Smart contracts. Part 1. When the paper knows what you told her and does it

The article was previously published on SurprizingFacts by our employee, but was blocked due to the requirement to run a corporate blog. We publish this article for the integrity of the entire series of articles on smart contracts.

A bit of history

 At the dawn of its development the Internet was a rather boring sight – the whole world was no more than a couple dozen worthy of attention sites with interesting content. The Blockchain technology, often referred to as the new Internet, returns us at the same time: there are only a few full-fledged software solutions on the entire network that are still very far from perfect.

But then, in 1996, when the first round of global The development of the Internet, the American programmer and cryptographer Nick Szabo (note on the photo of Nick Szabo in his childhood) first proposed the concept of "smart contracts", which today is inconceivable without a link to the Blockchain ecosystem. Sabo described the smart contract as a computer protocol that, based on mathematical algorithms, independently conducts transactions with full control over their implementation. This definition of smart contracts is still relevant.

Here's how Sabo himself comments on this now: "It's amazing to see how my vision of smart contracts, which I described more than twenty years ago, is blooming in a variety of creative directions. Blockchain technology appeared very timely, becoming an ideal ecosystem for the development of smart contracts, which are now becoming the most common phenomenon in business transactions and beyond. I am pleased to belong to the community involved in the development of open source technologies that ensure the security and confidentiality of all operations and work towards the common good. "

Smart contract itself all Will do

The prototype of smart contracts are ordinary paper contracts, which are used by any modern organization in their activities. After drawing up such contracts are usually manually signed, sent to long-term travel around the world to collect the necessary signatures, and then people personally execute all their provisions.

The most obvious development of these processes could be technologies that, firstly, would allow To overcome all spaces in a matter of seconds, and secondly, would automate the basic terms of the agreement. The contract in this case would be performed automatically, without human participation. As technology development shows – Blockchain and smart contracts are the appropriate solutions for this.

What is a smart contract? If to simplify, the smart contract is the same agreement between people and / or organizations, but only described in the form of program code that is executed automatically and receives all necessary data with the help of so-called "oracles" – programs that provide a bundle of real And the digital world together.

Usually smart contracts are written to Blockchain (although they can exist in another environment). In the Blockchain-environment, all the software logic of the smart contract is written and located in a block, which is a software container that combines all messages related to a particular smart contract. Messages can act as inputs and outputs to the smart contract code and lead to any action in the real or digital world outside Blockchain.

In this article, we will not delve into the technical details of creating and operating a smart- Contracts. It is important to note only that for a smart contract, several mandatory elements are necessary: ​​

Firstly, it is digital identification and the presence of digital signatures (public and private key) of two or more parties to the contract.

Secondly, for the conclusion of smart contracts, a private decentralized environment is needed, in which smart contracts will be recorded, and which supports entries and exits for oracles;

Third, the subject matter of the contract and the availability of the contract Tools. For example, if you are supposed to make any calculations – then this is a crypto-currency settlement account, if you need a link to the real world – then the program is an oracle.

Fourthly, these are the specifically described conditions for its execution, which the participants confirm simultaneously with the signature of the entire smart contract.

What are the smart contracts

 Depending on the degree of automation, smart contracts can be of different models:

  • Fully automated smart contracts;
  • A smart contract with a copy in the form of paper carrier;
  • Contracts in hard copy, part of the provisions of which has been transferred to the program code (partially automated smart contracts). For example, only payments can be automated. For such types of smart contracts can be attributed, for example, labor smart contracts, if the assessment of human performance can not be translated into specific values.)

 It is quite natural that now smart contracts are running-in and there are no functional capabilities and sufficient confidence in the system for programming really complex smart contracts. Therefore, most of the currently executed smart contracts belong to the third type of contracts that automate only certain aspects of agreements, in particular, the exchange of digital assets (for example, the exchange of money for property rights).

Nevertheless, there are all grounds To believe that in the short term, with the development of the block infrastructure and the emergence of trustworthy oracles, smart contracts will cease to be only a supplement to the paper version of the document and will become the main guarantor of the execution Any agreement. The paper version will lose all its importance and will be used only for the convenience of studying the documents.

