............. 19
2. How Nano Contracts Can Meet These Constraints .................. 21
IV. NANO LINES ..................................................................................... 28
A. Nano Contracts and the Problem of Queues .................................. 28
B. Legal Policy on Nano-Contracting Lines ........................................ 36
V. NANO LEASES ....................................................................................... 42
A. Nano Leases and Excess Capacity .................................................. 42
B. The Legal Policy on Nano Leasing ................................................ 46
VI. NANO GIGS ........................................................................................ 52
A. Nano Work and the Problem of Casual Work ................................ 52
B. The Legal Policy on Nano Work .................................................. 53
VII. NANO ACCIDENTS ............................................................................. 55
VIII. CONCLUSION ................................................................................... 58

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I. INTRODUCTION
THERES PLENTY OF ROOM AT THE BOTTOM
RICHARD FEYNMAN1
In the 1959 annual meeting of the American Physical Society,
theoretical physicist Richard Feynman stood up and took the stage, set to
deliver a puzzlingly titled after-dinner speech. 2 With his signature
mischievous grin, Feynman sought to persuade a room of physicists that
they should turn their gaze from the heavens above to the molecular level
below. It is at the bottom the smallest scale of atomic interactions that
we can find grand opportunities for innovation. In his inimitable style, he
surgeon, 3
to be able to replace the heavy hand of the surgeon with a pill containing a
nano robot that performs operations with perfect precision. Miniaturization
and development of nano scale technologies could lead to grand
discoveries or so Feynman claimed.
this message. His ideas were summarily dismissed as fanciful and
outlandish.4 The nanotechnology
revolution was built on 5 Today,
nanotechnology is growing everywhere, from medicine to engineering and
from manufacturing to science, attesting to 6
There is plenty of room at the bottom for contracts too. This Article
overarching argument is that (1) current technological trends show a
dramatic miniaturization of contract scale and (2) that the changed scale has
1 Richard P. Feynman, Plenty of Room at the Bottom, 16 RESONANCE 890, 890
(2011). Something will be lost from reading . Feynman later
gave a similar talk, this time recorded, which is available online. Muon Ray, Richard Feynman
Tiny Machines Nanotechnology Lecture aka Theres Plenty of Room at the Bottom, YOUTUBE,
(Aug. 22, 2012), https://www.youtube.com/watch?v=4eRCygdW--c [https://perma.cc/DHE2X3FB].
2 Feynman, supra note 1, at 890.
3 Id. at 900 (recounting a similar nano robot hypothetical proposed by Albert R. Hibbs).
4 The lecture was only cited seven times in the first two decades after its publication.
Editorial, Plenty of Room Revisited, 4 NATURE NANOTECHNOLOGY 781 (2009). On its reception,
see Christopher Toumey, Reading Feynman Into Nanotechnology: A Text for a New Science, 12
Techné 133, 142 (Fall 2008). At the time of writing, it boasts nearly 6,000 citations.
5 This is so much the case that Nature Nanotechnology has a norm of forbidding authors
s become somewhat of a cliché. Plenty of Room
Revisited, supra note 4, at 781 (referring to an unwritten rule to not
at the start of an article unless absolutely necessary).
6 See generally Debnath Bhattacharyya, Shashank Singh, Niraj Satnalika, Ankesh
Khandelwal & Seung-Hwan Jeon, Nanotechnology, Big Things from a Tiny World: A Review, 2
INTL J. U- & E-SERVICE, SCI. & TECH. 29, 29 36 (2009) (looking into the present and future
usage of nanotechnology across different fields).

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deep legal implications. What I will strive to show throughout is that scale
transformations do more than change the commercial aspect of transactions,
they also carry the seed of social transformation. Drawing on examples of
past scale transformations in contracts, it will become clear that a fall in
contract scale can lead to broad social, political, and material changes. But
while the march of technology is likely inevitable, the social response is not.
Some of the changes carry great promise, promoting greater autonomy,
choice, and prosperity. Yet, if the legal response is inattentive, these changes
can also imperil social values, marginalized communities, and freedom. The
Article works to illuminate both the promise and peril that lie at the bottom
of contracts.7
To motivate the analysis, consider the joint effect of some recent
colinear trends in contracting practices: digitization of the contractual
forms;8 cultural normalization of digital deals; the dispensation with wet
signatures; the thundering rise of Everything-as-a-XaaS
contracts; 9 the tokenization and fractionalization of ownership; the
ascendance of high-frequency trading (itself often a form of nano
contracting);10 the increasing ability of AI agents to
effectively process natural language, negotiate, and transact;11 and the
persistent high-speed Internet connectivity of geolocated individuals and
objects.12 What ties these trends together is their creation of infrastructure
that allows for the formation of agreements at near-zero latency and at
asymptotically low transaction costs. These trends set the ground for a new
breed of contract: nano contracts.
7 As emphasized throughout, the graveyards are full of failed predictions about the future of
contracts, chief among them being GRANT GILMORE, THE DEATH OF CONTRACT (1974). Part V
offers a homage to this wonderful, if mistaken, prediction by hazarding an opposite future. See
infra Part V.
8 See, e.g.,
younger lawyer will be excused for assuming that electronic contracts are enforceable, but as
recently as 2021, the Supreme Court of Mississippi held, as a matter of first impression, that the
nic means, i.e.
9 For further discussions of the XaaS model, see infra notes 77 81.
10 See Gianluca Piero Maria Virgilio, High-Frequency Trading: A Literature Review, 33 FIN.
MKT. & PORTFOLIO MGMT. 183, 183 (2019) -
frequency trading has had a profound impact on the micro- . In
particular, the trading and (effectively) leasing of future contracts for the span of a few
milliseconds is a large-scale demonstration of nano contracting and its potential.
11 See generally Yonathan A. Arbel and David A. Hoffman, NYU L. REV. (Forthcoming,
2024) (exploring the use of large language models to process language in legal settings).
12See Mobile Fact Sheet, PEW RSCH. CTR (Apr. 7, 2021) (reporting that 85% of Americans
own a smartphone), https://www.pewresearch.org/internet/fact-sheet/mobile/
[https://perma.cc/RJ3B-Z7U4]; infra notes 72 81 and accompanying text.

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Nano contracts are digitally negotiated agreements that employ
automated and near-instantaneous bargaining processes in multiparty peerto-peer ( p2p ) transactions. What makes them nano is their scale. They
cover transactions that last a few seconds; transfer cents, milles, and even
smaller fractions of the dollar;13 or transfer slivers and fragments of the
bundle of rights of ownership. Their p2p character reduces the need for
intermediation, and thus allows parties to transact with each other without
necessarily involving firms or platforms in the middle.
Two preliminary questions immediately present themselves. Is there
anything truly new about these agreements if they are simply smaller scale
contracts, and are these fleeting agreements even properly called contracts?
On reflection, these two questions respond to each other. Classical concepts
of definite position and momentum break down at the quantum scale. So
do contracts. In classical contracts, the most basic distinction is between
pure exchange relationships and contractual ones.14 This classification is
made based on certain assumptions about the identity of the parties, their
capacity, the negotiation process, the values exchanged, and so on. Because
these assumptions no longer necessarily hold, it is increasingly difficult to
classify nano contracts as either contracts or spot exchange. The blurring of
these two categories is what makes nano contracts so interesting to study.15
This point is best illustrated through a recent example. The rise of the
gig economy brought its own scale transformation.16 Before the gig
economy, short transportation agreements were mediated by the state
through licensing and certification schemes.17 Uber and Lyft changed that
by arguably disintermediating the relationship.18 Much of the recent lawfare
around these platforms is about the classification of the agreements they
facilitate. Is Uber an employer? What does it owe its drivers? Uber proposed
that it only matches passengers to independent contractors for pay, and that
this exchange does not amount to a contract, hoping to skirt the
13 Section 20 of the Coinage Act of 1792 defined the mille as a fraction of a cent. See
Coinage Act of 1792, ch. 16, § 20, 1 Stat. 246, 250 51 (1792) (repealed 1873).
14 True to the realist tradition, Arthur Linton Corbin advises that the very definition of what
counts as a contract must not be made in a purely analytical fashion divorced from our necessity
and convenience. ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS 4 (1952).
15 The technical definition of contracts as a set of enforceable promises is frustratingly
circular, but it does elucidate that if there is a nano contract, then it exists in the metaphysical
promises rather than digital code. See RESTATEMENT (SECOND) OF CONTRACTS § 1 (AM. L. INST.
1981); Contract, BLACKS LAW DICTIONARY (11th ed. 2019).
16 See, e.g., WEBSTERS NINTH NEW COLLEGIATE DICTIONARY 517 (1985) (defining gig as
). The modern meaning is more diffused and
contested. See Benjamin Della Rocca, Unemployment Insurance for the Gig Economy, 131 YALE
L.J. F. 799, 802 (2022) .
17 See, e.g., Medallion Owner, Individual, NYC MYCITY, https://nycbusiness.nyc.gov/nycbusiness/description/medallion-owner-individual/about
[https://perma.cc/CY7S-9BYN] (last visited Nov. 6, 2023).
18 See Orly Lobel, The Law of the Platform, 101 MINN. L. REV. 87, 98 (2016);

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responsibilities of an employer.19 Drivers might like to emphasize a more
contractual relationship between them and the platforms, for precisely the
opposite reasons. The new technological form blurred traditional
boundaries, resulting in novel and socially important questions about the
scope of contracts.
Such legal encounters teach the general lesson that in law, scale has a
quality of its own. Yet, as noted by Lee Fennell, scholars and policymakers
powerful new (and sometimes
fraught) legal configurations. 20 Nano contracts will bring their own
questions about legal classification. Are nano agreements that let a party use
for a brief stop, for example, best understood as leases,
licenses, or something else?21 Should
right of way be enforced as contracts? The small scale of nano contracts
brings with it new questions which we have not yet considered, making our
regulatory framework quite fragile to these developments.
The final preliminary question is how nano contracts might differ
from other forms of digital contracts. The answer, which admittedly sounds
like it comes from a college application, is focus and ambition. Unlike smart
contracts, which are primarily tools of contract governance, the focus and
ambition of nano contracts is to solve the problem of contract formation.22
It is frustratingly difficult to create systems that allow for the creation of very
small transactions, because even small frictions can overwhelm the value of
truly small agreements.23 Nano contracts address these issues using p2p
digital protocols. Another possible distinction is that nano contracting
technology does not require the blockchain or cryptography, although it
could incorporate them if desired.24 This marks nano contracts as a discrete
form of transactional technology aimed at addressing the negotiation and
formation bottleneck.
19 People v. Uber Techs., Inc., 56 Cal. App. 5th 266, 278 79, 270 Cal. Rptr. 3d 290, 300
enterprises, each of whom operates a separate and distinct business enterprise that provides a
Notably, when it came to Ub own
terms of service, the company advocated for a thick contractual relationship with passengers. See
Meyer v. Uber Techs., Inc., 868 F.3d 66, 70 71 (2d Cir. 2017).
20 LEE A. FENNELL, SLICES AND LUMPS 3 (2019) (arguing that legal scholars have paid only
(i.e., slices and lumps, the subject of her book)). Id.
21 See infra Section V.B.
22 For a deeper exploration of these connections, see infra Section III.B.
23 See Oliver E. Williamson, The Economics of Organization: The Transaction Cost Approach,
87 AM. J. SOCIO. 548, 552 (1981) (exploring the role of frictions (i.e., transaction costs) in
preventing valuable transactions).
24 A relevant example is new microgrids community projects to generate, store, and
transmit renewable energy in a peer-to-peer manner. See Lea Diestelmeier & Job Swens, Energy
Communities in the Netherlands, EUR. ENERGY L. REP., Nov. 26, 2021, at 239, 252.

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Nano contracts contain within them the germ of profound social and
economic change. This germ, however, needs to be scrutinized before it
spreads. A common saying in startup culture is move fast and break
things. 25 This Article is interested not only in asking what will break, but
also whose things are likely to break. Disruptive technologies, in a process of
Schumpeterian creative destruction, often upend social and economic
structures.26 Nano contracts disrupt a large domain of common interactions
that, due to their minuscule size and stakes, were left outside the market.
Interactions such as waiting in the line at the deli are today mostly governed
by social norms. Nano contracts will allow parties to turn these interactions
into transactions. To market enthusiasts, this presents an opportunity to
open new markets and create new forms of wealth. To market skeptics, nano
contracting is yet another instance of market creep, 27 which would
inevitably lead to excessive commodification, economic exploitation, and
material disparities. After the gig and sharing economy revolution, the
import of these questions is timely and salient. Uber, Airbnb, Taskrabbit,
and other sharing economy platforms created newfound sources of wealth
for some people on the margins of society.28 But many other workers
experienced financial losses and unemployment, neighborhoods saw
property prices rise, and hotels faced a shrinking market.29
This type of analysis requires consideration of future trends and
concrete use cases. To weigh these considerations, this Article offers a variety
of examples from diverse domains, some already deployed, others fast
approaching, and yet others more imaginative. The nature of such
projections is inherently uncertain and so a certain degree of suspension of
25 Henry Blodget, Mark Zuckerberg On Innovation, BUS. INSIDER (Oct. 1, 2009),
https://www.businessinsider.com/mark-zuckerberg-innovation-2009-10
[https://perma.cc/LP6L-Q5CM] (
.
26 JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM, AND DEMOCRACY, 81-86 (3rd ed.,
1950). For a review of the evidence, see Arthur M. Diamond Jr., Schumpeters Creative
Destruction: A Review of the Evidence, 22 J. PRIV. ENTER. 120 (2006).
27 For a helpful review of the debates around market creep, see Kimberly D. Krawiec, No
Money Allowed, 2022 U. CHI. LEGAL F. 221, 224 (2022).
28 See, e.g., Sophie Calder-Wang, The Distributional Impact of the Sharing Economy on the
Housing Market 3 (Dec. 20, 2021) (unpublished manuscript) (available at
https://www.lse.ac.uk/law/working-paper-series) [https://perma.cc/TXQ4-P3PC] (estimating
that Airbnb
of sharing, including low29 For a thorough, mostly skeptical view of the sharing economy, see Ronit Levine-Schnur
& Moran Ofir, Who Shares the Sharing Economy? 51 (LSE L. Working Paper Series, Paper No.
19/2023, 2023), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4415934
[https://perma.cc/CE3A-4TPX]. See also Allyson E. Gold, Community Consequences of Airbnb, 94
WASH. L. REV. 1577, 1580 (2019); Jamila Jefferson-Jones, Airbnb and the Housing Segment of the
Modern Sharing Economy : Are Short-Term Rental Restrictions an Unconstitutional Taking?, 42
HASTINGS CONST. L. QUART. 557, 573 (2015).

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disbelief around the particulars is warranted.30 Niels Bohr was after all right,
It is hard to make predictions, especially about the future. 31
This Article is about scale, contracts, and technology. It naturally
engages with conversations around the gig economy, platform regulation,
and, more generally, consumerism and technology.32 It poses some timely
questions surrounding the equitable distribution of the fruits of innovation.
It also presses us to think carefully about the proper limits of markets in
goods that, until now, have been unalienable due to the costs of negotiation.
The Article opens with a motivating thought experiment in Part II.
Part III lays the foundations of nano contracts where they fit along
what needs to be true for them to work, and what we can
learn about their organization from their constraints. From this trunk, four
limbs branch out. One explores the implications of nano contracts on
queues and the allocation of scarce resources; the other three explore the
interaction between nano contracts and property, employment, and
accidents. Part VIII concludes with some short reflections.
II. A PEDESTRIAN THOUGHT EXPERIMENT: NANO
CONTRACTS AND THE FOUR-WAY STOP
To begin, let us consider a potential use case for nano contracts. Our
opening thought experiment will be helpful in illuminating the potential,
and also the dangers and risks, of nano contracts. It comes from a routine,
almost invisible interaction that takes place with great regularity: the fourway stop.
Flying
Machines Which Do Not Fly, N.Y. TIMES, Oct. 9, 1903, at 6. Nine days later, the Wright brothers
FRED R. SHAPIRO,
THE YALE BOOK OF QUOTATIONS 800 01(2006). Even the more recent gig economy revolution
was met with skepticism. Despite the very vivid precedent of taxi cabs and hotels, Uber was met
with suspicion and Airbnb with incredulity Who, in their right mind, would let complete
strangers invade their private homes or ride in their cars? Derek Thompson, Airbnb CEO Brian
Chesky on Building a Company and Starting a Revolution, THE ATLANTIC (Aug. 13, 2013)
https://www.theatlantic.com/business/archive/2013/08/airbnb-ceo-brian-chesky-on-building-acompany-and-starting-a-sharing-revolution/278635/ [https://perma.cc/DRK7see also George Maier, Will Uber Still Exist by the End of the
Decade? (Oct. 29, 2021), https://blogs.lse.ac.uk/businessreview/2021/10/29/will-uber-still-existby-the-end-of-the-decade/ [https://perma.cc/8EXF-A5KV].
31 STANISLAW M. ULAM, ADVENTURES OF A MATHEMATICIAN 286 (1976).
32 Leading works on these issues include Lobel, supra note 18; Kate Andrias, The New Labor
Law, 126 YALE L.J. 2 (2016); Julie E. Cohen, Law for the Platform Economy, 51 U.C. DAVIS L.
REV. 133 (2017).

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Four cars approach an intersection. The laws of physics prevent all
cars from occupying the intersection at the same time. As they slow down,
we witness the emergence of a valuable, but rivalrous right: the right of way.
How should society allocate this scarce resource? Admittedly, this is an oddsounding question. We do not normally think of intersections and driving
as problems of allocating scarce rights, but rather of obedience to the laws
of traffic. Still, at a fundamental level, much of what traffic laws do is
coordinate and allocate movement rights. And we want traffic laws do that
job well.
Ideally, scarce rights should be allocated to those who need or value
them the most. But traffic laws adopt a mechanistic allocation rule: first in
first out ( FIFO ).33 A blind allocation of resources based on chance may fit
some social settings, but this allocation loses luster when applied to actual
road design. As a system, this distribution ignores many relevant moral facts
such as need, urgency, or desert. Indeed, we encounter a common
frustration every time we idle at an empty stop sign.
Realizing all of this, various actors have made tweaks around the edges.
Urban designers try to adjust traffic light timing such that the odds of
finding a green light will favor those on the more occupied road.34
Legislators set rules such that when a real emergency erupts, ambulances and
the police can usurp the right of way,35 and, in some parts of the country,
the rule is further tweaked by social norms of courtesy, although those are
not uniformly observed.36 Still, none of these tweaks do much to remedy the
basic issue: antecedence is not an efficient or desirable method of allocating
resources.3738
The problem is that it is hard to come up with a better system that
increases fairness or efficiency. We have all been in situations where we were
either late to an important appointment and needed some priority, or early
with extra time to give. Most of us would see the utility if not outright
sanity of a system where we could get priority when in a rush, and give
priority when time is on our side. After all, to give our place in traffic to the
car carrying a person in the throes of labor is a matter of basic decency. But
33 See Roney Perry & Tal Zarsky, Queues in Law, 99 IOWA L. REV. 1595, 1595 (2014)
(describing the FIFO principles); Donald Wittman, Efficient Rules in Highway Safety and Sports
Activity, 72 AM. ECON. REV. 78, 80 ( describing the utility of FIFO for traffic allocation).
34 See e.g., Jeffrey W. Buckholz, Introduction to Traffic Signal Timing, CED Engineering
at 8,
https://www.cedengineering.com/userfiles/Introduction%20to%20Traffic%20Signal%20Timi
ng-R1.pdf.
35 See, e.g., N.Y. VEH. & TRAF. LAW § 1104 (McKinney 2023) (granting privileges to
authorized emergency vehicles involved in an emergency operation).
36 For a broader analysis of allocation methods and preference algorithms, see infra Part III.
37 See Maram Bani Younes & Azzedine Boukerche, An Efficient Dynamic Traffic Light
Scheduling Algorithm Considering Emergency Vehicles for Intelligent Transportation Systems, 24
WIRELESS NETWORKS 2451, 2452 54 (2018) (reviewing solutions that minimize the inefficiency
of traffic light scheduling).
38 The hypothetical assumes two drivers at a single time; it is possible to generalize this
mechanism to an arbitrary number of drivers, but this is beyond the scope of this paper.

