The Feasibility of a Smart Contract "Kill Switch"

TL;DR

This paper analyzes the technical and regulatory aspects of implementing smart contract "kill switches" across various blockchain platforms, exploring their feasibility, challenges, and implications for decentralization and compliance.

Contribution

It provides a comprehensive comparison of existing termination mechanisms and evaluates their alignment with EU data protection and regulatory requirements.

Findings

Diverse approaches to smart contract termination exist across platforms.

Implementing kill switches involves balancing regulatory compliance and decentralization.

Technical challenges and security implications are significant in deploying kill switches.

Abstract

The advent of blockchain technology and its adoption across various sectors have raised critical discussions about the need for regulatory mechanisms to ensure consumer protection, maintain financial stability, and address privacy concerns without compromising the foundational principles of decentralization and immutability inherent in blockchain platforms. We examine the existing mechanisms for smart contract termination across several major blockchain platforms, including Ethereum, BNB Smart Chain, Cardano, Solana, Hyperledger Fabric, Corda, IOTA, Apotos, and Sui. We assess the compatibility of these mechanisms with the requirements of the EU Data Act, focusing on aspects such as consumer protection, error correction, and regulatory compliance. Our analysis reveals a diverse landscape of approaches, from immutable smart contracts with built-in termination conditions to upgradable smart contracts that allow for post-deployment modifications. We discuss the challenges associated with implementing the so-called smart contract "kill switches," such as the balance between enabling regulatory compliance and preserving the decentralized ethos, the technical feasibility of such mechanisms, and the implications for security and trust in the ecosystem.