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Conceptualizing Smart Contracts
- 1. Conceptualizing Smart Contracts Stanford LawWorkshop Computable Contracts Aaron Wright Cardozo Law School January 21, 2016
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- 3. Database maintained bya network of computers.
- 4. It’s not ownedby any one entity or person. It’s collectively managed by a peer-to- peer network through software.
- 5. Data about transactionsare stored in a series of “blocks” which are organized in a sequential “chain.”
- 6. Enables transactions involvingthat data to be processed and validated in a way that does not require parties on the network to trust one another
- 7. Why do blockchainsmatter?
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- 12. New part ofthe Internet stack
- 13. “Decentralised systems, suchas the blockchain protocol, threaten to disintermediate almost every process in financial services”
- 14. What can Ido with a blockchain?
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- 16. Manage access torecords with greater certainty and security
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- 18. What is a“Smart Contract”?
- 19. Use of codeand a blockchain to execute logic if certain conditions are met.
- 20. Universe of SmartContracts
- 21. Legal Code Universe ofSmart Contracts
- 22. Legal Code Group Rules Universe ofSmart Contracts
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- 26. Code → lessambiguous than words Self-executing → harder to breach
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- 30. Digital Identities &Signatures
- 31. E-Voting* *where public votingis not a concern
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- 33. With identity, votingrecords, securities, you can begin to use smart contracts to digitize corporate/LLC formations, equity allocation, and distributions
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- 35. Easier for machinesto process code, as opposed to human readable language
- 36. Easier to enterinto commercial arrangements using a virtual currency, as opposed to traditional hand-to-hand currency
- 37. Machines arguably needgreater degree of precision
- 38. What smart contractsare being built?
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- 50. Music Licensing andRoyalty Payments
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- 61. What are limitations/problems with smartcontracts?
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- 63. • Unless providedfor in the code, smart contracts lack the ability to be breached and can be hard to amend • Code immutably binds parties/devices without leaving them the possibility of unwinding the agreement, by virtue of nature of smart contract • Challenging questions for machine-to- machine commerce and legal code and unintended consequences
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- 65. • Courts havenot yet affirmed the enforceability of legal code • Without absolute certainty, risk averse parties may be justifiably reluctant to enter into such agreements • Questions of agency with machines and devices—i.e., manufacturer or owners
- 66. Will need toback-up any legal code with a human-readable version or wrapper (known in financial cryptography circles as a “Ricardian Contract”)
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- 68. • Blockchains/smart contractsare semi- private • Raises challenges for use cases, where privacy can be a valuable • Be careful when storing sensitive information on a blockchain
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- 70. • Smart contracts,on systems like Ethereum, can run autonomously without human intervention, becoming hard to stop • They are viral in nature, which raises questions as to what intermediaries will be able to be leveraged to halt their execution (miners, information intermediaries, and/or programmers).
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