> they swap a basket of assets for another basket of assets atomically and without counterparty risk.
Of course there is counterparty risk - the contract writer could be adversarial. People dont always audit smart contracts (or may not realistically be able to, especially if the contract writer is attempting to obfuscate a subtle bug they can use for their own advantage). Thats the point of the above comment.
If the traditional world, courts would interpret such a contract as not valid. In the DeFi world, code is law - at least until law enforcement and regulatory agencies catch up to it.
Fair enough, if you consider that to be counterparty risk. I prefer to think of that as an entirely separate kind of risk ('software risk'). This is partly because these contracts can be written by entirely separate parties having nothing to do with the counterparty (and sometimes provided as public infrastructure, since they don't cost the writer anything beyond the initial deployment cost).
I suppose to some extent it depends whether you consider the smart contract itself as a virtual counterparty that could default either through malicious coding or through bugs that allow hackers to steal assets.
I also don't see any problem with combining smart contracts and real legal contracts. If someone scams you in the DeFi world, they're scamming you in the real world too. I know that at least the UK Supreme Court has ruled that digital assets are property at common law.
Of course there is counterparty risk - the contract writer could be adversarial. People dont always audit smart contracts (or may not realistically be able to, especially if the contract writer is attempting to obfuscate a subtle bug they can use for their own advantage). Thats the point of the above comment.
If the traditional world, courts would interpret such a contract as not valid. In the DeFi world, code is law - at least until law enforcement and regulatory agencies catch up to it.