Blockchain and Smart Contracts
TODO: Links.
One of the three use-case categories for the SMUCCLaw project is “smart contracts.”
The phrase “smart contracts” is often associated with the concept of “blockchain.”
What is Blockchain
Blockchain is a technology originally designed to facilitate “cryptocurrency.” The main technological features of blockchain are that it allows a large number of people to all have access to the same authoritative data, it allows those people to add to that data, does not allow then to modify any data already present, and allows all that to happen without relying on a trusted third party. So nothing other than people representing a majority of the tokens on the network have the ability to change the data.
What are Smart Contracts?
Smart contracts are contracts (in the sense of promises made between parties that are intended to give rise to legal obligations) that have been automated to some degree. If you have an employment agreement, and your employer is using an automated system to calculate your pay on the basis of your electronic time sheets, that is a “smart contract.”
Arguably, the contract “if you give me $1, I will give you a can of soda” is automated in vending machines, making vending machines a very familiar form of smart contract.
More sophisticated forms of smart contracts involve encoding the terms of the contract in ways that the actions that the contract requries of parties can be automated. So, e.g., payment can be sent automatically when the product is recoded has having arrived electronically.
What Does Blockchain Have to Do with Smart Contracts
It is very common for smart contracts to want to automate the delivery of payment. Blockchain is an appealing method of doing so, because it is independently verifiable. The transaction is its own receipt. So smart contracts are one use case for blockchain, and many smart contract technologies are designed specifically with the objective of simple integration with blockchain platforms.
The Accord project, for example, is aimed at writing smart contracts that can be executed on the etherium blockchain.
So what?
Most people when they hear “smart contracts” are going to think that we are talking about “smart contracts implemented on blockchain”.
We aren’t, at least not specifically.
We’re talking about the formmalization in computer executable languages, of the terms of contracts, to allow for a number of capabilities, only one of which is automating the execution of the contract, only one method of which is performing transactions on a blockchain.
