Do Smart Contracts Lower Transaction Costs? A Critical Assessment of Coasean Blockchain Coordination

Abstract

This paper provides a critical examination of the widespread claim that smart contracts reduce transaction costs. The analysis is grounded in Ronald Coase’s theory of the firm and focuses on the role of transaction costs in determining the structure of economic coordination. Through a comparative analysis of traditional contractual mechanisms and algorithmic execution in blockchain environments, the study shows that smart contracts do not eliminate transaction costs but rather transform their structure. While automation can reduce certain ex post costs related to monitoring and enforcement, it simultaneously increases ex ante costs associated with the specification of contractual terms, formalization of obligations, and verification of code. The paper also examines the dynamics of transaction fees and network activity in Ethereum. The empirical results do not reveal a stable negative relationship between rising infrastructure fees and platform usage. These findings suggest that the diffusion of smart contracts leads primarily to a structural transformation of transaction costs rather than their straightforward reduction, refining the Coasean interpretation of how digital technologies affect the boundaries of the firm.