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such a system is unworkable at scale. It is impossible to individually check
each driver level of urgency. Even if it were possible to inquire, why trust
the answer? Nobody likes to sit in traffic.
Nano contracts offer a solution to this age-old problem. A nano
contract application installed on every drivers car, phone, or autonomous
driving system, could allocate the right of way through automated bargains.
Before beginning their journey, drivers enter their destination and their level
of urgency, allowing the app to determine how much they value priority. As
drivers approach an intersection, a silent auction is held, with drivers
bidding in increments of pennies or in tokens for the right to pass through
the intersection. The driver who wins the auction receives the right of way,
and the apps seamlessly exchange payments between them in the
background. These negotiations are near-instantaneous and contain
vanishingly low transaction costs. This process then repeats for those who
come later as they automatically negotiate their place in line, receiving and
sending nano payments as needed. For example, Brandon who left late to
his meeting with a wedding photographer but paid his way to arrive on time
is now $3.10 poorer, but much happier. Nicole, who had a relaxing
afternoon ahead of her, leisur
collecting $4.20 in fees along the way. She brings them both a cup of coffee.
Before addressing any issues, let us first stop and appreciate the
achievement of this system. These Lilliputian agreements offer a robust
solution to a vexing problem. As a system, nano contracts ensure that drivers
needs, rather than chance or order of arrival, allocate the right of way. Close
analysis will show that the system is also fairer than the status quo and offers
people a greater degree of control over their lives.39 And because the system
can run on priority tokens, rather than money, we can achieve all these
efficiency gains while promoting equity and access.40 Relative to our static
system today, nano contracts offer a fluid dynamic. Traffic flows.
While the four-way stop may sound like a small, isolated example, it
is not. In the United States alone, there are approximately 411 billion car
trips taken each day41 through a total of 330,000 traffic lights.42 If even a
fraction of those trips were governed by nano contracts, the potential
benefits would be enormous. Traffic is far less stressful if, instead of fighting
to keep your place, you make a couple of bucks by letting people pass you.
And traffic is far safer if, even when people find themselves in a rush, they
have a safer alternative to speeding that also ensures they arrive on time. If
39 See infra Section IV.B.
40 For further development of this point, see infra note 181.
41 See National Household Travel Survey Daily Travel Quick Facts, U.S. DEPT OF TRANSP.
(May 31, 2017), (https://www.bts.gov/statistical-products/surveys/national-household-travelsurvey-daily-travel-quick-facts) [https://perma.cc/372Q-M29W].
42 See John Halkias & Michael Schauer, Red Light, Green Light, PUB. ROADS, Nov./Dec.
2004, https://highways.dot.gov/public-roads/novemberdecember-2004/red-light-green-light
[https://perma.cc/R843-GV3C].

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we can minimize idling time because priority cars do not need to come to a
full stop, we can also reduce fuel consumption and noxious emissions.
This stylized example illustrates the potential that nano contracts can
unlock. Hopefully, it also sparks a sense of curiosity. If nano contracts can
solve these rote invisible inefficiencies, what other inefficiencies are currently
hidden? What else can we solve with nano contracts?
Our example is also structured to elicit ethical and legal concerns.
Applied without care, the use of nano contracts can result in priority given
to wealthier parties.43 Would nano contracting force poor drivers to treat
every four-way intersection like an endless red light? Would they create a
new source of income for some people or simply commodify yet another
area of life? And then what happens in the nano contract world to the social
norm of giving a friendly wave and letting another person pass before you?
The commercialization and commodification of previously market-free
areas may have a corrosive effect on social norms.44 Or what happens if
someone breaches their nano contract and lunges into a busy intersection?
These issues are real, as are the potential benefits. The goal of the legal system
is to anticipate these concerns and develop appropriate legal and regulatory
frameworks to ensure that when nano contracts are deployed, they are
implemented in a responsible and ethical manner.
III. FUNDAMENTALS OF NANO CONTRACTS:
PLATFORMS, PROTOCOLS, AND LEGAL TECHNOLOGY
How much room is there at the bottom, and can we even get there?
This Part discusses these two forms of skepticism. The skeptic
concerns the value of nano contracts. Nano contracts, the skeptic reasons,
are unlike a new form of a leveraged buyout or some innovation in futures
contracts. Those are the truly important, innovative transactions. Nano
contracts are small potatoes by definition. Do they deserve much attention?
Section III.A Blind to the role of scale
in contracts, the skeptic is not only unprepared for the future of contracts,
but also for their past. Examining the history of contracts from the
perspective of scale, this Section demonstrates how every scale
transformation was associated with profound and unpredictable social
outcomes. Scale, we remind ourselves, has a quality of its own.
ry challenges the feasibility of
nano contracts in real-life situations. With such small stakes, practical
concerns loom large. Section III.B responds to this challenge. Here,
platforms and protocols make their first appearance, and they are shown to
43 The literature on toll roads finds that the distributional effects may in fact be progressive,
and one must be sensitive to the actual implementation of a policy. See Jonathan D. Hall, Can
Tolling Help Everyone? Estimating the Aggregate and Distributional Consequences of Congestion, 19
J. EUR. ECON. ASSN 441, 469 70 (2021); David Levinson, Equity Effects of Road Pricing: A
Review, 30 TRANSP. REVS. 33, 33 (2010).
44 See infra note 191 and accompanying text.

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solve these practical concerns. Platforms have great utility, but they also
introduce market power. The alternative is protocols, which can also
facilitate transactions without such risks, although they are harder to develop
and maintain. But limitations notwithstanding, these alternatives render
nano contracts feasible.
A. Scale and Contract Evolution
The future impact of smaller transaction scale is not easy to predict.
Fortunately, it is easier to predict the past than the future. Let us consider,
then, key points from contracts history as they bear on the question at hand.
To be sure, the story of contract past is not a simple one. These legal
agreements reflect a complex web of social, political, and economic forces,
each vying for influence.45 What helps us see through this tangled web is
thinking about contracts along a much simpler dimension: scale. As
presently argued, over time the Anglo-American legal system has developed
legal technology that supports transactions that are increasingly smaller and
more flexible, allowing for more complex and varied interactions and social
arrangements. This shift led to the paradoxical result that we see the
simultaneous emergence of record-setting multi-billion transactions among
firms and five-dollar contracts for gigs, among other fleeting engagements.46
Take the move from status to contract. Under the manorial system,
people were bound by all-encompassing legal arrangements known as
status.47 Status arrangements dictated nearly every aspect of the lives of the
people living in the system and left little room for individual choices. These
45 For competing narratives on the evolution of contract doctrine and its relation to political
and moral theory, see Morton J. Horwitz, The Historical Foundations of Modern Contract Law,
87 HARV. L. REV. 917, 917 20 (1973); A. W. B. Simpson, The Horwitz Thesis and the History of
Contracts, 46 U. CHI. L. REV. 533, 533 35 (1979). For a modern evaluation of these competing
narratives, see Warren Swain, A W B Simpsons, The Horwitz Thesis and the History of Contracts
(1978-1979) 46 University of Chicago Law Review 533, 35 U. QUEENSLAND L.J. 115, 117 (2016).
A caveat is in order: I confine myself to the Anglo-American common law world, although various
parts of the analysis would apply to the civil law world and possibly beyond.
46 The technological key is transactional modularity. On the relevance of smaller
transactional blocks to handling complexity, see, for example, Henry Smith, Modularity in
Contracts: Boilerplate and Information Flow, 104 MICH. L. REV. 1175, 1176 77 (2006)
(discussing the characteristic costs and benefits of modularity); Cathy Hwang & Matthew
Jennejohn, Deal Structure, 113 NW. U. L. REV. 279, 303 (2018) (explaining that, for complex
.
47 Jonathan Bush offers an illuminating view of the role of freedom in this context. See
Jonathan A. Bush, Take This Job and Shove It : The Rise of Free Labor, 91 MICH. L. REV. 1382,
1407 (1993) (reviewing ROBERT J. STEINFELD, THE INVENTION OF FREE LABOR (1991)).

[p. 13]
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stringent sociolegal arrangements defined an individual as a serf, villein,
vassal, and later indentured servant or peon.48
These rigid structures of status were bound to crumble. As Henry
Maine famously observed, the social pressures pent up, [T]he movement of
the progressive societies has hitherto been a movement from [s]tatus to
[c]ontract 49 Over time, the old forms of status were stripped down to
shorter, more modular transactions that were terminable and (warts and all)
voluntary.50 Contract technology then allowed people to enter new forms of
transactions including employment contracts, lease agreements, bailments,
and warranties.51 None of these new forms of transactions emerged at a
defined point in history; rather, they represent a protracted and uneven
process where smaller scale transaction types slowly gained judicial, social,
and political recognition.52
The transition from large scale status to the smaller units of
contract has had a profound impact on society that continues to shape the
way that people and businesses interact.53 It can be difficult for a modern
reader to fully appreciate the significance of this shift. Fortunately, Jonathan
Yovel has provided us with a view from within of these transformations by
examining the travails of one prominent individual who lived through them:
Johann Sebastian Bach.54
As Yovel recounts, up until late in his adult life, Bach served as a
status-55 This status
designation constricted Bach and could have deprived the world of one of
its greatest composers. When Bach
lord expressed his displeasure by having Bach incarcerated for almost a
48 It must be emphasized the stylized picture here is a conceptual frame, rather than a linear
historical account, which is based on HENRY J. S. MAINE, ANCIENT LAW
ambitious project remains influential despite various scathing critiques regarding its historical
veracity and ideological bent, as eloquently recorded by Katharina Isabel Schmidt. Katharina
Isabel Schmidt, ?, 65 AM.
J. COMP. L. 145, 158-63 (2017) (offering methodological, ideological, and substantive critiques
; see also Nathan Isaacs, The Standardization of Contracts, 27 YALE L.J. 34, 40
(1917) (arguing that feudalism was built on a move from contract to status).
49 MAINE, supra note 48, at 165.
50 As Bush notes, the emergence of contracts did not prevent the emergence of new coerced
labor, such as [indentured] supra note 47, at 1404.
51 See Isaacs, supra note 48, at 35 37.
52 The Horowitz-Simpson debate echoes the protracted and sometimes incoherent
emergence of modern legal doctrines. See supra note 45 and accompanying text.
53 See generally MAINE, supra note 48, at 165 (noting that, following the adoption of the
Roman Codes facilitated .
54 Jonathan Yovel, From Status to Contract: The Unhappy Case of Johann Sebastian Bach, 27
CAN. J.L. & JURIS. 501, 502 (2014) (offering the life of Bach as a lens for understanding the
transition from status to contract relationships).
55 Id.

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56 After many troubles, Bach was finally able to leave for Leipzig,
where he became the celebrated musical director of the Thomasschule.57
There, Bach was able to put his status-laden legacy behind him and sign his
first significant formal contract.58 It was then
contract. 59 He may have, in fact, spoken contract too eloquently, as he soon
found himself engaging in acrimonious negotiations and legal disputes with
his new counterparties at the City Council.60 Thus
not a singularly sanguine story of redemption and empowerment. His letters
portray a record of grievances and disappointments by a person who was, to
put it with outmost respect, a real nudnik.61
Still, even if Bach may not have always been thrilled with the new
responsibilities and challenges of his contract position, he ultimately
embraced the freedom and flexibility that it offered. Most importantly, he
never went back. His experience is a synecdoche of the larger societal shift
from status to contract, as millions of people around the world left feudal
systems and entered a new era of economic and social interactions based on
(comparatively) voluntary agreements. 62 Today, every market-based
economy in the world relies on contracts as a central tool of resource
allocation. From employment contracts and leases to warranties and
bailments, we see in all of those smaller scale transactions how the shift from
status to contract has irreversibly redefined business and individual
interactions.
Less than two decades ago, a different transformative innovation took
place: the birth of the gig economy.63 Platforms like Uber,64 Fiverr,65 and
Airbnb66 transformed the way we work, travel, and do business, enabling the
56 Id.
57 Id. at 501.
58 formal seal and solemn promise to keep its terms. See
id. at 512, 519.
59 Id. at 502 03.
60 Id. at 503.
61 Yonathan A. Arbel & Roy Shapira, Theory of the Nudnik: The Future of Consumer Activism
and What We Can Do to Stop It, 73 VANDERBILT L. REV. 929, 931 (2020) (
as faction surveys, demand to
speak with managers, post detailed online reviews, and file lawsuits ).
movement from feudalism to capitalism. Schmidt, supra note 48, at 153 n.19. Yovel further
political model presupposing a
theory of human nature, fit each other like glove to hand. Yovel, supra note 54, at 503.
63 See generally Lobel, supra note 32, at 89 94 (describing the gig economy and its impact
on legal theory and regulatory law).
64 How to Use the Uber App, UBER, https://www.uber.com/us/en/about/how-does-uberwork/ [https://perma.cc/9YZC-ENHR] (last visited Oct. 6, 2023).
65 How Fiverr Works, FIVERR, https://help.fiverr.com/hc/en-us/articles/360010558038How-Fiverr-works [https://perma.cc/87ZQ-QRQR] (last visited Oct. 6, 2023).
66 Carissa Rawson, How Does Airbnb Work?, NERDWALLET (Oct. 6, 2023),

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creation of short, small-scale contracts.67 As the name alludes, at the heart of
the gig revolution is scale, centered around the short and small scope of the
engagement. And indeed, the gig economy downscaled contracts further and
made them less lumpy in scope, duration, and stakes.68 Uber transformed
hiring a personal driver into a single-ride deal; Fiverr converted general
contracting agreements into a twenty-minute gig; and Airbnb reshaped
private-residence subleases into a one-night proposition. By comparison,
these traditional, plain vanilla contracts appear as macro contracts relative to
the micro contract of gig engagements.
To be sure, gigs were not a new concept when these companies first
emerged. And the gig economy did not introduce any breathtaking doctrinal
innovations. Rather, what is notable about the gig economy .
The advent of internet infrastructure has made it possible, for the first time,
to build large-scale marketplaces for small transactions, gigs, and other
limited-term engagements. And just like the move from status to contract,
we again see how smaller arrangements facilitated macro transformations.
unfairly disrupts the character of neighborhoods, and leads to the
exploitation of foreign and domestic workers.69 At the same time, the gig
economy brought with it enormous benefits, enabling people to work on
their own terms and earn a living in ways that were previously impossible.
Between these two tensions, one conclusion is indisputable: the downscaling
of transactions has had a profound effect on the lives of people around the
globe.
This short historical tour offers a clear response to the skeptic.
Independently of any doctrinal or conceptual revolution, contract scale has
always had a transformative effect on the transactional world. From status
to contract and from contract to gig, nano contracts represent a general arc
in the history of contracts. This history entails continuous downscaling of
transactional blocks to profound social effect. Of course, for nano
contracts to fulfill this potential, they must be workable. The next Section
moves to consider a systemic view of nano contracts from an engineeringeconomic perspective, revealing in the process the role of legal structures.
https://www.nerdwallet.com/article/travel/how-does-airbnb-work [https://perma.cc/Z5NUFRK9].
67 See Samantha Delouya, The Rise of Gig Workers is Changing the Face of the US Economy,
CNN (July 25, 2023) https://www.cnn.com/2023/07/24/economy/gig-workers-economyimpact-explained/index.html [https://perma.cc/X9KX-SFKU].
68 See FENNELL, supra note 20, at 137.
69 See, e.g., Natasha Singer, In the Sharing Economy, Workers Find Both Freedom and
Uncertainty, N.Y. TIMES (Aug. 16, 2014), https://www.nytimes.com/2014/08/17/technology/inthe-sharing-economy-workers-find-both-freedom-and-uncertainty.html
[https://perma.cc/7CH5-MQMZ] -term
.

