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Blockchain-based smart contracts can change the way contracts are executed.

The world of information technology is used to seeing trends emerge and vanish.

 

A rather resilient development has been that of blockchain. This technology can function as an anonymised global decentralised ledger by encrypting all data it is fed, and subsequently making them available for the participating community. This community serves different purposes. More and more companies have elaborated new business models that make use of the technology and the community’s services. Bitcoin for instance, – as exemplified in our last article – rewards those who verify the correctness of transactions amongst its users and clients with 12.5 Bitcoins for the creation of a hashed block. These are worth some £37,630 (about £3,010 per Bitcoin) in late March 2019.

 

A hashed block is the mathematically verified sum of several thousand transactions, sealed with a time stamp and attached followingly to the block chain, which gives the technology its name. Accordingly, the offering of the different services that use the blockchain technology creates vigorous competition amongst its users, since only the first successful mathematical verification of a data package gets rewarded.

 

One potentially vital interpretation of this technology is that, by functioning in the aforementioned way, it facilitates the trustworthy usage of available global information – and for the first time does not rely on it. This is because generally, ledgers are controlled by a singular entity such as a person or a group of people in an institution which makes them prone to inaccuracy, no matter if caused by malicious intent or not. Since the new digital ledger is ‘maintained’ by all linked participants of the encrypting blockchain method, transactions of any sort are stored anonymously on every computer in the bitcoin network. This shifts the need for trust from having to confide in one particular entity to relying on the coherence of the technology. And therefore, transactions are both visible and anonymised.

 

The newly discovered potential trust-neutrality inspired humans worldwide to develop methods which employ this technology with the aim to enormously increase the efficiency of existing practises. One such example is Blockchain-based smart contracts. Smart contracts are defined as ’self-executing digital contracts “with the terms of the agreement between buyer and seller being directly written into lines of code”’. While ‘digital’ and this notion of ‘coded’ are rather comprehensive terms, a ‘self-executing’ contract still is considered a novelty.

 

This is mainly because the blockchain technology’s ability to execute orders that were coded beforehand expands contracts by the feature of semi-agency.

 

Therefore, ‘self-executing’ can be seen as a relative phrase since behind the allegedly automated process there are software engineers coding the terms and a network of miners responsible for the work their machines conduct: decentralising the verification mechanism of whether contracts’ conditions have been met. While – and in business terms this is a powerful argument – this digital version of the process may be much more efficient, and with possible positive outcomes for the user at that, yet the question of accountability remains to be answered that this term appears to answer already.

 

Is it consequently advisable to employ this terminology? The two contrasting positions in this debate are clear; the libertarian blueprint on the one hand, presumes perfect knowledge and thus attributes the capacity to understand these technical nuances to the people despite the ambiguous terminology. On the other hand, the overly authoritarian approach to censor certain words would be comparable with dictating speech. When we cannot argue coherently for assured outcomes, such as wilful deceit through speech, it is a rather audacious endeavour to intervene.

 

A more sustainable take may be to inform the readership, which is what the Future Citizen Institute aims to do in its mission to offer insights and foster a cooperative community.

 

Author: Patrick Lehner

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