Looking at how fast such giants as IBM, Intel, Cisco, Microsoft and Linux are developing frameworks for creating closed block-ecosystems that allow storing and executing smart contracts without violating corporate principles Confidentiality of data and the regime of commercial secrecy are all coming soon.

Note: public Blockchain-ecosystems that allow anyone who wants to access transactions on smart contracts are unacceptable for business. After all, organizations are usually not too eager to disclose their business connections, and even less willing to open access to all their transactions.

Lee Brain, CTO of the investment office in Barclays, also confirmed this provision, saying that smart Contracts must be protected from unauthorized access, and in this sense, the publicity of some blocking solutions can be a problematic place in the use of smart contracts by businesses and organizations.

Case Studies

 Potential opportunities for using smart contracts are really extensive. You can use smart contracts for all possible situations, ranging from conventional smart labor contracts to trading in financial derivatives and insurance premiums.

The best-known example of the use of technology is decentralized autonomous organizations, or DAO (The DAO, Digix.io , Fermat). Work in such organizations is completely based on smart contracts and is managed by collective decisions of its participants, owners of tokens. At the same time, absolutely all working moments, from daily tasks to the schedule of payment of salaries, are prescribed in the program code. This makes decentralized organizations much more effective than traditional ones: if a participant in such an organization systematically fails to perform their duties or, for example, often ruffs other members of the community, the owners of the tokens can simply withdraw their support for this participant and then they will automatically lose the contract And will be removed from the DAO.

However, smart contracts do not necessarily make the foundation of the company's existence – they can be a convenient addition, a tool for solving the problem Business tasks. For example, it could be the turnover of documents, accounting, auditing and even the delivery of goods.

For example, the British bank Barclays, which last September held the world's first bargain trading transaction, already uses smart contracts to To register the transfer of ownership and transfer payments to other financial institutions, and the developer of the Bitcoin Core protocol Jeff Garzick once suggested the following application of smart contracts: "UPS can execute contracts that say:" If we Obtain payment for the goods, its manufacturer, who in the supply chain is on the many links above, will immediately begin to create a new product such as this has already been delivered

for other purposes. "

What we do with smart contracts in Jincor

 At the moment, all participants are evident advantages of applying smart contracts on the global market. Reducing transaction costs, the ability for any small company to enter the global market and present its presence outside its local market with the help of smart contracts, absolute trust between counterparties – all this makes organizations to scrutinize the possibility of implementing smart contracts in their activities, as well as It has already happened with crypto-currencies (in the previous article we told that more than 100 000 companies around the world, including Microsoft, Amazon, Tesla, Dell and Steam, already accept crypt calculations currency).

However, a major obstacle to the mass distribution of smart contracts in the business environment remains high input threshold. The programming of smart contracts is very expensive, and requires the presence of so-called codelawyers – specialists with a very rare fusion of competencies.

Jincor's mission is to enable organizations to create smart contracts without special Technical and legal knowledge. On the basis of its own blockade, Jincor develops a designer of smart contracts, with which any Internet user can create his own smart contract and place it in the locker, after which the automatic execution of the conditions specified in it will begin. In addition, Jincor provides all the necessary environment for the full use of smart contracts, including the block-ecosystem, digital identification mechanisms, digital Signatures, as well as a decentralized arbitration system (the article on arbitration will be released tomorrow), which allows solving disputes in the most rational and impartial way. For the conclusion of smart contracts on the platform, organizations will need to have available, or create a request to Jincor to purchase JCR tokens to pay for Jincor services.

Jincor ICO

 Starting August 21, JCR tokens will be available under pre-ICO 2 times cheaper than the starting price of the token (ICO will begin on November 1). Buying JCR tokens on pre-ICO will help ensure a constant progressive profitability, as their value in the future will depend on the popularity of the platform in the business environment.

You can also subscribe to our channel in the Telegram. We will be pleased to provide further clarifications on the article, draft or forthcoming ICO.

What we will talk about in the next article

In the next article (Smart Contracts, Part 2. From HYIP to Reality), we will talk about why smart contracts can not live without decentralization and blockage, what are the fundamental advantages they In themselves, what obstacles exist for the implementation of smart contracts in business processes and how we overcome these obstacles in Jincor.

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