[p. 16]
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B. Nano Contracts as a Technology
Nano contracts use digital infrastructure to facilitate the automated,
real-time, p2p bargaining processes between strangers. Such technology can
wield different forms. For example, in the four-way stop example, a nano
contract app conducted an auction to determine which driver gets the right
of way.70 But this is just one bundle of features for the implementation of
nano contracts. In some cases, nano contracts may use fixed prices rather
than auctions, and in others, they may facilitate exchanges based on barter,
reputation, or even tokens.
While n allows them to fit many use cases,
this feature also makes nano contracts difficult to define.71 Boundary setting
is made more difficult because scale is not one-dimensional. Rather, scale
covers transactional duration, transactional stakes, and the scope of rights
transacted. And there may even be some conflict between these dimensions;
a contract for leasing goods for a few seconds may still fetch a high value, as
we know from the pervasive high-frequency trading industry. These
challenges notwithstanding, the examples provided in Parts IV to VII will
cement some idea of the core and periphery of this concept.
Nano contracts arise from the natural continuation of the existing
trends noted above, including the proliferation and normalization of
digitized agreements, the growing digitization of goods and services, and the
emergence of persistent connectivity at lower latency of geolocated
individuals and objects. 72 These mutually reinforcing trends enable,
technologically, legally, and culturally, the ability to form p2p contracts in
real time at near-zero latency and at vanishingly low transaction costs. While
each of these trends is worthy of full treatment, I focus on one recent trend
overlooked by contracts scholars that lend special credibility to the
emergence of nano contracts: the rise of the XaaS contracting model.
In the days of yore, people bought products from sellers and services
from service providers. So central was the distinction that it was deemed
fitting to construct an entire body of law that deals with one rather than the
other73 and then test neophyte lawyers on it. In recent years, a new model
transitioning erstwhile products into services has started taking over,
commonly abbreviated by the aaS suffix74. In the past, consumers would
buy software like Microsoft Word, and leave the store with a box with a hard
copy of the code. Today, consumers are only subscribers to an ever-shifting
70 See supra Part II.A.
71 Their key feature, the small transactional scale, makes the task of drawing lines akin to
72 See supra note 12 and accompanying text.
73 See U.C.C. § 2 (AM. L. INST. & UNIF. L. COMMN 1977).
74 Daniel Newman , Why The 'As-A-Service' Model Works So Well For Digital Transformation,
Forbes (Jun, 27, 2017)

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piece of code.75 We now have software as a service (Monday and Microsoft
Office 365), infrastructure as a service (Amazon Web Services and Microsoft
Azure), platform as a service (Google App Engine and Heroku), payment as
a service (Square and Dwolla), and a dozen others.76 One market report
estimates that in 2023, the software-as-a-service market alone will be valued
at 195 billion dollars.77
A recent comprehensive study of the XaaS model has identified several
market philosophy changes that the concept embodies.78 Among these is
what the authors perhaps not coincidently call nanonization of
products.79 By this, the authors refer to the growing trend to disaggregate
product bundles to the specific functions that the end user cares about.
Farming as a service is an especially apt example. While 45% of the Indian
workforce is engaged in agriculture, tractors are quite rare, averaging only
one per village.80 Trringo is one of a few platforms that offer farmers
individual standalone services such as tractors, reapers, cultivators, and tillers
that the farmer can access by simply tapping an app or calling a call center.81
This allows farmers an alternative to ownership, to pay only for the specific
fragment of ownership if and when it is needed.
The advent of the XaaS model represents the growing n
of contracts and products. It demonstrates the market need for unbundled
goods, the utility of specialization, the importance of small-scale
transactions, and the robustness of the supporting technological
infrastructure. One chief difference is that in nano contracts, parties will
transact p2p rather than peer-to-firm. Even with a platform in the middle,
the degree of intermediation in nano contracts is significantly lower than it
is in the central firm model of XaaS.
At this point, it is useful to distinguish nano contracts from seemingly
adjacent technologies: the smart contract and the blockchain.
75 See Brien Posey, Definition, Microsoft Office 365 Suite, TECHTARGET (Oct. 2016),
https://www.techtarget.com/searchenterprisedesktop/definition/Microsoft-Office-365-suite
[https://perma.cc/B65M-83XD]; Tony Redmond, Office 365 Reaches 345 Million Paid Seats,
OFFICE 365 IT PROS (Apr. 28, 2022), https://office365itpros.com/2022/04/28/office-365number-of-users/ [https://perma.cc/VG4L-UMMH] (last visited Oct. 13, 2023).
76 See, e.g., Ryan LaFlamme, The Big-aaS List of as-a-Service Offerings,
https://www.auvik.com/franklyit/blog/aas-as-a-service-list/[https://perma.cc/266L-SBJY] (last
visited Oct. 13, 2023).
77 See, e.g., Public Cloud Application Services/Software as a Service (SaaS) End-User Spending
Worldwide from 2015 to 2023, STATISTA, https://www.statista.com/statistics/505243/worldwidesoftware-as-a-service-revenue/ [https://perma.cc/3PDR-PT47] (last visited Oct. 13, 20203).
78 See SHANTANU BHATTACHARYA & LIPIKA BHATTACHARYA, XAAS: EVERYTHING-AS-ASERVICE 5 (2021).
79 See id. at 5, 14 17.
80 Id. at 14.
81 Id. at 15; Ayesha Venkataraman, How Do You Hail a Tractor in India?, N.Y. TIMES (Oct.
17, 2016). Other services include Hello Tractor Lucy Ngige,
Hello Tractor AFN (Aug, 16 2022) and Farmee https://www.farmmee.com/.

[p. 18]
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formative essay conceptualized the smart contract as a digital contract that
algorithmically executes its own terms.82 More recently, Greg Klass offered
a sharper definition, defining smart contracts as software, perhaps run on a
block chain, designed to execute future exchanges or other coordinated
actions between persons who might not otherwise trust one another to
perform 83 An insurance contract, which automatically makes payments if
a predefined event takes place, is a typical example.84
For our purposes, the crux of a smart contract is streamlining contract
execution.85 For this reason, many developers have used smart contracts with
blockchain technology. In broad strokes, blockchain is a protocol that runs
on tens of thousands of networked computers and creates a decentralized
system of trade, meant to allow for trust among complete strangers with a
central platform.86 Just as the blockchain allows one to reliably send bitcoins
to another, it can be adapted to run smart contracts that facilitate other
forms of exchange. And so, while smart contracts do not require the
blockchain, they often take advantage of it. 87 A review of smart contracts on
GitHub repositories shows that 86.5% were tagged by authors with
blockchain-related terms.88
All of this highlights the key difference between the technologies.
While smart contracts try to solve real or perceived problems of execution,
nano contracts are tools of contract formation. They aspire to allow parties
to create contracts at vanishingly low cost and near zero latency. Whether
the exchange is trusted or trustless is not a critical factor in the use of nano
contracts. In fact, there are instances where smart contracts are too slow and
expensive for the purposes of nano contracts, due to the
82 See Nick Szabo, Smart Contracts: Building Blocks for Digital Markets, EXTROPY, 1st
Qu.1996, at 50, 50 smart contract is a set of promises, specified in digital
.
83 Gregory Klass, How to Interpret a Vending Machine: Smart Contracts and Contract Law, 7
GEO. L. TECH. REV. 69, 70 (2023). For other definitions, see id. at 77 78.
84 See Kevin Werbach & Nicolas Cornell, Contracts Ex Machina, 67 DUKE L.J. 313, 331
32 (2017).
85 See Shaanan Cohney & David Hoffman, Transactional Scripts in Contract Stacks, 105
MINN. L. REV. 319, 321 23 (2020) (listing proposed uses and sources). The authors argue
persuasively on substance, less so in terms of marketing that smart contracts are better termed
See id. at 323.
86 See IBM, What is Blockchain Technology?, https://www.ibm.com/topics/blockchain
[https://perma.cc/6AR5-Z5TD]. At the time of writing, there are estimated 16,300 reachable
bitcoin nodes. See Reachable Bitcoin Nodes, BITNODES.IO, https://bitnodes.io/
[https://perma.cc/2QZW-GPG6].
87 See, e.g., Mark Verstraete, The Stakes of Smart Contracts, 50 LOY. UNIV. CHI. L.J. 743,
88 For detailed explanation of the methodology, see Yonathan Arbel, Smart Contracts and the
Blockchain, BATTLE OF THE FORMS (Dec. 7, 2022) http://battleoftheforms.com/smart-contractsand-the-blockchain/ [https://perma.cc/P6D9-C5ZG].

[p. 19]
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relatively long settlement time. Whether nano contracts can achieve their
goal, however, depends on their practicability.
1. Practical Constraints that Nano Contracts Must Meet
To succeed in facilitating digital p2p contracts in real time, nano
contracts must overcome certain challenges. Some of these challenges are
legal in nature, while others are extralegal but still affected by legal norms.
By understanding these constraints, we can come to understand what
policies can contribute to, or stymie, the development of nano contracts.
Drawing on the transaction cost framework applied by Michael Munger in
the context of the sharing economy, we can identify five key constraints:89
(1) Triangulation costs must be manageable. Triangulation costs, as
defined by Michael Munger, refer to the combined costs of locating
potential service providers, settling on their price, and agreeing on terms.90
Triangulation costs must be sufficiently low relative to the benefit, or
surplus, of the transaction. Otherwise, parties will not form contracts. In the
context of established markets for commoditized goods, triangulation costs
can disappear into the background. But in other markets, they loom large.
While there is a large supply and demand for used cars, matching buyers and
sellers is challenging.91 Locating a seller with the specific required model,
and then negotiating with them successfully, involves time, risk, and
expense. To remove some of these frictions, people pay car dealerships
significant amounts of money to create working markets. The challenge for
nano contracts is that the transactional surplus is small. Therefore,
triangulation costs must be exceedingly small in comparison to make nano
contracts practical.
(2) Contract formation must be sufficiently streamlined. The
creation of the legally enforceable agreement cannot be too costly, or else
parties would use alternative legal arrangements, informal arrangements, or
abandon the deal altogether. This issue is familiar from history, as the
primary means of contracting at early common law, the covenant, was rarely
used due to its reliance on sealed written documents at a time when a
significant portion of the population was illiterate.92
89 See generally Michael C. Munger, TOMORROW 3.0: TRANSACTION COSTS AND THE
SHARING ECONOMY (2018) (discussing the sharing economy and its relation to transaction costs).
90 Id. at 71 107.
91 See Charles Murry & Henry S. Schneider, The Economics of Retail Markets for New and
Used Cars, in HANDBOOK ON THE ECONOMICS OF RETAILING AND DISTRIBUTION 343, 350 55
(2016) (explaining the benefits and burdens of personalized pricing and bargaining in a large
retail market like those for new-and used-cars).
92 See, e.g., JOHN BAKER, AN INTRODUCTION TO ENGLISH LEGAL HISTORY, 338 42 (5th
ed., 2019) (discussing the history of the covenant in English courts).

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For macro contract today these frictions are for the most part low
potentially even too low relative to the value of the transaction.93 But, for
nano contracts, where the speed of formation is of the essence, and the
volume of transactions may be extremely large, per-transaction, real-time
expression of assent will add just enough friction and cost to make nano
contracting all but impossible.
(3) Payment processing must be speedy, secure, and cheap. If the
costs of processing payments are too high, the parties will see no benefit in
transacting. When buying a car, payment processing costs are usually
inconsequential. But for small-scale transactions, like buying chewing gum
at a gas station, payment processing costs can be prohibitive in relation. 94
Even some midscale transactions, like paying workers, are often delayed for
weeks because of the alleged transaction costs of paying workers daily.95 If
drivers are to purchase priority at four-way stop signs, the payment must be
smooth, quick, and most importantly, inexpensive.
(4) Dispute resolution must be available, trustworthy, and
efficacious. In the event of a breach of contract, a party can sue in court.
But for many small-scale consumer transactions, standard court proceedings
are prohibitively costly, making it necessary to use alternative mechanisms
such as class actions or small claims courts. The absence of effective dispute
resolution has been linked in the research to the loss of significant
transactional surplus.96 In the four-way stop example, what happens if a
driver speeds into the intersection, ignoring the nano contract?
(5) Enforcement must have a sufficient deterrent effect on
noncompliant parties. For macro contracts, enforcement issues arise with
some regularity, yet this problem is not sufficiently pressing to undermine
the entire system. Some parties evade service, impose delays on the process,
and engage in distractions. Yet, as long as the party is not judgment proof
or poses no credible threat of making herself judgement proof the threat
is considered acceptable.97 If a sanction exists, it must have sufficient bite to
ward off unwanted behavior.
93 For an unwavering attack on form contracts, see David Hoffman, Defeating the Empire of
Forms 4 5 (Inst. Law and Econ. Working Paper No. 23-04, 2023) (challenging the proliferation
of explicit, formal, and long-winded contracts for low-value transactions); Mark A. Lemley, The
Benefit of the Bargain, 2023 WIS. L. Rev. 237, 238
written agreements).
94 Under the Dodd-Frank Act of 2010, merchants are allowed to set minimum amounts for
credit card purchases that do not exceed $10. 15 U.S.C. § 1693o-2(b)(3)(A).
95 See Yonathan A. Arbel, Payday, 98 WASH. U. L. REV. 1, 1 8 (2020) (explaining why
96 See Simon Johnson, John McMillian & Christopher Woodruff, Courts and Relational
Contracts 2 5 ( Working Paper No. 857, 2001).
97 See generally Yonathan A. Arbel, Shielding of Assets and Lending Contracts, 48 INTL REV.
L. & ECON. 26 (2016) (exploring the problem of judgment proofing as a strategy of avoiding
legal enforcement).

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2. How Nano Contracts Can Meet These Constraints
These constraints appear foreboding at first. The nano stakes of nano
contracts make the system particularly fragile to practical concerns because,
at this scale, there is just too little surplus to cushion transactional costs.
Fortunately, there is a proven answer for most of these issues. The
downscaling of macro contracts to micro contracts in the gig economy
already answered many of these concerns.98 These answers largely involve
two supporting mechanisms, platforms and reputation, although neither is
perfect. The following discusses these answers in order.
Triangulation Costs. The gig economy faced this problem in earnest.
It is costly to triangulate partners for any deal, and for small deals in
particular. That is one central reason why the gig economy had to wait in
the shadows for so long. The solution, enabled by technology, is the
reinvention of an old concept: the two-sided marketplace. The ancient
concept of the bazaar proved something that might otherwise appear
counterintuitive.99 Merchants are better served when they are located
adjacent to other, especially in the case of competing merchants, because it
is easier for buyers to find an appropriate seller.100 Companies like Uber and
Airbnb adopt this model with an additional spin: they moved buyers and
sellers to virtual spaces.
Another solution that avoids the use of platforms is the use of
protocols. 101 Protocols are standards of communication that allow
transacting parties to locate each other and communicate directly. One
example of a protocol that works at scale comes from blockchain-based
exchanges, where two strangers can transfer value without the
intermediation of a platform. The Internet itself also demonstrates the
power of standard protocols in coordinating multiparty information
exchanges, with relatively little centralized authority.
As applied to nano contracts, we can think of a spectrum of solutions
to the triangulation problem differing in the degree of intermediation. We
can conceive of systems of centralized ordering which are heavy in
intermediation, such as those organized by airlines that sell line priority. Less
decentralized are platforms, which can help maintain a marketplace and
means of communication between interested parties, such as the various
98 See generally Seth Oranburg & Liya Palagashvili, Transaction Cost Economics, Labor Law,
and the Gig Economy, 50 J. LEGAL STUD. S219, S227 (2021) (conducting an analysis of the gig
.
99 See generally Clifford Geertz, The Bazaar Economy: Information and Search in Peasant
Marketing, 68 AM. ECON. REV. 28 (1978) (emphasizing high search and information costs in an
analysis of the bazaar marketplace ).
100 For a study of the impact of spatial clustering on competition, see Harold Hotelling,
Stability in Competition, 39 ECON. J. 153 (1929).
101 For a comprehensive analysis of protocols and the subtleties of architecture design and
regulation, see, for example, Christopher S. Yoo, Protocol Layering and Internet Policy, 161 U. PA.
L. REV. 1707, 1716 17 (2013) (describing the conceptual underpinnings of protocol layering).

[p. 22]
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online stock and crypto exchanges. And then we can think of direct
communication protocols, which involve no third-party mediation.
Platforms promise, as Orly
besides of course 102 The rise of platforms raises various
concerns, perhaps most notably the rise of monopolies in the presence of
network effects.103 Protocols are more attractive on this score, but their
design, maintenance, and difficulty of propagating updates are still real costs
that must be borne. 104 Fortunately, open-source communities and
government-funded standard-setting organizations provide workable
models for such implementations.
Contract Formation. The solution for the formation problem in the
context of nano contracts relies on advance consent and automated
negotiations. This allows the app to negotiate in real time with very little
latency or cost even in the form of attention.
Some scholars argue that automated contract formation is
problematic, at least when the question arises in the context of smart
contracts.105 The contracting script lacks agency, they reason, and so it
cannot manifest the necessary assent required to enter into a contract.106 The
same holds for nano contracts, which will likewise have to rely on automated
formation methods and advance expressions of assent.
This view of contractual assent is open to debate.107 While everyone
agrees that lack of assent is a bar to enforcement, the procedural forms of
expression of assent are a different matter. In modern contracts, there was
never an issue with authorization of an offer or acceptance by proxy, as
agency law and, well, the ability of any corporation to form valid contracts
makes obvious.108 Nor is the introduction of digital assent especially
problematic, given how consumers routinely enter and courts enforce
online contracts.109 Again, there are good reasons to worry about faulty
102 Lobel, supra note 32, at 110.
103 See generally Bruno Jullien, Alessandro Pavan & Marc Rysman, Two-Sided Markets,
Pricing, and Network Effects, in HANDBOOK OF INDUSTRIAL ORGANIZATION 485 (Kate Ho, Ali
Hortaçsu & Alessandro Lizzeri eds., 2021) (exploring two-sided markets and monopoly
concerns).
104 The Bitcoin protocol is the best exemplar. There, disputes about updates to the protocol
have created community schisms. See Chelsea D. Button, The Forking Phenomenon and the Future
of Cryptocurrency in the Law, 19 UIC REV. INTELL. PROP. L. 1, 9 11 (2019).
105 See, e.g., Amy J. Schmitz & Colin Rule, Online Dispute Resolution for Smart Contracts,
2019 J. DISP. RESOL. 103, 105 ( t also may be difficult to fit square concepts of offer, acceptance
106 See id.
107 For a similar conclusion, see Klass, supra note 83, at 72
special formation issues. In other instances, however, parties might express their agreement solely
by using a smart contract, without an accompanying verbal agreement, recalling a vending108 See RESTATEMENT (THIRD) OF AGENCY § 1.04(2)(b) (AM. L. INST. 2006).
109 Scraping may appear at first sight to challenge this thesis, as several courts have ruled that

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assent, but the medium of assent is orthogonal to these concerns. If we
question the validity of clickwrap agreements, it is not because the words are
shown on a screen, but because they are not read or understood.
That nano contracts rely on preestablished manifestations of assent is
likewise immaterial. If a merchant considers buying oil and deposits an offer
to buy a number of barrels with her agent
willing seller if market conditions improve, then
effective.110 As long as there is a verifiable pedigree of assent, it matters little
for nano formation that the medium is digital, that assent is preestablished,
or that it is conveyed via algorithm.111
Payment Infrastructure. It is surprisingly expensive to transfer
payments. These costs make it difficult to implement any system of
micropayments. 112 This is because traditional payment systems were
designed for large, not small, transactions. As a result, the fees associated
with these transactions can be quite high, making them impractical for use
in micropayment systems.
Fortunately, f startups, and to a lesser
extent, cryptocurrencies, are increasingly building solutions to these
problems. For example, PayPal offers the option to transfer payments
between friends and family at no cost.113 While this remains a far cry from
a costless system of money transfers, developments in the payment space
continue to grow.114 In the meantime, the gig economy resolved this issue
through platform-side accumulation.115 In those regimes, interim payments
automated web access does not create consent to terms of service. However, those cases are deeply
rooted in questions of copyright preemption rather than any substantive view on the quality of
consent. See, e.g., Genius Media Grp. Inc. v. Google LLC, No. 19-CV-7279, 2020 WL 5553639,
at *7 (E.D.N.Y. Aug. 10, 2020), aff'd sub nom. ML Genius Holdings LLC v. Google LLC, No.
20-3113, 2022 WL 710744 (2d Cir. Mar. 10, 2022). In any event, digital contracts are just as
binding as their offline counterparts, as modern battles are waged over form contracts.
Recently, Mark Lemley offered a scathing critique of the modern practice of contract
enforcement of clickwraps, terms of use policies, and similar standard form contracts. Lemley,
supra note 93, at 252 56. These concerns target, however, the issue of consent and deliberation
rather than timing or method. Depending on their specific implementation, nano contracts may
well escape the crosshairs of his and similar critiques.
110 See Restatement (Third) Of Agency § 6.01 (AM. L. INST. 2006).
111 Greg Klass makes a similar point using a vending machine analogy. Klass, supra note 83,
at 85 egal contract between the user and the
112 See Arbel, supra note 95, at 31 34; see also Peter Conti-Brown & David A. Wishnick,
Private Markets, Public Options, and the Payment System, 37 YALE J. REG. 380, 393 (2020).
113 What's the Difference Between Friends and Family or Goods and Services Payments?, PAYPAL
(June 22, 2022), https://www.paypal.com/us/cshelp/article/whats-the-difference-betweenfriends-and-family-or-goods-and-services-payments-help277 [https://perma.cc/GK73-YZGQ].
114 See Franklin Allen, Xian Gu & Julapa Jagtiani, A Survey of Fintech Research and Policy
Discussion, 1 REV. CORP. FIN. 259 (2021).
115 For example, Lyft pays its drivers on a weekly basis. Zippia, When Does Lyft Pay?

