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Category Archive: smart oracles

Smart Contracts as new laws? Better handle with care


(Sole24Ore) “A contract is
an agreement”, this was the mandatory phrase for starting a private law exam
test after which we would discuss the conditions for its validity. Today, university
memories are coming back as contracts are revised in technological form; indeed
they’re called Smart Contracts. This brilliant intuition came from Nick Szabo who proposed them in 1994, even before Bitcoin and
the diffusion of the Internet.

Let’s start with
the definition:
“Smart Contracts are computer protocols that
facilitate, verify, or enforce the negotiation
or performance of a
contract, or that
obviate the need for a contractual clause. Smart contracts aim to provide
security superior to traditional contract law and to reduce other transaction
costs associated with contracting.” 
The words in bold about automatic performance of the
clauses is a source of opportunities and risks, questions and doubts. One thing
is certain: A Smart Contract isn’t a contract, but only the part related to
agreements performance.
Until now, when
one of the contracting parties feels the other party didn’t respect a clause of
the contract then a third party need to be called in order to settle the
conflict. This neutral authority has always been a human one. Now, we rely
increasingly on technology to facilitate relationships between humans, even if
this could seem an oxymoron. Maths (or should we say cryptography)
intends regulating any operation between each one of us, close or far, a known
or unknown stakeholder.
How do
technology and economy meet at this point?
If a contract
represents the formalization of an agreement, how can we make it secure between
parties that remotely agree and maybe don’t even know each other? The answer is
Smart Contracts based on Blockchain technology.
The contract
then becomes an instructions set. If it can be codified, it can also be
“computed”, i.e. if the conditions are satisfied, it ensures that performance
is automatic.
It sounds like
a futuristic scenario, but in reality the Internet of Things (IoT) includes this form of contracts for new services.
All is fine, in the end “equal justice for all”, not only for those who possess
the power. Eliminating all excess of human discretion which leads to long and
inconclusive civil lawsuits is actually one step forward.
But in which
direction?
If we choose
the one that leads to no human discretion at all, the risk may be even greater.
These systems
are fascinating, they open up incredible scenarios, but they also are
autonomous and immutable. This isn’t good, machines must remain instruments.
They mustn’t have the last word. Otherwise this will be the first step on a
slope in which decision power is given to machines. Instead, we would like
machines that assist us in the decision-making process. We must leverage them
but not be ruled by them. The variability of emotions remains a human factor
that we shouldn’t give up.
The third
party, not human, to which we entrust the performance of contract can’t always
be mathematics. We hope for a coexistence with the practitioners: the new
generation lawyer will have to know how to write a Smart Contract, for example translating the clauses into computer code as shown
in the figure.

All this to
emphasize the fact that Smart Contracts should be used to control the performance, and never to judge. New technologies require for behavioral models to adapt. .
We must use them according to their usefulness, without extremisms. We will use
these instruments but wisely, because we don’t live in a deterministic world. Not
yet.

Author: Massimo Chiriatti, technologist and member of Assob.it

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Smart contracts may depend on Smart Oracles, said CTO of Ripple Labs

Smart contracts may depend on Smart Oracles to inform contracts about the state of the outside world, said CTO of Ripple Labs
(CoinDesk) Stefan Thomas is one of the more talented and respected developers in
the space. An old hat at this young technology, he has been making
waves as the CTO of Ripple labs. In a recent effort he has set his
sights on smart contracts technology. The designs and implementation he
and his team have come up with are interesting, to say the least.
In a white paper entitled Smart Oracles, we see described a novel, simple, and flexible approach to smart contracts.
In such a system, rules can be written in any programming language,
and contracts can interact with any service that accepts
cryptographically signed commands. The paper also includes an
implementation of smart oracles, called Codius (based on the Latin “ius” meaning “law”).
Cosmic Christ, Alex Grey
Smart contracts are an exciting new frontier for technology,
business, and law that have the potential to usher in a wave of
innovation and serve as a building block for a next chapter of the
internet.
The concept of a smart contract is to formally encode the conditions
and outcomes of a legal agreement into a computer program. Rather than
rely on another party to enforce the terms of the arrangement, the
obligations of a smart contract are settled automatically and
autonomously through the execution of its code.
As such, math-based currency networks like Bitcoin and Ripple
provide an important building block for smart contracts by allowing the
transfer of digital assets with a cryptographic signature. The benefits
of using smart contracts instead of traditional contracts are increased
speed, efficiency, and trust that the contract will be executed exactly
as agreed.
Uatu, The Watcher
Most proposals for smart contracts depend on independent entities to
inform contracts about the state of the outside world. Bitcoin contracts
rely on “oracles
to attest to facts from the outside world by introducing signatures
into the network if and only if specific conditions are met.
For instance, the smart contract for a will would need to know
whether or not someone had died. Such a system typically requires the
smart contract code to be executed on the consensus network itself. But
encoding advanced logic and executing untrusted code is complicated to
integrate. Until now, this has been one of the primary obstacles for
creating a viable smart contract system.
Smart oracles take the concept of oracles a step further by placing
the untrusted code execution in the oracles’ hands. Smart oracles, then,
are trusted or semi-trusted entities that can both provide information
about the outside world and execute the code to which the contracting
parties agreed.
By decoupling the execution of untrusted code from the consensus
databases and other services that track and transfer asset ownership,
smart contracts can be achieved without increasing the complexity of
existing consensus networks like Bitcoin and Ripple.
Algolon, The Observer
Without being tied to any single consensus network, contracts created
using smart oracles can interact with multiple networks at once as well
as virtually any type of online service. This means that a single smart
contract could interact with Bitcoin and Ripple, web-based services
like PayPal, Google, Ebay, etc. or even other Internet protocols, such
as SSH, LDAP, SMTP and XMPP.
The Codius implementation of smart oracles is designed to provide
developers with a robust and familiar platform to build smart contracts
and hit the ground running. Because Codius uses Google’s Native Client to sandbox untrusted code, developers can write contracts in any programming language.
Codius and smart oracles in general open up new possibilities for
developers, entrepreneurs, and enterprising legal and financial
professionals. Agreements that previously required lengthy legal
contracts can be translated into code and run automatically by smart
oracles.
Smart contracts hold the potential to empower people to build a
fairer, more affordable and more efficient legal system and smart
oracles are one of the simplest ways to realize that dream. Potential
use cases include bridges between value networks, escrow, cryptocurrency
wallet controls, auctions for digital assets, derivatives, debt and
equity, smart property and voting.
Since the system is extensible, the functionality will continue to expand as the ecosystem develops.

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