Smart Contracts

  • December 01, 2018

To understand the nature of the revolution that is occurring in this area, we start not by learning contract law but by learning a bit about the “Bitcoin protocol” or how Bitcoin and the Blockchain work.

michaelnielsen.org
As stated on michaelnielsen.org, “you need to be comfortable with public key cryptography, and with the closely related idea of digital signatures.” He also assumes that you’re familiar with cryptographic hashing. These concepts he states, “can be taught in freshman university mathematics or computer science classes. The ideas are beautiful, so if you’re not familiar with them, I recommend taking a few hours to get familiar.” Lawyers, in effect, are being replaced by computer scientists.

Of course, you don’t need to understand how the Blockchain works to start using the tools in the same way that you don’t need to understand how MS Word works to produce a written contract. But Smart Contracts are crafted differently.

RSK
(rsk.co)
RSK is an open-source, Smart Contract platform. RSK’s mission is to: “add value and functionality to the Bitcoin ecosystem by enabling Smart Contracts, near instant payments and higher-scalability.” To learn more, you can become an “Ambassador” and “[b]ecome a pioneer in the most secure and efficient Smart Contract platform in the market.”

Ethereum
(ethereum.org)
Ethereum is an alternative Smart Contract platform. It can be used to “create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.” The idea that a will could be a Smart Contract and placed on the Blockchain is an interesting one and I am sure, not yet on the dashboard of the legislators in Victoria. “Using Ethereum, you can create a contract that will hold a contributor’s money until any given date or goal is reached. Depending on the outcome, the funds will either be released to the project owners or safely returned back to the contributors. All of this is possible without requiring a centralized arbitrator, clearinghouse or having to trust anyone.” You can see the top apps built using Ethereum at stateofthedapps.com/rankings in such areas as Finance, Exchanges, Property, Insurance, Health and others.

Aside from Smart Contracts, the Blockchain has other uses:

TIerion
(tierion.com)
TIerion uses the Blockchain to create “technology and products that reduce the cost and complexity of trust.” Examples are crafting an audit trail, or timestamping documents or creating verifiable credentials using the Blockchain. Companies that use this technology right now include Dell, Xero and Liaison.

Another use of the Blockchain is for voting. You can be issued a vote token that can be used only once on each vote. The Blockchain creates a permanent record of voting data that keeps each person’s identity anonymous but allows you to go back and see your voting record.

Yet another use of the Blockchain is to keep records, a necessary governmental function, such as births, deaths, marriages and the like. In October 2014, a couple at Disney World were the first in the world to have their marriage permanently recorded on the Blockchain.

As you can see the possibilities of the Bitcoin protocol are vast. However, I believe the implications for lawyers are that they will have to learn new skills.

Mathematics, computer science…brave new world, here we come!

© 2018 David J. Bilinsky