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accumulate after every ride, and the platform sends payment in a single beat,
either after a period of time or after meeting a minimum withdrawal limit.
Nano contracts must adopt one of three solutions. They can use
platforms to accumulate payments before transfers; they can rely on
alternative financial tools, like crypto tokens, that are cheaper to transmit
over an agreed protocol;116 or they can wait until payment infrastructure
improves. A more general lesson from this analysis is that the issue of
payments highlights one source of platform market power the
inefficiency of payment infrastructure and therefore proposes a different
avenue for reducing the dependence on platforms.
Dispute Resolution. Perhaps the most sensitive part of small-stake
contracts is dispute resolution. The problem is well-known: dispute
resolution systems are expensive to operate, their decisions are protracted,
the de minimis doctrine bars litigation,117 and they are generally a poor fit
for small-stake disputes.118 But if disputes are never settled, parties can
breach with impunity, undermining the entire system. The legal system has
developed several mechanisms to deal with small-stakes disputes, from
cheaper arbitration, mediation, and conciliation processes to stake
aggregation via class actions and group litigation.119 Yet, for transactions in
very small scales, especially when they are heterogenous, these solutions can
only provide a partial solution. Thus, the gig economy came to rely on two
complementary mechanisms: reputation120 and in-house adjudication.121
Reputation has proven itself a major disciplining force. To see its role
in the private ordering of small transactions, consider the consequences of
breach. Suppose an Uber driver does not live up to the expected standard
the car is messy, the driver casually scans their phone while driving, and
grating music blares from the speakers. These issues violate
transactional expectations, but none would command sufficient stakes to
https://www.zippia.com/answers/when-does-lyft-pay/. Uber offers a more elaborate scheme,
where drivers who do not want weekly pay, can cash out immediately for a fee, which may be
waived if they have a special Uber Pro Card. Uber, Instant Pay,
https://www.uber.com/us/en/drive/driver-app/instant-pay/.
116 Cryptocurrencies are still not quite there. Between August 2021 and April 2023,
-chain transaction cost ranged from around $0.95 to $2.40. See BLOCKCHAIN.COM,
https://www.blockchain.com/charts#currency [https://perma.cc/6NHF-B5R7].
117 See, e.g., Harris v. United States, 232 F.3d 912 (Fed. Cir. 2000).
118 See Christopher R. Drahozal, Arbitration Costs and Form Accessibility: Empirical
Evidence, 41 U. MICH. J.L. REFORM 813, 840 (2008) (summarizing empirical evidence on
arbitration costs finding that it is unclear that arbitration is much cheaper than litigation)
119 See STEVEN P. CROLEY, CIVIL JUSTICE RECONSIDERED 185 223 (2017) (discussing the
problem with access to the courts).
120 See Rory Van Loo, The Corporation as Courthouse, 33 YALE J. REG. 547, 552 (2016)
(noting that the corporation plays a "key dispute resolution role as a reputation-based
121 Id. at 559 umers' ease of access to the

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warrant a lawsuit.122 The solution is a personal accountability system, in the
form of reputation.123 Uber prompts passengers and drivers to leave a
reputational signature by reviewing each other. If a driver consistently
underperforms, she suffers the risk that passengers will refuse to ride with
her.124 If a passenger is rowdy or aggressive, she might find herself with no
transportation. Research shows that, while imperfect, these systems
effectively promote good behavior among users, even in the absence of
litigation.125
Another solution is used by platforms and normally reserved for more
meaningful transgressions: corporate 126 In these internal
dispute resolution mechanisms, both parties can explain their position,
usually in a limited fashion and without legal representation, and the final
adjudication is given to an employee of the platform.127 The platform will
often issue a quick refund, preferring to err on the side of the user and resolve
the matter internally with the service provider.128 Of course, the platform
compensates itself for such services. But by putting itself in the middle, it
also opens itself to class actions and regulatory interventions. These benefits
may ameliorate some of the concerns we might have with platform power.
122 Of course, passengers are less likely to use the platform if the overall riding experience is
poor. However, since the riding experience is a public good and each driver has minimal
influence on it, drivers may be inclined to act without considering the collective experience,
leading to a free-rider problem. See generally Michael Luca, Designing Online Marketplaces: Trust
and Reputation Mechanisms, 17 INNOV. POLY & ECON. 77, 78 (2017) (describing the design
challenges that arise in online marketplaces).
123 See Ngai Keung Chan, -Generated Ratings,
17 SURVEILLANCE & SOCY 183, 183 84 (2019) (discussing the effects of ratings, and fear of
falling ratings, on Uber drivers).
124 Indeed, Uber expels low reputation drivers. James Cook, Ubers Internal Charts Show
How Its Driver-Rating System Actually Works, INSIDER (Feb. 11, 2015)
https://www.businessinsider.com/leaked-charts-show-how-ubers-driver-rating-system-works2015-2 [https://perma.cc/782D-93Y2].
125 For example, Uber drivers take much shorter routers with nonlocal passengers, relative
to taxi drivers. See Meng Liu, Erik Brynjolfsson & Jason Dowlatabadi, Do Digital Platforms
Reduce Moral Hazard? The Case of Uber and Taxis, 67 MANAG. SCI. 4665, 4665 67 (2021).
126 See Van Loo, supra note 121, at 547.
127 See Tuan Nurhafiza, Raja Abdul Aziz & Abdul Hamid, The Settlement of
Disputes Through Online Dispute Resolution (ODR): A Literature Review, 2 ASIAN J. RSCH. BUS.
& MGMT. 90, 91 (2020) (discussing an online form of internal dispute resolution facilitated by
technology).
128 There is an active debate in the literature about the prevalence and meaning of
preferential treatment to active consumers (nudniks) in these systems. Compare Yonathan A.
Arbel & Roy Shapira, supra note 61, at 929 31 (2020), with Meirav Furth-Matzkin, The
Distributive Impacts of Nudnik-based Activism, 74 VAND. L. REV. EN BANC 469, 471 72 (2021);
Shmuel I. Becher & Tal Z. Zarsky, Minding the Gap, 51 CONN. L. REV. 69, 90 91 (2018); Amy
J. Schmitz, Access to Consumer Remedies in the Squeaky Wheel System, 39 PEPP. L. REV. 279, 280
(2012).

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Finally, even though the stakes are small, the legal system is not absent.
For example, in the case of a four-way stop,129 if a driver breaches a nano
contract and causes an accident, this will be a higher stake conflict that will
introduce the legal system directly. The court will deem the breaching driver
as being at fault for the accident, analogous to a driver waving at another to
give them the right of way and then crashing into them. This provides
another mechanism of dispute resolution.
Contract interpretation is an adjacent issue. A breach presupposes the
existence of an obligation that was not met, which requires us to first define
the scope of contractual obligations. For digital contracts, interpreting intent
may seem challenging. This issue was repeatedly raised in the context of
smart readers.130 Indeed, ascribing meaning to code looks difficult.131
Fortunately, David Hoffman and Greg Klass have convincingly
resolved the interpretive question.132 Interpretating digital contracts requires
the same toolset that the common law has always used. Importantly, as scale
falls, the scope of transactional complexity falls superlinearly.133 The room
for disagreements in a merger agreement is vastly larger than it is when
buying a Coke from a vending machine. Small transactions, small
disagreements.
The discussion underlies my view that these tiny agreements are real
contracts, rather than pure transactions. However, as noted, at this scale the
boundaries are quite murky, and I can see how some might hold a more
transactional view.
Enforcement. Winning a judgment is not enough; one also has to
collect it. One of the most challenging issues in macro contracts is the
problem that defendants are often judgment-proof (or can deliberately
become so).134 As the stakes fall, this problem trends to zero,135 but a new
one appears in its stead: costs of collection can easily become prohibitive.
129 See supra Part II. A Pedestrian Thought Experiment: Nano Contracts and the Four-Way
Stop
130 See Cohney & Hoffman, supra note 85, at 324 27 (explaining that judges may not be
131 See Frank Pasquale, A Rule of Persons, Not Machines: The Limits of Legal Automation, 87
GEO. WASH. L. REV. 1, 1 (2019) (arguing that forms of legal automation can undermine the
legitimacy of the law). I hedge this statement because, as we have learned from the emergence of
large language models, AI can provide intelligible explanations. See generally Yonathan A. Arbel
& Samuel Becher, Contracts in the Age of Smart Readers, 90 GEO. WASH. L. REV. 83, 95 (2022)
(showcasing the utility of LLMs in simplifying legal texts).
132 See Cohney & Hoffman, supra note 85; Klass, supra note 83.
133 Ambiguity is embedded within every transaction; but one source of ambiguity comes
from the interaction of different transactional terms. Since very new terms can interact with all
previous terms, deal complexity increases the scope of potential ambiguities superlinearly.
134 See, e.g., Yonathan A. Arbel, Asset Shielding and the Theory of Credit, 48 INTL REV. L. &
ECON. 26, 27-28 (2016) (discussing the use of asset protection to avoid liability).
135 See id. at 30 32.

[p. 27]
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Filing a lawsuit with a small claims court costs $15 to $20 in New York,136
$40 in Massachusetts,137 and $85 in Alabama.138 This alone could swamp
any value from winning a judgment on a nano contract.
In micro contracts, there are at least four solutions to this problem.
First is the use of platforms. The platform has deep pockets and is
responsible for residual claims against parties on the platform.139 More
importantly, the platform, as a repeat player, has an incentive to effectively
resolve common disputes and compensate disgruntled users even without
legal action.140 Second is the use of reputation. Even if collection is
expensive, imposing a sanction in the form of a reputation hit is not. Third
is the use of precautions.141 Platforms do not pay drivers until after the trip
is finished, but they charge the passenger in real time. The concern that a
passenger will not pay is thus largely resolved. The fourth solution is escrows,
a solution that can easily be easily implemented by platform-free protocols.
By depositing payments in an escrow, and making the release of payment
conditional on performance, many enforcement problems are resolved. In
smart contracts, the blockchain manages the escrow.142 But this is far from
a fool-proof solution.143 One must still determine whether a party actually
136 Court Fees in the New York City Civil Court, NYCOURTS.GOV,
https://nycourts.gov/courts/nyc/civil/fees.shtml [https://perma.cc/S7G9-99XU] (last accessed
Oct. 13, 2023).
137 Small Claims Court, MASS.GOV, https://www.mass.gov/service-details/small-claimscourt [https://perma.cc/D2HK-KRRH] (last accessed Oct. 13, 2023).
138 Small Claims, TWENTY-SIXTH JUDICIAL CIRCUIT COURT OF ALABAMA,
https://russell.alacourt.gov/small-claims/[https://perma.cc/6BMA-QQ63] (last accessed Oct 13,
2023).
139 See, e.g., What Is the Average Uber Accident Settlement?, THE LAW PLACE,
https://www.thelawplace.com/faqs/average-uber-accident-settlement/ [https://perma.cc/6U222AE8] (last accessed Oct. 13, 2023) (noting that victims of Uber accidents have access to
settlements resulting from the following damages: property damage, medical bills, loss of income,
pain and suffering, and wrongful death).
140 On the incentive of repeat sellers to go beyond the letter of the contract in consumer
markets, see Lucian A. Bebchuk & Richard A. Posner, One-Sided Contracts in Competitive
Consumer Markets, 104 MICH. L. REV. 827, 827 28 (2006); Becher & Zarsky, supra note 128, at
90 91 (2018); Arbel & Shapira, supra note 61, at 943 44 (2020).
141 Platforms are also incentived to audit service providers prior to transactions, as recently
studied by Xinyu Hua & Kathryn E. Spier, Holding Platforms Liable 3 (HKUST Research Paper
2021-048, 2023).
142 See Farshad Ghodoosi, Contracting in the Age of Smart Contracts, 96 WASH. L. REV. 51,
143 Cohney & Hoffman, supra note 85, at 385
Errors in coded exchange will r

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performed according to the proper interpretation of the contract. Doing that
accurately requires discretion.144
***
The analysis presented in this Part explains the primary institutional
features that underlie nano contracts and exposes some of the ways
policymaking can further their adoption. On this basis, we now move to
explore how nano contracts can transform several central areas of law:
queues, property, employment, and torts. The crux of the analysis will focus
on the regulation of queues, an area in which we can easily see nano
transformative effects and failure modes. This will allow us to offer
a broader sketch of the issues inherent to other domains of private law. After
describing the potential, the discussion evaluates risks, whether legal
intervention is needed, and in which form.
IV. NANO LINES
A. Nano Contracts and the Problem of Queues
Lines are a painful, if often neglected, public policy problem.145 They
emerge whenever demand outstrips service capacity.146 Busy intersections,
concert tickets booths, amusement parks, customer service
call lines, plane boarding, fast food drive-throughs, bank tellers, a plane on
the tarmac, the DMV, and ticket booths are frustratingly common
examples. Lines are often a conflict zone; a common source of friction that
every so often erupts into wanton displays of violence,147 such as in Black
Friday sales or road rage on congested roads.148 But even in their more
quotidian form, lines exact a toll on our lives. At the DMV alone, Americans
spend an average of 44 minutes per visit.149 One study estimated that
144 Id. at 3-mediated transactions will often fail
to achieve what their promisors intend, even as they are surrounded by communications in real
languages, intended to be relied on by real people. In such cases, law will confront and must
surmount two temptations: ignoring the code altogether as a mere instrument of performance
or enforcing it as an exculpatory clause written in ciphered .
145 For a comprehensive analysis, see Perry & Zarsky, supra note 33, at 1596 97.
146 See David Fagundes, The Social Norms of Waiting in Line, 42 L. & SOC. INQUIRY 1179,
1179 (2017). As Fagundes notes, the is highly culturally dependent. Id. at 1187 88.
147 See Adrian Furnham, Luke Treglown & George Horne, The Psychology of Queueing, 11
PSYCH. 480, 480 81, 487 (2020) (reviewing the psychological effect of queue rage. The authors
also present a 2019 study measuring levels of violence caused by customers waiting for treatment
at an Israeli hospital).
148 See Tiffany Hsu, Fistfights and Long Lines on Black Friday? Not as Much Anymore, N.Y.
TIMES (Nov. 23, 2018), https://www.nytimes.com/2018/11/23/business/black-fridayhistory.html [https://perma.cc/3FHU-5QNM]; Mark Asbridge, Reginald G. Smart & Robert E.
Mann, Can We Prevent Road Rage?, 7 TRAUMA, VIOLENCE & ABUSE 109, 109 11 (2006).
149 Neel Padmanabhan, Reducing DMV Wait Times with Queue Management and Digital

[p. 29]
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Americans squander $10.3 billion annually waiting to see their physician or
dentist.150 Another study estimated that traffic congestion cost Americans
over $7.7 billion in 2019.151 This is time that could be used for family,
recreation, work, hobbies, or romance but is instead spent waiting in line.
Most lines today are not regulated. No federal law specifies line
;152 instead,
153 But to say that the line is subject to social
norms does not mean that these norms are prosocial. Indeed, David
Fagundes describes how the nuanced rules of lines are often accompanied
by a shadow threat of social opprobrium that sometimes erupts into
violence.154
Yoram Barzel theory of lines and their cost also helps frame our
discussion.155 Normally, markets allocate scarce resources based on a price
system, using a system of willingness-to-pay ( WtP ). Lines, instead, allocate
resources to those who wait, thus substituting the WtP with a mechanism
that Barzel describes as willingness-to-wait ( WtW ).156 When deciding
whether to join a line, an individual assesses whether the waiting is worth
her time. Depending on the length of the line, some will join, others will
not. As a result, a vicious dynamic emerges. Lines will tend to build up until
the point at which they suck up so much time that they are hardly worth
the wait.157 at a
line that is too long.
Another problem with lines is how they distribute resources. Most
lines adopt an alloc ing of
first in time wins.158 Distributing scarce resources based on who happens to
be first in time may meet some formal criterion of fairness but is neither
Transformation, VIRTUAQ (Mar. 2, 2020), https://virtuaq.com/blog/2019-03-02-dmv-waittimes [https://perma.cc/8CUS-7LVA].
150 Akbar Marvasti, A Contingent Valuation of Customer Delay in Medical Services, 32 E.
ECON. J. 31, 41 (2006).
151 DAVID SCHRANK, LUKE ALBERT, BILL EISELE & TIM LOMAX, 2021 URBAN MOBILITY
REPORT, 42 (2021).
152 Fagundes, supra note 146, at 1179.
153 Id. Fagundes later qualifies this statement, noting that in specific instances such as traffic,
line cutting can be sanctioned. Id. at 1180.
154 See id. at 1183 86. Line priority is created by the continued possession of a place in line
and, subject to some exceptions, is abandoned if one needs to rest her feet in a more comfortable
sitting place. See also Gad Allon & Eran Hanany, Cutting in Line: Social Norms in Queues, 58
MGMT. SCI. 493, 493 95 (discussing social norms of exception governance).
155 Yoram Barzel, ifing by Waiting, 17 J. L. & ECON. 73, 94 95 (1974).
156 Id. at 73.
157 See id.
158 See JOHN F. SHORTLE, JAMES M. THOMPSON, DONALD GROSS & CARL M. HARRIS,
FUNDAMENTALS OF QUEUEING THEORY 5 6 A common discipline in everyday
supra note 145, at 1596.

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seat on the bus when an
individual in need
than care. Recognizing that first in line heuristics are a crude mechanism of
allocation, some services offer line priority
159 For example, on trains, first to come heuristics generally
determine who sits first. However, a preference is given to people with
certain conditions such as a physical handicap or old age. Some queues use
human discretion, i.e., triage, to allocate priority.160
for example, people wait according to the scheduled appointment time. But
the staff is given the discretion to give priority to a patient who suffered
acute trauma. In specific cases, social status is used to award priority hence
the existence of VIP lines.
Some scholars express hope that that we can solve problems of waiting
in line now that online lines are an option.161
understand why this is not quite true. Online lines do nothing to produce
any excess service capacity and so the resource in question is just as limited
as it originally was. We still must bide our time until the specialist is available
to see us, our cortado is brewed, and the mechanic gets to our car. True, it
is less painful to wait at home than it is to wait at the post office, but this
sometimes, quite counterintuitively, worsens the problem. Once lines
abandon the implicit cost of standing in line, they lose the signal inherent
to the WtW mechanism. When that happens, many more individuals join
the line, some of them with a fleeting interest in the product, some with
none at all. Some are scalpers and others are bots all of them inflate the
line and distort its desired allocation.162 Relative to a world where those in
159 SHORTLE, THOMPSON, GROSS & HARRIS, supra note 158, at 6. Some restaurants offer
the option to order online and suggest that by doing so, one can skip the line. See Mobile Order
and Pay, MCDONALDS, https://www.mcdonalds.com/us/en-us/mobile-order-and-pay.html
[https://perma.cc/3VNJ-4BH3] (last visited Oct. 7, 2023). This is not precisely true, as the
patron skips one line (ordering) but still must face the other (production). In the event of excess
demand, online orders simply turn into a place in line for production (rather than ordering).
160 Those who wait in line also perform some triage, as they may allow people in need to cut
in front of them. On the efficiency and limitations of line triage, see Allon & Hanany, supra note
154, at 503.
161 See Ramsi A. Woodcock, The Efficient Queue and the Case Against Dynamic Pricing, 105
IOWA L. REV. 1759, 1797 (2020) [I]n the information age the burden of queuing has been
driven almost to zero, because now waiting on line takes only the time needed to log into a website
and check to see whether a product is available. ); Fagundes, supra note 146, at 1191 (noting that
online ordering systems
preorder . . . and pick . . . ntly, recognizes the
possibility of queue markets enabled by technology. See id.
162 Taylor Lyles, Bots Are Ruining Your Chance of Buying a PS5 and Xbox Series This Holiday,
IGN (Nov. 15, 2021, 4:18 PM), https://www.ign.com/articles/bots-scalpers-ruining-chances-ofgetting-ps5-xbox-series-x-nintendo-switch-oled [https://perma.cc/ETZ6-LYM6]
also taken the opportunity to use bots to try and jack up the price of highly desirable and hardto-fi .

[p. 31]
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need could ensure allocation by waiting in a physical line, an online queue
can make matters worse. Absent some credible signal of need or merit,
online queues are assured to be neither more fair nor more efficient.
Yet, even though the line system is hard to justify on grounds of equity
or efficiency, the status quo proves recalcitrant. This is due to twin
fundamental problems, which we can dub the verification and the
grasshopper problems.
The verification problem arises from the question: how can you tell
whether someone in the fast lane is indeed in an urgent situation? Many
people would claim a special need just to avoid a line. Thus, it might be
necessary to install a costly verifier like a triage nurse at the emergency
room to make judgments. To solve the problem, hospitals must now
employ a full-time health practitioner who spends their expertise on
administration rather than care. Another type of cost is the verification
process itself. 163 Patients may need to produce documents showing
bloodwork, special medical conditions, or urgency. And, at the risk of
infinite regress, there will often be a line to the triage itself, as visitors to the
emergency room know. Then, there is the cost of the mistakes the verifiers
are bound to make in good faith and we are not assured of that good faith.
Given the discretion necessarily allotted to verifiers, some of them abuse
their position to give priority . In the
shadow of all of this, we sometimes see the emergence of a new wasteful
dynamic, where people learn how to game the verifier. In the organ
transplant context, some doctors exaggerate their needs so that the
system will give their patients priority in line (at the expense of the less
fortunate patients who remain to languish in line).164
Even when we can resolve the verification problem reasonably well,
we are exposed to a second-order problem: the grasshopper problem. While
ants, in the sense of planning for the future, others
are carefree grasshoppers 165 A veritable grasshopper might live
time in airports. 166 He always leaves late for the airport. He will occasionally
163 One study of the cost-effectiveness of triage, accounting for the costs of administration,
found an increase in total costs. Stefan Morreel, Ines Homburg, Hilde Philips, Diana De Graeve,
Koenraad, G. Monsiuers, Jasmine Meysman et al., Cost Effects of Nurse Led Triage at an Emergency
Department with the Advice to Consult the Adjacent General Practice Cooperative for Low-Risk
Patients, a Cluster Randomized Trial, 126 HEALTH POLY 980, 985 (2022).
164 See Benjamin J. McMichael, Stealing Organs? 97 IND. L. J. 135, 154 (2022) (citing Aaron
Ahearn, Ethical Dilemmas in Liver Transplant Organ Allocation: Is it Time for a New Mathematical
Model?, 18 AM. MED. ASS'N J. ETHICS 126, 126 (2016) ("Essentially, transplant professionals
were escalating the level of care pretransplant patients were receiving in order to exaggerate their
patients' illness acuity and move their patients 'up' the waitlist.")).
165 AESOP, THE ANTS & THE GRASSHOPPER (1919), https://read.gov/aesop/052.html
[https://perma.cc/HD4Z-4MWD].
166 Jordan Ellenberg, Be More Productive: Miss Some Flights, WIRED (Aug. 11, 2014, 11:25

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arrive so late that he is bound to miss his flight unless, that is, he gets to
skip the airport security line. As it turns out, airport personnel will often do
just that, because they attempt to help passengers in a hurry arrive on time
by letting them skip the line.167
What is so troubling about this example is that this is not an example
of the failure of the verification system. The verification method works
perfectly here. The grasshopper is in a real rush, and the airport verifier is
correct to flag him as someone in need. The problem is that by giving the
grasshopper priority, the verifier rewards him for his reckless planning at the
direct expense of other passengers who are better planners. This points at
the general problem with verification systems of triage: they create
unintended grasshopper problems that exacerbate the pressure on the
already scarce resources.
Nano contracts circumvent this patchwork. They offer a solution to
the problem of queues by creating a protocol for parties to directly, quickly,
and potentially anonymously, negotiate the allocation of places in the line
among themselves.168 A nano contract can just as easily be used to auction
off a place in line at airport security, at a baseball stadium, and at the
pharmacy. It can also be used to pay email recipients to afford special
or get priority
for technical support. Notably, t
If the person third in line is trading their places with the person who is last
in line, only the two trading partners are impacted. This places line trading
transactions in the coveted echelon of Pareto improving transactions
deals where at least one person is made better off without harming anyone
else. This is because if the compensation offered is too low, or if one does
not want to wait any longer, they can refuse the switch. It is also possible,
although less likely, that nano contracts would allow a late-comer to jump
to the first place in line, pushing all else back a spot, if the late-comer is
willing to compensate all line-waiters for the added wait. And if people do
not
Quite remarkably, nano contracts simultaneously solve the
verification and the grasshopper problem without the need for costly triage.
They solve the verification problem because it is not enough to just say you
are in a rush. The user must put their money (or tokens) where their mouth
is. The more others need priority, the more one must stake. This verifies
that the user truly values priority. The grasshopper problem is similarly
resolved. If my tardy friend had to pay based on how many people he jumps
in line, he would certainly start planning better. The requirement to pay for
priority rewards good planning and moderately sanctions grasshoppers.
Key to this entire system is voluntary trade. Unlike the current system
which imposes an arbitrary line, nano contracts let people have a choice. I
can retain my place in line if I am in a hurry or need, or I can choose to wait
a bit longer and be compensated for my time. Especially in settings where
AM), https://www.wired.co.uk/article/jordan-ellenburg [https://perma.cc/2YH9-7A2U].
167 See Allon & Hanany, supra note 160, at 493.
168 For a statement on the positive distributional gains of line-trading, see Barzel, supra note
155, at 82.

[p. 33]
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transactions are anonymous, we need not worry about coercion or duress,
no more at least than we must worry about bullies who cut in line or the
connected who are given priority over us. Unlike systems like priority
boarding, the compensation goes to us, not to a third-party actor. The fourway stop is illustrative: it allows all cars to quickly determine who will go
first, while remitting payments between line participants. Another example
is the food delivery service DoorDash. After making the order, the user is
given the option to choose a tip for the driver.169 Because the driver views
the tip before taking the order, this tip can be used to gain priority in the
delivery queue.170
A related advantage is the p2p nature of the nano contract system.
Many firms have seized on the inefficiencies of the status quo and
commoditized lines.171 For example, Six Flags sells the place in line of those
who arrived first to those willing to pay more.172 In socialist countries, there
are fixers, variably known as i machers, 173 who offer to get
people ahead in line for the right fee.174 In the United States, maître ds often
accept bribes in the form of tips to give preference to certain guests.
Concert venues sell VIP tickets for a hefty premium that allow their holder
to avoid the line and enter the venue early.175 Unlike nano contracts, where
payments are remitted to other people in line, in these queue product
transactions, the firm is earning the revenue. Because lines are a source of
revenue, companies like Six Flags may have less incentive to shorten lines.
This is a point about the status quo that must be emphasized. Lines are
already commercialized but not in a p2p manner like a nano contract. Those
169 Doug H., Delivery Drivers Can See Your Tip! And It Can Get You Faster Service,
RIDESHARING DRIVER, (Mar. 17, 2023), https://www.ridesharingdriver.com/tipping-fasterdelivery [https://perma.cc/9MA9-DSLJ]).
170 Id.
171 See Martin Lewison, Demand-Based Pricing in the US Theme Park Industry, 5 INT. J.
LEISURE & TOURISM MKTG. 271, 281 (2017) (finding that 57% of parks examined offered a
queue product).
172 Experience Six Flags with Six Flags Plus, SIX FLAGS
https://www.sixflags.com/america/store/tickets [https://perma.cc/YBS7-9HQ8].
173 Alena Ledeneva, Blat and Guanxi: Informal Practices in Russia and China, 50 COMP.
STUD. SOC'Y & HIST. 118, 122 (2008) (describing the Tolkachi
. Yaron Zelekha & Simcha B. Werner, Fixers and Corruption:
Shadow 'Public Servants', 4 J. CURRENT ISSUES CRIME, L. & L. ENFORCEMENT 441, 442 (2011).
On the etymology of Macher, see Macher, MERRIAM-WEBSTER, https://www.merriamwebster.com/dictionary/macher [https://perma.cc/2FW8-YZJ3] (last visited Oct. 14, 2023).
174 See generally Tara Béteille, , 55 ASIAN SURV. 942,
946, 966 (2015) (noting the diverse functions fixers play and their lack of accountability).
175 Neil Shaha, How the Music Festival VIP Pass Went from Luxury to Basic, WALL ST. J. (July
26, 2023, 11:05 AM), https://www.wsj.com/articles/music-festivals-vip-tickets-8771bffb
[https://perma.cc/P6YD-8BVA].

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are not equitable, fair, or even efficient,176 resulting in
incentives to preserve the lines.177
Critically, a nano contract does not even have to use money. Consider
the course priority rules used by the Kellogg School of Management at
Northwestern University.178 Naturally, some courses are in high demand.
Standard systems of registration favor those who plan and sign up early, but
not necessarily those with greatest interest or need in a particular course. The
University decided to implement a queue-auction system. Every student
receives 2,000 3,000 token points.179 Students bid, with no maximum, on
each of their courses according to a set procedure.180 At the end of the
different courses.181 In much the same way, tokens can be allocated for traffic
priority or other forms of access.
The very existence of nano contracts mitigates the risk associated with
a real emergency, we can
get to our destination sooner, even if a bit poorer. While we must pay for
priority, at least we can get it when we need it. This is a great improvement
over our congested roads, where all independent of need, urgency, or
medical condition must wait. And as alluded, one does not have to use the
system every day to benefit from it. It is enough for one to know of its
existence to insure oneself against risks.
If line trading is profitable, it is natural to wonder why we do not see
more of it. The answer comes from the enlightening work of Professor Felix
Oberholzer-Gee of the Harvard Business School. Oberholzer-Gee sought to
examine why markets for time rarely exist.182 To that end, he had ten
researchers approach 500 individuals who waited in line for the cafeteria,
the train station, and the DMV.183 Pretending to be in a hurry, the
researcher offered to cut in line in exchange for a $0 $10 payment.184
His first finding is consistent with much of the above. The more
money offered, the more people were willing to forego their place in line
(from 45% with no payment to 76% with $10).185 However, only a small
176 See generally Allon & Hanany, supra note 160, at 494 95 (studying the game theoretical
foundations of line inefficiencies related to imperfect monitoring).
177 See Lewison, supra note 171, at 281.
178 Kellogg Course Bidding System Rules, NORTHWESTERN UNIV.,
https://www.kellogg.northwestern.edu/serial/academics/bidding-registration/course-biddingrules.aspx [https://perma.cc/AA9M-WK8D] (last visited Oct. 14, 2023).
179 Id.
180 Id.
181 See Id.
182 Felix Oberholzer-Gee, A Market for Time: Fairness and Efficiency in Waiting Lines, 59
KYKLOS 427, 428 (2006).
183 Id. at 432.
184 Id. (The experiment offered five different treatments corresponding to offers of $0, $1,
$3, $5 and $10).
185 Id. at 434.

[p. 35]
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minority of people agreed to actually take the payment: they simply let the
researcher pass them while refusing payment.186 It seems that most people
used the offer of money as a makeshift verification mechanism but were
prevented by social norms from actually accepting it. This is why higher
amounts yielded better responses, even though they were not collected. The
problem, of course, is that when payments are not remitted, the credibility
of payment offers vanishes. This allows those who do not play by the social
rules to manipulate others.
Interestingly, Oberholzer-Gee pushed the line a bit too far. He
approached some of the people who previously let others cut ahead of them
in line a second time.187 He offered them, again, payment to cut ahead.188
In all cases, he was summarily rebuffed.
some angry, a few outright hostile, suggesting that it was probably not safe
189 He thus concluded that the rarity of markets
rket are viewed as
one-190
While favors have a positive connotation, they obey a much more
complex logic. Because line trading is viewed as a favor, people act with
outright hostility when they feel that their boundaries are transgressed. And
because it is uncomfortable to ask for a favor from a stranger, many of us
feel uncomfortable asking others for help, even when we are in a real hurry.
At the same time, we are all too familiar with those who do not concern
themselves with the opinions of their peers and liberally cut in line.
Nano contracts do much more than facilitate exchange. They create a
norm in which asking for priority does not require calling for special
favors.191 They also implement a mechanism that reduces the friction
involved in trades for time. This highlights a major contribution of nano
contracts: opening up opportunities of mutual interest that are shrouded
today by social and transactional frictions.
186 Id. at 436.
187 Id. at 438.
188 Id.
189 Id.
190 Id.
191 An unsettled debate is whether conversion of social processes to market processes leads
to more or less undesirable behavior. Uri Gneezy and Aldo Rustichinis famous study found that
day care centers saw an uptick in tardiness when they instituted a fine for late arriving parents.
Uri Gneezy & Aldo Rustichini, A Fine Is a Price, 29 J. LEG. STUDS. 1, 7 8 (2000). For a
replication failure, see Cherie Metcalf, Emily A. Satterthwaite, J. Shahar Dillbary & Brock
Stoddard, Is a Fine Still a Price? Replication as Robustness in Empirical Legal Studies, 63 INTL REV.
L. & ECON. 1, 1 (2020)
causes respondents to reduce nons
. In the current context, the substitution is not between a social norm and price, but two
different types of prices (time versus dollars).

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36 Draft[Vol. __
The overall effect is, of course, nuanced. While this may increase
leave late, this is not necessarily a bad outcome.
Research shows that when resources are scarce, people prefer systems where
those who wait longer receive greater compensation over systems where
priority is assigned based on either a system of lottery or surge pricing.192 If
the success of priority access in parks and airplanes is a guide, consumers
adjust quickly to such market norms.193
B. Legal Policy on Nano-Contracting Lines
Nano contracts offer a general solution to lines. In doing so, nano
contracts solve significant problems like permitting people in a rush to gain
priority, transferring payments to people with greater patience, and avoiding
the costs of verifiers and grasshoppers.194 But the proliferation of nano
contracts would also entail a market creep into areas previously governed by
social norms.195 They also engender distributive concerns regarding their
effect on those living close to the social margin, alongside other efficiency,
political, and ethical concerns. Whether the legal system should regulate
nano contracts, or even permit them at all, depends on our evaluations of
these potential concerns.
Perhaps the broadest and most sustained critique of line
commodification is that offered by Harvard philosopher, Michael Sandel.196
In his book, Sandel seeks to defend the separation of lines and markets,
advocating for what he calls the ethic of the queue. 197 This moral system
holds that allocating goods through lines is desirable in and of itself, at least
relative to price mechanisms.198 A central tenet of the queue ethic is the
belief that WtW is better than, or at least not clearly worse than, a WtP
system. If society wants to allocate resources to those who value them the
most, WtP is limited, Sandel argues, because it does not reflect real need but
192 Charles Raux, Stéphanie Souche & Yves Croissant, How Fair is Pricing Perceived to Be?
An Empirical Study, 139 PUB. CHOICE 228, 236 (2009)
ranking of the perception of allocation rules is found, from the fairest to the most unfair: the
moral and the compensation rules, then the queuing and the peak pricing with additional supply
.
193 See Gilda Hernandez-Maskivker & Gerard Ryan, Priority Systems at Theme Parks from
the Perspective of Managers and Customers, 6 TECH. INNOVATION MGMT. REV. 40, 44 (2016)
(finding that customers with stronger negative attitudes towards waiting are more likely to want
to avoid waiting in queues. In contrast, people with a more positive attitude towards waiting may
be more tolerant of queuing in regular lines ).
194 See supra Part IV.A.
195 See generally Oberholzer-Gee supra note 182 (markets in lines)
196 See MICHAEL SANDEL, WHAT MONEY CANT BUY: THE MORAL LIMITS OF MARKETS 28
(2012).
197 See id. at 28.
198 See id.

[p. 37]
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rather the ability to pay for the good in question.199 He notes, with visible
annoyance, how baseball fans who sit in the expensive front rows often come
late and leave early, manifesting only passing interest in the game, unlike the
other less affluent diehard fans.200 Lines further embody a democratic ethos,
he claims, visibly affirming our equality as we all languish in waiting,
regardless of wealth, race, or creed.201 Thus, Sandel finds the queue ethic to
be a superior alternative to market mechanisms of allocation.202
is unpersuasive. It would
require a great feat of line drawing to explain how a market economy that
allocates most of its goods through markets and prices suddenly turns
unethical when it comes to lines. Sure, markets and prices have their
discontents, and there are those who condemn all market transactions as
morally suspect. But in a society where it is permissible for dealerships to
sell, say 2023 Subaru Outbacks based on WtP, how can one justify the
dissipation of this principle at the line to the dealership? This position is
mystifying because lines are downstream of the price system. Lines tend to
emerge when goods are being sold at a price that lies below the market
clearing price.203 In our society, the manufacturer is generally free to set
prices as it sees fit. If it is permissible for Subaru manufacturers and dealers
to raise prices until no line exists, and then offer sale prices when they have
exhausted the initial pool of buyers, why is it a moral wrong to keep prices
low and sell line priority instead?
The commitment to the queue ethic is especially puzzling in a world
204 Sandel
himself
205 These products are
largely normalized. As Fagundes notes, while most customers may dislike
them, VIP queues do not represent norm 206 Perhaps there is an
ethical theory that condemns expedited shipping, but that condemnation
certainly has not been widely accepted.
It is also not the case that WtW is a better measure of value than WtP.
While the comparative literature is not expansive, the existing evidence that
suggests that WtP indeed carries a strong signal. One empirical study
examined the decision to purchase a priority pass relative to the decision to
wait in the normal line.207 It found that those who pay value priority much
199 Id. at 17-43.
200 Sandel seems to assume that the point of a front row seat is to see the game rather than
being seen as seating in the front row.
201 See SANDEL, supra note 196, at 18.
202 See id. at 30-35.
203 See Barzel, supra note 155, at 75.
204 See Lewison, supra note 171, at 281.
205 SANDEL, supra note 197, at 7.
206 Fagundes, supra note 146, at 1190.
207 Hernandez-Maskivker & Ryan, supra note 193, at 43 44 (finding that the greater the
negative attitude [by theme park customers] towards waiting times, the higher the probability of

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38 Draft[Vol. __
more than those who wait in line.208 A different study found no correlation
between willingness to pay for a shorter line and economic status, which
suggests that payments do measure a real difference in valuation.209
The darkest side of the issue is that, from an egalitarian perspective,
we must be cautious about championing WtW. There is an implicit
assumption that somehow WtW is more progressive than WtP. The idea
seems to be that because our society has inequality in the distribution of
material goods, WtW is an equalizing force.
On reflection, this is wrong. To put the point bluntly, we simply do
not live in a society where free time is equally divided. This is the very thrust
of Thorstein leisure class framework.210 A struggling mother of
four working a minimum-wage job will not see much benefit from a system
that rewards those who can spare the time to wait in line. And, of course,
money and time are often fungible, making inequality in one transform into
inequality in the other.211 For instance, some people hired line waiters,
paying them as much as $6,000 to gain the right to watch the seminal oral
argument in the Supreme Court on same sex marriage.212 Even when people
wait for themselves, reliance on WtW can be regressive. Lawyers should be
Research on the welfare system and
eviction shows that time requirements create serious obstacles and stress for
213 A recent study shows that poor tenants face evictions
on a large scale because they cannot afford the time involved in public transit
to the courthouse.214 Even though they are paid less, those with less financial
resources do not sit on troves of free time.
I want to make a stronger argument. In many situations, nano
contracts will be more progressive than the status quo. This is partly because
there is nothing inherently beneficial to the economically disadvantaged
determined by luck. Nano contracts mitigate some of harsh effects by
customers being express pass holders ).
208 See id. at 44.
209 See Marvasti, supra note 150, at 41.
210 See generally THORSTEIN VEBLEN, THE THEORY OF THE LEISURE CLASS (Oxford Univ.
Press Inc. 2017) (arguing that those of lower socioeconomic status have less free time than those
of higher socioeconomic status).
211 Fagundes, supra note 146, at 1190.
212 Robert Barnes,
Others to Hold a Spot, WASH. POST (Oct. 6, 2015, 3:32 PM),
https://www.washingtonpost.com/politics/courts_law/supreme-court-bar-bans-line-standingfor-hearings/2015/10/06/a309e0e6-6c15-11e5-aa5b-f78a98956699_story.html
[https://perma.cc/BZN9-TQD5].
213 Ilya Slavinski & Kimberly Spencer-Suarez, The Price of Poverty: Policy Implications of the
Unequal Effects of Monetary Sanctions on the Poor, 37 J. CONTEMP. CRIM. JUST. 45, 48 (2021).
214 David A. Hoffman & Anton Strezhnev, Longer Trips to the Court Cause Evictions, PNAS,
January 3, 2023, at 1, 1 2 https://www.pnas.org/doi/epdf/10.1073/pnas.2210467120
[https://perma.cc/DD7C-M4CT].

[p. 39]
2023] 𝑛𝐾 39
offering people a meaningful choice. They can elect whether they want to
retain their place in line, or whether they want to spend a few more minutes
idling in exchange for direct compensation. If a person has a bit of extra
time, they may be able to leave the post office with a few extra dollars in
their pockets. And if they are in a rush, they can just keep their place (or pay
a little to get priority).215 As long as choice is preserved, nano contracts offer
a potential improvement over the status quo. By contrast, attempts to
maintain the status quo often unwittingly harm those are less well off.216
There may still be a residual concern with a world in which the
wealthy tend to be first in line. Indeed, that is already the case under the
current system elite airline members board first, toll roads give priority to
those who can afford them, and VIP tickets create a fast track for those who
can afford them. Nano contracts, however, offer a way to remedy some of
these issues. If we identify a systemic access concern with a specific type of
line, it is possible to issue tradable tokens on the platform. We can allocate
priority tokens to people on a monthly or annual basis, which can be used
in addition to, or instead of, money.217 This offers another way to target
vulnerable parties, which is not possible under the current system.
While I think Sandel I do believe that there
is an important kernel there, and that it offers some valuable lessons for the
regulation of nano contracts. Rather than a blanket objection to
commoditized lines, we should be attentive to the type of good that is being
allocated.
It is one thing to allocate primary resources such as Subaru Outbacks
and tickets to baseball games based on WtP
allocate publicly provisioned goods in this way. This is because public
provisioning already implies a judgment that market allocation of the
underlying good is faulty. Prominent examples where notions of queue ethic
may be applicable include the line to the voting booth, kidney transplants,
a place in line for the draft or jury duty, fresh water during a natural disaster,
215 The standard transaction would involve place trading. This means that if the person in
place five trades places with the person in place seven, this has no effect on the person in place
six.
216 Many unhoused people found that they could earn an income without the destabilizing
requirement of background checks by serving as line-waiters for Supreme Court hearings that
is, until the Supreme Court banned this practice for attorneys. Supreme Court of The United
https://www.supremecourt.gov/visiting/visitorsguidetooralargument.aspx#attny. See also Barnes,
supra note 212.
217 The analogy of food stamps, rather than direct money distributions, is apposite. On the
two methods, see Robert Breunig et al., Explaining the Food Stamp Cash-Out Puzzle, Food
Assistance and Nutrition Research Report No. 12 (2001) (discussing the empirical tendency of
households to spend more on food when given food stamps relative to equivalent cash transfers).
See also Siobhan McDonough, Giving People Cash is Usually Better than Shipping Them Food,
VOX (June 28, 2022, 10:00 AM), https://www.vox.com/future-perfect/23180175/cash-aid-foodglobal-africa-famine-hunger [https://perma.cc/6U37-4FMQ].

[p. 40]
40 Draft[Vol. __
waiting for a court to render a judgment, or access to medical resources
during a pandemic.218 What ties these examples together is that society
decided that the goods should be allocated outside of markets.219 In those
cases it will certainly be true that commoditizing the line would undermine
this goal. Explicit markets in lines in such instances may be offensive to our
sense of equality and justice by expressing the view that
votes, lives, or sufferings are more valuable than those of others. By creating
markets in those domains, we risk changing the very nature of the good
itself. As Sandel notes, [h]ow a good is allocated may be part of what makes
220 Another effect is the crowding out of social
norms. If an elderly, frail woman asks a person to get ahead in line to the
social norms dictate
the answer to be that will be 221
By focusing our attention on these types of goods, we can come to
appreciate the need to regulate, and sometimes even ban, nano contracts in
certain contexts. The quest for policymakers will be two-fold: (1) identify
these contexts, and (2) find measures that can actually work to limit the
proliferation of nano contracts. To an extent, legislators have already begun
this quest by making it illegal to trade in certain rights.222 Interestingly, there
is no specific sanction for queue trading in the context of public provision
of supplies during an emergency, but it is quite likely to be frowned upon.
At the same time, it is important to recognize that limiting private
contracting, side deals, and shadow bargains is difficult. As the OberholzerGee study shows, some lines are partly protected from the incursion of
markets by social norms.223 As particular applications of nano contracts can
be designed to allow people to trade under the screen of anonymity,
compliance with social norms will become a challenge. Therefore, it is
important to heed the constraints identified in Section III.B,224 as its
solutions usually involve reliance on broader institutions and regulators may
have more success regulating these institutions than the parties themselves.
218 See, e.g., Megan Twohey, Steve Eder & Marc Stein, Need a Coronavirus Test? Being Rich
and Famous May Help, N.Y. TIMES (Mar. 18, 2020),
https://www.nytimes.com/2020/03/18/us/coronavirus-testing-elite.html
[https://perma.cc/LDM5-7N89].
219 See generally Kimberly D. Krawiec, Markets, Repugnance, and Externalities, 19 J.
INSTITUTIONAL ECON. 944 (2023), (discussing the existence of
seeks to limit).
220 SANDEL, supra note 197, at 33.
221 I do not make the argument that our existing social norms function well in general. I
submit that even common norms of courtesy suffer from deep pathologies, as explored in
Yonathan A. Arbel & Yotam Kaplan, Tort Reform Through the Backdoor: A Critique of Law and
Apologies, 90 S. CAL. L. REV. 1199, 1220 24 (2016) (discussing, as an example, apologies given
after an accident).
222 See Krawiec, supra note 219.
223 See Oberholzer-Gee, supra note 182, at 429.
224 See supra Section III.B.

[p. 41]
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So far, I have argued that nano contracts have progressive effects and
bring social utility. However, despite
grasshopper problem, there is one additional efficiency-based concern. This
is the problem of cloggers. Recall the four-way stop example. There, I
assumed that that those four drivers were already on the road. But nano
contracts can also induce more people to go on the road. With nano
contracts in place, cloggers may find it profitable to drive aimlessly, in the
hope of collecting money from drivers who are in a rush. Cloggers introduce
delays to all drivers, increase the cost of travel for drivers in a rush, and waste
their own time.
Despite this real possibility, cloggers do not deal a fatal blow to the
use of nano contracts to solve queues. This is because cloggers must bear real
costs when they engage in clogging. Airlines oversell flight tickets,
calculating that some passengers will miss their flights. When flights are
overbooked, however, airlines offer handsome payments to people who are
willing to forgo their place in line. 225 Yet, there is no evidence of widespread
abuse by cloggers who strategically book busy flights.
Because of these costs and the relatively modest payments from nano
contracts, it is unlikely that clogging will be widespread. Even in the
situations where clogging does emerge as a problem, we should consider two
responses. One is indifference: a small degree of clogging is tolerable, given
that the payments go to people who demonstrably lack more productive
avenues to eke out a living. The second is the adoption of keyhole solutions,
like banning clogging and imposing restrictions on clogging behavior (e.g.,
cars that drive aimlessly for hours will not be able to collect payments).
In summary, nano contracts offer a natural solution to the problem of
queues. Evaluation of their merits suggests that, in most cases, there are real
advantages both ethics-and efficiency-based to their adoption. True,
we need to exercise caution in the case of publicly provisioned goods, as
nano contracts can crowd out social norms and corrode the goods
themselves. However, for the vast array of products and services, nano
contracts offer a significant improvement over the current system. Payments
made through nano contracts can be progressive, providing people of limited
means with another way to monetize their spare time. Nano contracts also
reward planners and waiters, while relieving all of us from anxiety about the
future. This is not to say that a hands-off regulatory approach is necessary.
Regulatorary involvement will be needed for tasks such as issuing tokens and
delimiting permissible uses. But, as a general outlook, nano contracts hold
important potential for improving the social problem of queues.
225 Bumping & Oversales, U.S. DEPT OF TRANSP., (Apr. 15, 2021)
https://www.transportation.gov/individuals/aviation-consumer-protection/bumping-oversales
[https://perma.cc/5V4Y-8EPL] (showing that compensation for passengers who are denied
boarding on an overbooked domestic flight runs up to 400% of the one-way fare, up to $1,550).

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V. NANO LEASES
A. Nano Leases and Excess Capacity
Most of our personal resources are underutilized. Take the personal
household: the average car sits idly for 22 hours a day (i.e., 95% of the
time).226 The average drill is used for 12 minutes a year.227 A large percentage
of homes are barely used think of the kitchen, bathroom, and shower,
which are only used for a few short hours each day. We wear only one shirt
at a time, and leave every other shirt to sit idly for weeks at a time. Even
commercial assets have a high degree of downtime. Office space is used only
for the workday (and since the COVID-19 pandemic, much less);228
restaurants normally only operate for half of the day, despite occupying
expensive real estate; even factory machines rarely run 24/7.229 Idle assets
account for a sheer amount of waste.
Nano contracts offer a way to utilize this idle capacity through nano
leases,230
231 Consider a working example from a new start-up called
Helium.232 Most people have underutilized broadband internet capacity,
with median households using only one-third of the capacity used by power
users.233 Helium offers people with such excess capacity the option to install
a router that grants casual access to passersby who pay for access. The stakes
226 Paul Barter, Cars Are Parked 95% of the Time . Lets Check!, REINVENTING PARKING
(Feb. 22, 2013), https://www.reinventingparking.org/2013/02/cars-are-parked-95-of-time-letscheck.html [https://perma.cc/3RQ5-SJTV].
227 Leon Kaye, Why Sharing Makes Sense in an Over-Consuming World, THE GUARDIAN (Jan.
12, 2012 11:43 PM), https://www.theguardian.com/sustainable-business/collaborativeconsumption-sharing [https://perma.cc/9WKZ-JL2Y].
228 Jose Maria Barrero, Nicholas Bloom & Steven J. Davis, Why Working from Home Will
Stick, (N Working Paper No. 28731, 2021).
229 The Federal Reserve publishes estimates of industrial capacity utilization which reveal
that over 20% of industrial capacity goes unutilized. See FED. RESERVE, G.17 (419), STATISTICAL
RELEASE: INDUSTRIAL PRODUCTION AND CAPCITY UTILIZATION 19 (2022),
https://www.federalreserve.gov/releases/g17/current/default.htm [https://perma.cc/Y5CQ4YZB] ( 2022 period, the average total industry utilization rate was 79.7 percent;
.
230 For convenience of exposition, the following analysis groups leases, licenses, and sales
under nano contracts. Substantively, the lines between these legal categories become quite murky
at the nano level.
231 Lobel, supra note 102, at 108.
232 Kevin Roose, , N.Y. TIMES (Aug. 3, 2022),
https://www.nytimes.com/2022/02/06/technology/helium-cryptocurrency-uses.html
[https://perma.cc/54SM-37RW].
233 Broadband Insights Report (OVBI), OPENVAULT, (Q4, 2021),
https://openvault.com/wp-content/uploads/2022/03/OVBI_4Q21_Report_FINAL-1.pdf
[https://perma.cc/EW3N-47QN].

[p. 43]
2023] 𝑛𝐾 43
and duration of every transaction are small and short, making them into a
clear example of a nano contract, or even a nano lease.234
The potential of a service like Helium goes far beyond saving on
roaming charges in a new city. It opens up the ability for broad coverage for
IoT machines, offering ways for electronic scooters,
wearable objects, parking meters, cars, and even dog tags to communicate
with the world through direct internet access.235
Another impressive example is food sharing. Olio is a popular foodsharing platform that allows businesses to donate excess food to foodinsecure individuals.236 In January 2021, Olio facilitated around 14,000
food exchanges each day.237 While not the same as an individual-toindividual nano lease, the platform is arguably demonstrative of the viability
of a marketplace for excess cooking capacity. We might imagine neighbors
offering an extra pot of stew, a weekly meal prep, or a fresh-cut salad on
demand. Germaphobes might balk, but the indolent and the bon vivant will
celebrate.238 Lastly, start-up Tulerie allows people to rent out their clothes
for a short duration.239
A last illustration is something most of us would not even consider to
be capacity: aerial passage rights over land. It is quite clear that drones will
become an increasingly important mode of goods delivery, but their success
depends on the ability to pass over land without violating the aerial rights of
landowners on their delivery path.240 The issue is highly contentious, and
the drone industry tries to promote legislation that would extinguish
to exclude drones from their low airspace.241 An
alternative solution to the problem is to use nano contracts; if drones can
234 One user reports earning about a $1 a day from such nano leases in Harrisburg,
Pennsylvania. Robbie Paul, What is Helium and How Does it Work,
https://www.digikey.bg/en/blog/what-is-helium-and-how-does-it-work (Jul, 20, 2021).
235 Helium, , YOUTUBE, (Nov. 7, 2019),
https://www.youtube.com/watch?v=Vx9YyS7-d3g [https://perma.cc/7D5N-FYEC].
236 Share More, Waste Less, OLIO, https://olioapp.com/en/ [https://perma.cc/L4YQ-LHT9]
(last visited Oct. 7, 2023).
237 Tamar Makov, Tamar Meshulam, Mehmet Cansoy, Alon Shepon & Juliet B. Schor,
Digital Food Sharing and Food Insecurity in the COVID-19 Era, 189 RES. CONSERVATION &
RECYCLING, Feb. 2023 at 1, 4 fig.1.
238 There is already a secretive network of gourmet home cooking in various countries. See,
e.g., Nicholas Jordan, Under the Table: Australias Dazzlingly Diverse Home Cooking Underground,
THE GUARDIAN, (Oct. 10, 2021, 12:30 PM),
https://www.theguardian.com/food/2021/oct/11/under-the-table-australias-dazzlingly-diversehome-cooking-underground [https://perma.cc/WTR7-2U5S].
239 How it Works, TULERIE, https://tulerie.com/pages/how-it-works
[https://perma.cc/5Q97-ANYV] (last visited Oct. 7, 2023).
240 See Hillary B. Farber, Keep Out! The Efficacy of Trespass, Nuisance and Privacy Torts as
Applied to Drones, 33 GA. ST. U. L. REV. 359, 367 79 (2017).
241 See Troy A. Rule, Drones, Airspace, and the Sharing Economy, OHIO ST. L. J. 158, 159
(2022).

[p. 44]
44 Draft[Vol. __
directly negotiate, in real time, with landowners, they can offer a consensual
form which respects
technology.242
Beyond these examples, many assets owned by individuals can be
converted to use nano leases. Used books, garage-stored bikes, PC
computing power, right of way through their backyard, video games, a
mailbox address, extra closet space, access to the yard water hose, garage
access, fruit trees, and muscadine vines. Once transaction costs are low
enough, the options appear unlimited.
A few substantive caveats are in order. First, some physical costs and
limitations impede nano leases. A lawn mower, to use an example raised in
the literature, still needs to be transported from yard to yard. And given high
demand during the weekends, lawn mowers may not be perfectly susceptible
to sharing.243 Some degree of idleness is inevitable, even with ideal nano
contracts. Second, dispute costs can arise whenever a person returns the
lawnmower broken, downloads illegal materials using our IP, or commits
the cardinal sin of putting a dog ear in our book. Third, and more deeply,
the periodic
idleness of seemingly redundant assets does not necessarily bespeak
244 There is more to an asset than its utilization. It might be
but not having unique access to it will disrupt something very basic about
how I perceive myself in relation to my property not to mention
when she writes how certain objects we possess [tied] up with
[our] personhood because they are part of the way we constitute ourselves as
continuing personal entities in the world. 245
source of value to me, even though it is never utilized.
We want to be sympathetic to these arguments, but also avoid
stretching them too far. For many assets and many individuals, the reason
why assets were not shared with others had little to do with autonomy,
ownership, or necessary slack, and probably more to do with the transaction
costs involved in sharing them. The gig economy has shown that, once
transaction costs are tamed, many people are happy to let strangers use their
private homes,246 drive their cars,247 share their parking space,248 and even
provide excess storage room in their closet.249 People see the tradeoffs in their
242 For a platform-based solution, see id. at 172.
243 See FENNELL, supra note 20, at 143-44; Lobel, supra note 102, at 110.
244 FENNELL, supra note 20, at 143.
245 Margaret Jane Radin, Property and Personhood, 34 STAN. L. REV. 957, 959 (1982).
246 Rawson, supra note 66
247 How Turo Works, TURO, https://turo.com/us/en/car-rental/united-states
[https://perma.cc/C923-ZVHU] (last accessed Nov. 6, 2023).
248 How SpotHero Works, SPOTHERO, https://spothero.com/faq [https://perma.cc/ECV67B7N] (last accessed Nov. 6, 2023).
249 Sarah Holder, , BLOOMBERG (July 13, 2019),

[p. 45]
2023] 𝑛𝐾 45
lives differently than we do, and respecting those choices is part of respecting
their autonomy.
The benefits of nano leases go beyond putting idle capacity to use.250
To lessors, monetizing underutilized assets can be an important source of
income and help defray bills, while freeing up space. Nano leasing can
improve household liquidity, a deep concern that affects low-income
households with particular force.251
To lessees, the availability of nano leases makes it less necessary to
own, license, or rent goods in the first place.252 For example, knowing that
we can reliably access a laptop on demand can make it less necessary to travel
with one. Leasing also has the advantage of allowing specialization. Owning
own bandwidth connection involves research into the following:
conducing market analysis for providers, selecting the correct router,
identifying the optimal transmission channel, and updating and sometimes
even replacing the firmware. But nano lessees are spared all that trouble: they
decide how much they are willing to pay and then just connect. Potential
lessors can specialize in providing bandwidth services, letting others enjoy
their acquired expertise.
Heralding nano leases is the rise of the XaaS model discussed above.253
Consider, in particular, the model of Product as a Service ( PaaS ).254 Under
this model, a firm takes a product that it would normally sell and instead
offers it on a pay-per-use or subscription service. For example, Homie offers
individuals the ability to treat their washing machines, dryers, and
dishwashers as a service for which they pay-per-use, with the company being
https://www.bloomberg.com/news/articles/2019-07-03/rent-out-your-closet-with-an-airbnbfor-storage [https://perma.cc/WRN2-TTEH].
250 See generally, Thomas Merrill, The Economics of Leasing, 12 J. LEGAL ANALYSIS 1, 1 (2020)
(highlighting benefits of leasing such as allowing owners to finance purchases, minimizing some
ownership risks, and reducing transaction costs).
251 On positive household liquidity effects of house-sharing, see Jinan Lin, Tingting Nian &
Vijay Gurbaxani, Impacts of the Sharing Economy Entry and Regulations on Financial
Delinquencies 1 (Apr. 23, 2023) (unpublished manuscript)
(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4041490 [https://perma.cc/U6GTVQJY]); Andrew J. Bibler, Keith F. Teltser, & Mark J. Tremblay, Short-Term Rental Platforms
and Homeowner Displacement: Evidence from Airbnb Registration Enforcement 27 (Jan. 30,
2023) (unpublished manuscript) (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4390232
[https://perma.cc/X727-43QG]).
252 In fairness, the research on the relationship between ridesharing app usage and household
vehicle ownership finds contradictory and inconclusive effects, suggesting that in some instances
people may buy more cars in order to utilize them for commercial reasons. See Yanghao Wang,
Wei Shia & Zhenhua Chen, Impact of Ride-Hailing Usage on Vehicle Ownership in the United
States, 101 TRANSP. RSCH. PART D: TRANSP. & ENVT, December 2021, at 1, 1.
253 See supra notes 72 81 and accompanying text.
254 Tasker O. Generes, Jr., Get Ready for the Product-As-A-Service Revolution, FORBES (Oct.
15, 2020, 9:00 AM), https://www.forbes.com/sites/servicenow/2020/10/15/get-ready-for-theproduct-as-a-service-revolution/?sh=2fedb79a4226 [https://perma.cc/2GBM-RTCY].

[p. 46]
46 Draft[Vol. __
responsible for maintenance and detergent.255 A more familiar example is
digital-storage-as-a-service. Local storage was a significant concern before
cloud storage, making it necessary for individuals to own a large volume of
storage media disks, CD-ROMs, hard-drives, USBs, and so on. Today,
Unlike these top-down transactions, nano contracts offer the ability
to connect individuals with other individuals in a p2p fashion. This
decentralized model has important promise, especially in contexts where
spatial concerns are at issue. If Mr. Whiskers slips through the door into the
city, we can be sure to locate him using his tags and local internet
networks.257 Broad access to home laundry and ironing can make travel
anywhere much more comfortable.
laundry machine will spare me the need to buy a machine or rent a larger
apartment. Once a sufficiently broad network of continuous supply is
achieved, many other nano leasing opportunities currently covered by the
fog of the future will become visible. After all, we can trust that wherever we
go we can purchase milk on demand, making it unnecessary to haul a cow
with us.258
B. The Legal Policy on Nano Leasing
Nano contracts allow us to better utilize our resources, which
challenges our traditional notions of ownership, possession, and renting.
The shift from owning things to leasing them, particularly when applied to
a wide range of assets, represents a conceptual shift. In the Demsetzian
framework, the primary evolution in property regimes takes place between
systems of mutual governance to systems of private property.259 Nano
contracts suggest that there is another potential move in the folds from
property to contract. We can view nano contracts as an invitation to engage
in an important conversation about the social meaning of the transition to
255 Subscription on Household Appliances, HOMIE, https://www.homiepayperuse.com/en/
[https://perma.cc/YZ57-UQSA] (last visited Oct. 7, 2023).
256 Johan David Michels, Christopher Millard & Srishti Joshi, Beyond the Clouds Part I:
What Cloud Contracts Say About Who Owns and Can Access Your Content 2 (May 11, 2019)
(unpublished manuscript) (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3386609
[https://perma.cc/ZP4X-Q4YZ]).
257 Airtags already offer a similar functionality, although the scope of coverage is limited. See
Sascha Sega, Apple AirTag Review, PCMagainze (Jun. 9. 2021)
https://www.pcmag.com/reviews/apple-airtag
258 See FENNELL, supra note 20, at 136.
259 See Harold Demsetz, Toward a Theory of Property Rights, 57 AM. ECON. REV. PAPERS &
PROC. 347, 356 57 (1967); see also Thomas W. Merrill, The Demsetz Thesis and the Evolution of
Property Rights, 31 J. LEGAL STUD. S331, S332 (2002).

[p. 47]
2023] 𝑛𝐾 47
a world where governance is dominated by the latter.260 The following
discussion briefly outlines some key concerns.
One concern about nano contracts is that their use challenges the
concept of private ownership. Under the Hegelian developmental thesis, the
and maintenance of capacities and self-understandings that make up free
261 This raises interesting questions for nano contracts: is
something severed when we no longer own basic property? Is the leasing-self
different in important ways from the owning-self? What aspects of property
are tied up to autonomy: rights to exclude, abilities to break and shape, or
the temporal continuity of our relationship to objects we can call our own?
Perhaps something profound is lost when our interactions with goods are
tentative and time-bound. These are questions that future property scholars
will want to debate.
The endowment effect, a cornerstone of behavioral economics and a
highly influential idea in legal scholarship, suggests that ownership imbues
goods with special meaning.262 In experiments conducted around the world,
researchers found that people who own goods value them more highly than
they do when given the option to purchase them.263 However, when goods
are designated as trade goods, this effect disappears.264 For those who believe
in the endowment effect, nano leasing should give pause. It seems that
hyper-leasing, either as a lessee or a lessor, could fundamentally alter the
value people endow in their property.
There are also consequences for the notion of leasing itself.265 For
example, Airbnb has not only changed the way people monetize their
property rights, but it has also changed the meaning of ownership.266 People
260 See Merrill, supra note 221, at 44.
261 See ALAN PATTEN, HEGELS IDEA OF FREEDOM 140 (1st ed. 1999).
262 In psychology, see, for example, Daniel Kahneman & Amos Tversky, Prospect Theory: An
Analysis of Decision Under Risk, 47 ECONOMETRICA 263, 277 78 (1979); Daniel Kahneman,
Jack L. Knetsch & Richard H. Thaler, The Endowment Effect: Evidence of Losses Valued More than
Gains, in THE HANDBOOK OF EXPERIMENTAL ECONOMICS 939, 939 42 (Kenneth J. Arrow &
Michael D. Intriligator eds., 1st ed. 2008). In law, see, for example, Russell Korobkin, Wrestling
with the Endowment Effect, or How to Do Law and Economics Without the Coase Theorem, in THE
OXFORD HANDBOOK OF BEHAVIORAL ECONOMICS AND THE LAW 300, 300 334, (Eyal Zamir
& Doron Tiechman eds., 2014).
263 For an excellent comprehensive and mordant review, see Kathryn Zeiler, What Explains
Observed Reluctance to Trade? A Comprehensive Literature Review, in RESEARCH HANDBOOK ON
BEHAVIORAL LAW AND ECONOMICS 347, 347 93 (Joshua Teitelbaum & Kathryn Zeiler eds.,
2018).
264 Id., at 359.
265 An old joke reveals something deeper about the difference between ownership and rental.
It goes: -
266 Alexandrea J. Ravenelle, Sharing Economy Workers: Selling, Not Sharing, 10 CAMBRIDGE
J. REGIONS, ECON. & SOCY, 281, 289 90 (2017) (offering an insight into sharing economy
self-perception) Many do not see themselves as entrepreneurs, but rather just as hustlers.

[p. 48]
48 Draft[Vol. __
who rent their homes on Airbnb often make changes to make the space more
inviting, keep it cleaner, and install better amenities.267 While some of these
changes are innocuous, even salutatory, they can also redefine how people
think about their homes: from a private sanctuary to a place of business.268
Contrary to what one might expect, the erosion of ownership may be
compatible with an array of anti-consumerist, environmentalist, and Marxist
philosophies.269 Under these theories, private property and excessive
consumption are objectionable. Some of these ideas can be traced back to
the work of economist Thorstein Veblen, who argued that conspicuous
consumption, fueled by a desire to signal social status, drives consumers to
consume in excess.270 The result, as explored by thinkers like Juliet Schor, is
an overconsumption that contributes to environmental degradation.271 One
solution advocated by these movements is the sharing of resources among
members and the removal of the stigma around owning few items.
Communal living arrangements, such as the family, private clubs, and
Moshavim and Kibbutzim, all exemplify models of shared property
governance.272 Nano contracts involve a profit motive and can lead to
concentration of capital, so they are by no means equivalent to these
arraignments. Nevertheless, they may also address concerns with private
property and waste. Nano contracts allow multiple people to share the same
goods and thereby considerably reduce private ownership. The greater
utilization of assets would reduce the need to overproduce items like drills
and tractors, mitigating the toll on the environment. To the individual,
nano contracts could offer a roadmap to a self that is not anchored by the
need to own. Life-as-a-service, if you will.
Jurisprudentially, nano contracts also have a disruptive effect, going
to the very heart of the legal notion of property. As Henry Smith explains,
Id. at 288 92. Some, however, leverage their business into a growth strategy. Id.
267 The Reddit subcommunity r/AirBnB
up See, e.g., u/flackahino, Hi Reddit! What Are
Some Ways I Can Make My Listing/Place More Attractive? Also, as is, it 110? 10 Being Best, REDDIT (Oct. 26, 2017, 11:54 AM),
https://www.reddit.com/r/AirBnB/comments/78wgyg/hi_reddit_what_are_some_ways_i_can_
make_my/ [https://perma.cc/L7RU-9THB].
268 See generally Rodrigo Saturnino & Helena Sousa, Hosting as a Lifestyle: The Case of Airbnb
Digital Platform and Lisbon Hosts, 12 PARTECIPAZIONE E CONFLITTO 794, 810 12 (2019),
ontological
business).
269 For a broad, critical review of the anti-consumerism movement, see Katerina Makri,
Bodo B. Shlegelmilch, Robert Mai & Katharina Dinhof, What We Know About Anticonsumption:
An Attempt to Nail Jelly to the Wall, 37 PSYCH. & MKTG. 177, 177 (2020).
270 VEBLEN, supra note 210, at 69.
271 JULIET B. SCHOR, THE OVERSPENT AMERICAN: UPSCALING, DOWNSCALING, AND THE
NEW CONSUMER 156 (1st ed. 1998).
272 See Richard D. Schwartz, Social Factors in the Development of Legal Control: A Case Study
of Two Israeli Settlements, 63 YALE L.J. 471, 474 75 (1954).

[p. 49]
2023] 𝑛𝐾 49
property is an architecture a system, rather than the collection of isolated
functions implied by the metaphor of the easily separable bundle of sticks.
As Smith argues, property is, first and foremost, about the ability to put
assets to use,273 with other features (e.g., exclusion rights and leasing rights)
emerging only as means to this end.274 Accordingly, many of the features of
property law are contingent. For example, the right to exclude is not an
inherent aspect of property, but rather an attempt to solve a problem of
transaction (or, more specifically, information)
transaction cost world we could use all governance all the time, whether
supplied by government or through super-fine grained contracting among
all the concerned 275 Nano contracts arise from asymptotically low
transaction costs between a large mass of users. Thus, they offer the ability
to develop radically different governance mechanisms, far more fine-tuned
regimes.
Contracts do not go unscathed either. Nano leases straddle sales,
leases, and licenses and present a difficult question for their classification.
For Article 2 of the U.C.C. to apply, the contract must involve a sale of
goods, which means the passing of title.276 While this may be true of some
nano contracts, Article 2 of the U.C.C. will not apply to, say, bandwidth
access agreements. Further, the transactional scale of nano contracts makes
Article overall regulatory approach far less appealing. Unlike sellers of
heavy equipment, it makes little sense to offer parties to nano leases extensive
inspection rights or insist on perfect tender rules.277 These rights become
increasingly less applicable when the scale is as small as someone who is
licensing picking rights from their prolific mulberry tree.
Some transactions may be thought of as nano leases, thus controlled
by U.C.C. Article 2A.278 However, at this scale, leases become hard to
distinguish from licenses. The proper classification has significant practical
significance, as it affects matters such as jurisdiction, termination rights, and
the availability of self-remedies. Under 2A-103(J), a lease involves the
transfer of possession,279 but a transfer of possession is also consistent with a
license. To distinguish the two, courts find licenses for non-exclusive grants
273 Henry E. Smith, Property Is Not Just a Bundle of Rights, 8 ECON. J. WATCH 279, 281
(2011) (arguing that ends in property [including the right to exclude] relate to our true interests
served by property: interests in using things. ).
274 Id.
strategies. ).
275 Id. at 282.
276 The UCC defines as the passing of title from the seller to the buyer for a price.
U.C.C. § 2-401 (AM. L. INST. & UNIF. L. COMMN 1977).
277 U.C.C. § 2-513 (providing inspection rights and a right to reimbursement for inspection
costs if the goods fail to conform and are rejected).
278 U.C.C. § 2A.
279 U.C.C. § 2A-103(J).

[p. 50]
50 Draft[Vol. __
of possession,280 revocable agreements,281 and when the scope is
limited to in personam rights (although this latter examination often appears
conclusory).282 The problem is that an extremely short extension of
possession is often indistinguishable from exclusive possession, and
revocation at these time scales is often irrelevant. Thus, when a nano
these issues become extremely hard to disentangle.
In terms of policy, one major concern with nano contracts for excess
capacity is distributional. Take the case of broadband. As noted, most users
underutilize their capacity.283 As a result, broadband suppliers can offer
better pricing, factoring in actual average usage rates. If certain home users
start commercializing their excess capacity, actual usage will rise, increasing
service costs for the providers. It is likely that costs will rise, not only for
those who nano lease access, but for everyone. This cross subsidy creates
unfairness between consumers. There are instances where increased capacity
has broader and less obvious effects. In an apartment building, it matters
whether an apartment is utilized by a single person or revolving strangers.
Not necessarily because of the apartment space capacity itself, but because
of greater utilization of shared resources such as elevators, a sense of
community, or simply noise.
At the same time, nano contracting can reduce net capacity usage.
Because Uber increases the revenue from driving, it can lead to greater road
usage. Nonetheless, a study on with respect to road capacity
found that Uber actually reduced congestion by increasing vehicle
occupancy. Further, surge pricing possibly reduces the capacity load in time
of great demand.284 A study of car sharing found improved welfare,
280 See In re Caribbean Petrol. Corp., 444 B.R. 263, 270 71 (Bankr. D. Del. 2010); Gage
v. City of Topeka, 468 P.2d 232, 232 (1970); Jetz Serv. Co. v. AGS Meadow Oaks Assocs., No.
92 CIV. 4439 (LLS), 1993 WL 17201, at *2 (S.D.N.Y. Jan. 14, 1993); United States v. Anderson
Cnty., Tenn., 575 F. Supp. 574, 578 (E.D. Tenn. 1983), affd, 761 F.2d 1169 (6th Cir. 1985);
cf. Spinks v. Equity Residential Briarwood Apartments, 90 Cal. Rptr. 3d 453, 482 (6th Dist.
2009).
281 See e.g., N. Alaska Env't Ctr. v. State, Dep't of Nat. Res., 2 P.3d 629, 635 (Alaska 2000)
282 Joplin Supply Co. v. West, 130 S.W. 156, 161. (Mo. App. Ct. 1910) There is a marked
difference between a license and a lease. Under a lease, the right of possession against the world
is given to the tenant, while a license creates no interest in the land, but is simply an authority or
283 See supra note 233.
284 See Samuel Fraiberger & Arun Sundararajan, Peer-to-Peer Rental Markets in the Sharing
Economy, N.Y.U Stern School of Business Research Paper 19 (2017),
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2574337 [https://perma.cc/A98U-JTYA].
For a general review, see Volker Stalker, Aaron Kolleck, Saba Rebecca Brause & Nadine Schawe,
Navigating the Landscape of the Sharing and Gig Economy Literature: A Systematic and
Interdisciplinary Review 10 (Sept. 2021) (unpublished manuscript)

[p. 51]
2023] 𝑛𝐾 51
especially among lower-income consumers. The authors propose that
n economic force that democratizes access to a
What contracts can do contracts can also undo. One lesson from
copyright law is that there are strong upstream pressures to use contractual
schemas to limit the ability to utilize property rights downstream.286 If
aggressive nano leasing reduces demand for goods, if it increases bandwidth
usage, or if it allows owners to extract rents from goods, producers may seek
to use contractual mechanisms to prevent nano leases. As an analogy,
producers of electronic devices have made it deliberately difficult to contract
out repair services of 287 In a similar
fashion, Internet providers may limit the ability to share bandwidth in its
terms of service. In the case of repairs, this limitation led to the formation
of a large advocacy coalition, demanding a right to repair.288 Should there
be a right to nano lease?
In sum, nano leasing offers a way to drastically increase the utilization
of assets. This effect can usher in great social advances, contribute to the
ethics of consumption, and reduce the resource load on the planet. These
benefits notwithstanding, a move from property to contracts raises several
difficult concerns. There is the philosophical question about autonomy and
self-definition in a world where little belongs to us. Then there are some
distinctly legal questions about the classification of nano contracts and the
type of rights that should be associated with a nano lease, relative to a macro
lease. Distributionally, nano contracts have ambiguous effects, and there are
at least some areas where few will be enriched at the expense of the many.
The passage of ordinances in many cities against short-term rentals exposes
how expanding rental rights can have significant effects on communities.289
As we move to a nano contract future, these questions will become
increasingly important.
3TCG]).
285 Fraiberger & Sundararajan, supra note 284, at 22 (finding that peer-to-peer rental-income consumers
286 See Guy A. Rub, Copyright Survives: Rethinking the Copyright-Contract Conflict, 103 VA.
L. REV. 1141, 1157 58 n. 69 (2017).
287 Roy Shapira, Consumerist Waste: Beyond Repair, 122 MICH. L. REV. (forthcoming 2023).
288 Who We Are, RIGHT TO REPAIR, https://repair.eu/about/ [https://perma.cc/LN2NAFW6] (last visited Oct. 7, 2023).
289 Amanda Hoover, The End of Airbnb in New York, WIRED (Sept. 5, 2023, 6:00 AM),
https://www.wired.com/story/airbnb-ban-new-york-city [https://perma.cc/9PF3-MBBA].

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VI. NANO GIGS
A. Nano Work and the Problem of Casual Work
Nano jobs like
or helping to replace a punctured tire become possible with nano
contracts. What would be the impact of nano contracts on labor markets?
For a close comparison, the gig economy has had a profound impact on the
lives of millions of Americans. Estimates are speculative, but one finds fiftynine million adults participating in it almost 36% of the entire US
workforce.290 This transition from jobs to gigs represents a shift towards the
utilization of skills on a more casual basis than traditional employment
contracts and independent contracts. However, the gig economy has not
always been a positive force, and the impact it has had on employment and
employee rights has been a major point of contention and focus of scholarly
debate in recent years.291
There is plenty of room at the bottom, even in labor markets. Indeed,
services such as MTurk (wherein a worker might be paid $1 to watch a 1-
) already blur
the line between micro and nano contracts.292 Many people are willing to
use their idle time, such as during commutes or in between meetings, to
engage in short-term paid tasks. For example, individuals with relevant
expertise could provide casual customer service, solve technical problems,
label data for AI projects, monitor security cameras, clean public spaces, or
recharge electric scooters. Just think of the users of public transportation and
how they can leverage the long, circuitous rides if they could access nano
jobs on their commute. The potential applications of nano contracts in labor
markets are vast and could provide new opportunities for individuals to earn
income and for businesses to access specialized skills on demand.
The rise of the gig economy has made the point straightforward. There
is a large untapped market for labor. Tapping into it can vastly improve the
fortunes of millions. Nano work offers workers the opportunity to engage
in work with little commitment. There is also an important, less obvious
progressive element to fleeting nano engagements. One lesson from policies
like California Bottle Bill (whereby a small payment is paid when bottles are
properly disposed)293 is that providing opportunities for people to work on
290 Chris Kolmar, 23+ Essential Gig Economy Statistics [2023]: Definitions, Facts, and Trends
on Gig Work, ZIPPIA (Feb. 16, 2023), https://www.zippia.com/advice/gig-economystatistics/[https://perma.cc/8H8S-UPZK].
291 See Altanshagai Batmunkh, Maria Fekete-Farkas & Zoltan Lakner, Bibliometric Analysis
of Gig Economy (May 7, 2022) (unpublished manuscript) https://ssrn.com/abstract=4102964
[https://perma.cc/C46D-YCPM] (showing the dramatic growth of articles discussing the gig
economy from 2104 2022).
292 Oranburg & Palagshavili, supra note 98, at S228.
293 Cal. Pub. Res. Code § 14572 (West)

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a casual, non-committed basis, can serve as an important anti-poverty
tool.294
B. The Legal Policy on Nano Work
Considering the regulatory implications of nano gigs requires a sense
of their effect on the rights of workers. A good source of inspiration here is
the gig economy, although in some ways what the net
effects are, to borrow from Zhou Enlai. 295
One persistent line of critique against the gig economy depicts its
value as mere regulatory arbitrage. That is, rather than providing any actual
hygiene, and other regulatory requirements that apply to taxis and hotels . . .
. [S]haring economy firms flourish by reproducing existing services without
296 Recent work has attempted to evaluate
these concerns. Using an extensive data source, researchers from Harvard
Business School and the London School of Economics concluded that this
critique may be overstated.297 They found that regulatory arbitrage only
explains part of the value of such labor agreements.298 In fact, they find that
this economy provides tremendous value to workers who, relative to their
alternative opportunities, earn staggeringly 26% higher wages.299
Another critique comes from the potential transformation of
employment law to contracts. Employment law is meant to create a
mandatory framework that constrains private contracts and offers some
minimum protections for workers.300 The gig economy has been accused of
creating a new class of workers,301 what economist Guy Standing calls the
294 Martin Medina, The Informal Recycling Sector in Developing Countries, GRIDLINES,
Oct. 2008, at 1, 1 rcent of the urban population at least
15 million people survive by salvaging recyclables from waste . . . .
informal waste collection comes at a serious health risk. Eric Binion & Jutta Gutberlet, The Effects
of Handling Solid Waste on the Wellbeing of Informal and Organized Recyclers: A Review of the
Literature, 18 INTL J. OCCUPATIONAL & ENVT HEALTH 43, 44 48 (2012).
295 William P. Alford, Exporting The Pursuit of Happiness, 113 HARV. L. REV. 1677, 1705
(2000) (reviewing THOMAS CAROTHERS, AIDING DEMOCRACY ABROAD: THE LEARNING CURVE
1999) (recounting the Zhou Enlai saying).
296 Ryan Calo & Alex Rosenblat, The Taking Economy: Uber, Information, and Power, 117
COLUM. L. REV. 1623, 1626 27 (2017).
297 See Christopher T. Stanton & Catherine Thomas, Who Benefits from Online Gig Economy
Platforms? 1 ( Working Paper No. 29477, 2021).
298 See id. at 2 7.
299 Id. at 2 3.
300 See N.L.R.B. v. Jones & Laughlin Steel Corp., 301 U.S. 615, 622 (1937) (protecting the
-
.
301 See Stocker, Kolleck, Brause & Schawe, supra note 284, at 3.

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precariat, 302 whose source of income is ever contingent. Many legal
scholars, such as Catherine Fisk, have thus called for an expansion of labor
protections to these workers.303 A large legal battle is currently underway,
attempting to define Uber drivers as employees of Uber.304 Recently, the
Supreme Court of England ruled that Uber drivers are workers, although it
left open questions of whether they are also employees.305 On this side of the
pond, Uber drivers are still not recognized as employees, although the legal
battle continues.306 The difficulties imposed by Uber to legal classifications
are an order of magnitude larger for nano contracts. If
involvement with the platform can be measured in hours, then nano work
will be measured in minutes at most. This will make it ever more difficult
to allot nano workers vacation days, social benefits, minimum wage, and
other employment protections. The policy reaction can be to adapt labor
ittle good has come
from trying to force the square peg of how people work today into the round
hole of 1930s-307 Instead, it might be necessary to expand the
social net, either through Universal Basic Income or other social programs,
regardless of employment status.308
A different type of reaction comes from focusing on those who live
the most precarious lives. Some forms of nano employment solve a
longstanding problem among those who face barriers to joining the formal
job market for reasons such as discrimination, criminal history, and mental
wellness. One unexpected lesson from bottle recycling programs is that they
provide an important source of income for extremely poor households; by
one estimate, as much as 6.8% of their annual income. 309 Nano
employment, like the bottle recycling example, can be an important antipoverty mechanism.
Before concluding this Section, a brief remark on work and the self.
Just as much as nano leases solve the problem of asset underutilization, nano
contracts can be cast as solving the problem of labor underutilization. But is
302 GUY STANDING, THE PRECARIAT vii (2014).
303 Catherine Fisk, Hollywood Writers and the Gig Economy, 2017 U. CHI. LEGAL F. 177,
177 78.
304 See e.g., Kate Conger and Daisuke Wakabayashi, Massachusetts Sues Uber and Lyft Over
the Status of Drivers, NYTIMES (Jul. 14, 2020).
305 Uber BV v. Aslam [2021] UKSC 5 [starts on 2, pincite is 28].
306 See Michael C. Harper, Using the Anglo-American Respondeat Superior Principle to Assign
Responsibility for Worker Statutory Benefits and Protections, 18 WASH. U. GLOB. STUD. L. REV.
161, 164 65 (2019) (describing how the rise of digital platform work without traditional
employment contracts tain judicial response to the challenge of
307 Oranburg & Palagashvili, supra note 98, at S232.
308 See Miranda Perry Fleischer & Daniel Hemel, The Architecture of a Basic Income, 87 U.
CHI. L. REV. 625, 625 26 (2020).
309 Bevin Ashenmiller, Economic Underpinnings of Recycling and Waste Disposal Policies, The
Effect of Bottle Laws on Income: New Empirical Results, 101 AM. ECON. REV 60, 64 (2011).

[p. 55]
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this a problem? To some, idleness and leisure are activities (or anti-activities)
that help define the self. When one works, one is under the command and
prerogative of the employer. If nano contracts expand the space of life
designated as work, they shrink the space that is more easily identifiable as
autonomous, where our own caprice reigns. Philosopher Byung-Chul Han
has chastised late-stage capitalism as an era where exploitation comes from
the self: [E] 310 On this view, nano
contracts threaten the last vestiges of individuality by expanding the fences
of our work camp to every second of leisure.
I hesitate to offer a general response to such general philosophical
concerns. However, it is at least worth noting that for many people, shorter
engagements can be life changing. The gig economy allowed many people
who were shunned by traditional labor markets to find a source of
income single parents who could not commit to a regular nine-to-five
job, small business owners who had seasonal lulls, or a recent graduate
waiting to land her first job. Nano gigs can do the same for those looking to
utilize extra time waiting
In sum, this Section presented a potential application of nano
contracts to employment. The flexibility they offer is unmatched and the
potential is tremendous. But nano work also makes the legal challenges of
defining employment, and ensuring employee rights, harder than ever. If
employment collapses to contract, a century of worker rights advocacy will
crumble. Nano work also raises some preliminary questions about inequality
and the need for demarcation between the space of work and the space of
self.
VII. NANO ACCIDENTS
Famously, the Coase theorem holds that the primary reason why we
need tort law is transaction costs.311 Accidents, like sparks emitted from
passing trains into adjoining fields, create costs and risks. If transaction costs
were low, these problems could have been solved by farmers and railways
directly, as they would negotiate to the efficient outcome. But, as Coase and
the legal scholarship that built on him vividly recognized, ours is not that
world.312 In our world, transaction costs are sufficiently high to prevent such
bargains, making it necessary for the law of tort to decide the outcome of
accidents. Since then, some of the most important works in tort theory have
tried to design rules that would approximate the results of bargains under
ideal conditions.313 As the sophistication and complexity of this literature
310 BYUNG-CHUL HAN, THE BURNOUT SOCIETY 19 (Erik Bulter trans., 2015).
311 See Ronald H. Coase, The Problem of Social Cost, 3 J.L. ECON. 1, 26 27 (1960).
312 See Richard A. Posner & William M. Landes, The Positive Economic Theory of Tort Law,
15 GA. L. REV. 851 (1981).
313 See Keith N. Hylton, A Missing Markets Theory of Tort Law, 90 NW. U. L. REV. 977, 978
(1996).

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shows, the task of designing optimal tort rules is challenging, and real life
tort rules likely fall short of this ideal.
Nano contracts will not abolish transaction costs, but they can make
many of them close to trivial. The four-way stop illustrates a situation where
transaction costs impede the efficient allocation of the scarce resource (i.e.,
right of way) as it will be unrealistic for drivers to discuss among themselves
who should get the right of way.
Traditionally, contracts and torts involve mostly separate realms.
While contracts are based on agreement and intent, torts address
nonconsensual interactions accidents. The contention here is that nano
contracts expand the range of possible consensual agreements. As such, they
can turn large spheres of tort law into contract law. To evaluate this
contention, let us consider such an instance, using a modified version of the
scenario suggested by Coase:314
A train is speeding down the tracks in Iowa. Suddenly, the
computer reports an imminent electrical load. To avoid damaging the
engine, the operator must quickly decide where to emit the sparks: to the
right, where there is a corn field; or to the left, where there is a soybean field.
The operator knows that the sparks will cause damage either way. A decision
must be made quickly. What should the train operator do?
Tort law tries to
law, the train company will have to pay the field owner for all the harm its
sparks caused.315 The hope is that if the train company will internalize the
costs of the accident, it will be motivated to minimize the amount of harm
its sparks cause. 316 However, applying tort law in this situation is
problematic. Estimating the actual harm caused by the sparks is difficult,
and it is likely that the legal system s assessments deviate significantly from
the true amount of harm inflicted. This is further complicated because juries
may be systematically biased in favor of farmers or trains, so even on average
damages will not equal the true harm. Another complication is the effect of
time. Currently, the market price for soybeans is much lower than corn.317
But these prices fluctuate heavily over time and the operator must decide
without a confident sense of what prices are or will be at the time of
adjudication.
Now suppose the market rates for soybean and corn are $1,118 and
$758 respectively and admittedly, this example requires more in the way
of suspension of disbelief that the farmers have a nano contract app that
can automatically communicate with adjacent conductors. Using a real-time
lowest price auction, the conductor can negotiate the accident with the
farmers. Neither farmer wants the sparks to cause harm to their crops, but
314 Coase, supra note 311, at 29.
315 See generally Mark F. Grady, Common Law Control of Strategic Behavior: Railroad Sparks
and the Farmer, 17 J. LEGAL STUD. 15, 19 25 (1988) (reviewing tort liability for emitted railroad
sparks).
316 Richard A. Posner & William M. Landes, The Positive Economic Theory of Tort Law, 15
GEO. L. REV. 851, 854 (1980).
317 See United States Department of Agriculture, National Agriculture Statistics Service,
Crop Values Annual Summary (Nov, 13 2023) https://afdc.energy.gov/data/10338

[p. 57]
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the corn farmer knows that the expected harm to their field is $1,118.
Therefore, they bid $5,000 to protect their profits. This allows the corn
farmer to come out ahead in the event of an accident. The soybean farmer
also sees an opportunity to protect their profits. Since the expected harm to
their field is only $754, they can outbid the corn farmer and ask for only
$4,000. Even at this reduced rate, the soybean farmer will come out ahead
from the accident. Since they will still profit even if they bid $3,000, they
will underbid accordingly. Through this split-second auction process, it is
expected that the soybean farmer will win with a bid of $1,117. This will
cause the conductor to emit sparks onto the soybean field, causing harm of
$754. The soybean farmer comes out $363 ahead, and the more valuable
crop is saved.
From a social perspective, this is the desirable outcome we want
the inevitable spark discharge to cause minimal harm. The tort system,
however, cannot guarantee this outcome because its valuation only occurs
after the critical decision has been made. On the other hand, a nano contract
can assure that this desirable outcome will follow. It is worth noting that
even if the trains computer could consult commodity prices in real-time,
this outcome would not be guaranteed. Negotiated contracts offer a real
advantage over market prices, especially when the owner plans to use their
assets in nontraditional ways.
Nano contracts also offer a distributional advantage. Under the tort
system, the soybean farmer is only entitled to $754, whereas under the nano
contract system, the farmer could recover $1,117. If in a given context
victims are systematically poorer than tortfeasors, or if tortfeasors can escape
judgements, this would be a progressive improvement over the status quo.318
But even absent such distributional considerations, a working system of
If accidents were completely subject to contracting, we might have to
worry about a different problem. If an accident is inevitable, the farmers act
as a monopoly, and they can demand an arbitrarily high price from the train
company. Tort law, however, breaks this monopoly. If the parties fail to
negotiate, the standard rules of tort law apply. This means that the train
company will have to pay the farmer for the harm caused, as later assessed
by the court. This assures us that the parties will nano contract only when
they deem the outcomes superior to those of protracted litigation with
uncertain valuation.
A broader question is the dynamic effects of nano contracts on
accidents. If this road is accident-prone (and there are, indeed, various sites
where accidents are common), the soybean farmer will soon make the same
318 See Richard A. Epstein, The Social Consequences of Common Law Rules, 95 HARV. L. REV.
1717, 1734-5 (1982) (arguing that there tends to be an asymmetry of wealth between injurers
and victims in personal injury litigation). On judgment evasion, see Yonathan A. Arbel, Asset
Shielding and the Theory of Credit, 48 INTL REV. L. & ECON. 26 (2016) (describing the incentives
to shield assets from legal collection).

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realization as father in Catch-22.319 That is, she can make
more money from not growing anything. That way, she can collect $1,117
every time a train emits sparks with little effort.320 While this seems initially
like a perverse outcome, it is actually quite desirable. The farmer would only
abandon their crops if the probability of accidents is sufficiently high. But if
accidents in an area are so common, society is well served by having safe
areas where sparks can be discharged. On the other side of the ledger, train
companies may invest more in anti-spark technology to avoid those regular
and predictable payments.
This example offers a view on how nano contracts can efficiently
minimize harm to victims from accidents and offer compensation for the
residual harm that is agreeable to the victim. Such a solution can be extended
to many other instances, although caution is required. For reasons that
roughly track the discussion on the commodification of queues,321 we
should be wary about the contractualization of accidents that involve
bodily harm. In such cases, nano contracts can violate deep moral and social
norms. But in many other cases, like those involving trespass or property
damage, nano contracts present an opportunity to rethink the alienability of
accidents.
parties would negotiate the most efficient outcome in the absence of
transaction costs.322 If accidents cannot be economically prevented, the nano
contract would ensure that the harm is minimized. In any event, the optimal
result would ensue, but there will be no need for direct state involvement.
The parties will negotiate the cost of accidents among themselves. Further,
if society cares about the distribution of costs, it can do so via changes to the
background tort regime.
VIII. CONCLUSION
At this late point, some readers will find themselves in one of two
groups. One group will see nothing inevitable about nano contracts. A legal
sci-fi that can be easily dismissed out of hand. Another group will have the
exact opposite reaction: nihil sub sole novum (nothing new under the sun).
To them, nano contracts amount to no more than a rebranding of gig
economy agreements, if not of plain vanilla contracts. The former will find
nano contracts fantastic, as they will never materialize; the latter will find
them trite, as they have always existed.
319 JOSEPH HELLER, CATCH-22 81 102 (1st ed. 1961).
320 Under the tort system, however, the farmer will not be able to collect anything unless she
grows crops. Thus, in accident-prone sites, tort law can lead to excessive and futile investment.
321 See supra Section IV. Nano LinesB. Legal Policy on Nano-Contracting Lines
322 See Coase, supra note 311, at 42.

[p. 59]
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If there is still room for pleading with these readers, I think both
groups have missed out on a key aspect of the Article. Consider the wise
insight of science fiction author Frederick Pohl [A] good science-fiction
story should be able to predict not the automobile but the traffic jam 323
Accordingly, the point here is not to make precise predictions to two decimal
points about a bright future, or to claim to have reinvented the law of
contracts. The goal of this Article is to think, in a sustained manner, about
the culmination of deep existing trends, such as the digitization of
transactions, nanonization in the XaaS sphere, minimization of
transactional scale, and the tokenization of ownership.324 Transactions want
to be small. What emerges from this investigation considering the history of
contracts is the insight that scale has a quality of its own. Smaller transaction
scale opens new markets, some exciting and liberating, others troublesome
and antithetical to our values. Diminishing transactional scale brings with it
both the car and the traffic jam. Paying attention to these implications is
worth the price of admission.
There is plenty of room at the bottom. While I am cautiously
optimistic about the future of nano contracts, there is definitely room for
good faith disagreement over whether the net is positive or negative.
Clearing up lines effectively, liberating people from the onus and the chase
of ownership, and providing new job opportunities can be socially
transformative. At the same, we can recognize that there is certainly
something unheimlich about a person without possessions (or rather, a
person with unlimited possessions, but none of them hers) and something
of the
queue ethics clearly shows that some find it uncanny to let those in a rush
or with less patience buy priority from those willing to sell it, and letting
people cut in line to the voting booth certainly triggers ethical
goosebumps.325 These differing judgments suggest that there is also plenty
of room for scholarly analysis: which future trajectory do we want to pursue?
How might we influence the market? And on a more meta level, should we
think about these issues now or let the market play out and attempt to repair
the issues ex post?
This article did not attempt to solve all these traffic jams. Rather, it
seeks to offer a clear perspective on nano contracts, their structure, and legal
implications for lines, property, employment, and torts. Hopefully, these are
challenges that would urge us to think about new frameworks the next time
we are stuck at a four-way stop.
323 Frederick Pohl, The Great Inventions, GALAXY MAGAZINE SCIENCE FICTION, Dec. 1968,
at 6.
324 See supra Part III. Fundamentals of Nano Contracts: Platforms, Protocols, and Legal
Technology
325 SANDEL. supra note 197, at 28.