The future of decentralized contract is here - Singapore is road testing its first B2B contract registered to the Blockchain between two enterprises. While last week’s debut of smart contract between IBM and Bank of Tokyo-Mitsubishi UFJ is private in nature, this Blockchain MOU will be the first B2B contract publically available on the Blockchain for anyone to verify.
The MOU outlines the clauses and conditions of partnership between BLOCKCON (a Blockchain conference organizer based in Singapore), and ACCESS (Singapore Cryptocurrency and Blockchain Industry Association) using Attores’ digital signing service. Partnership details include events, marketing and PR to help promote BLOCKCON 2017.
The signing of the MOU is registered on the Blockchain with secure private keys from all 3 parties, making it a cryptographic proof of the transactional event.
The unique advantage of having this MOU registered to the Blockchain, according to David Moskowitz from Attores, is that the signing becomes a historical event marked by a permanent timestamp on the Blockchain.
Names of signers and date of signing are expressed as cryptographic public keys. This makes the contract immutable as any changes made after the signing will create mismatch of hash value of the contract details, therefore leaving proof of alteration. At the point of writing, the contract details are available on public ledger on etherscan. Anyone can verify the contract details without involving the signers.
Not a smart contract - yet
While this Blockchain MOU marks real world progress toward true digitization of contractual agreements, it is not yet a “Smart Contract”. At this stage, it’s only “semi-smart”, because what’s being codified on the Blockchain is the transaction event itself. There isn’t any “quantifiable elements” in this MOU to trigger execution of the code. A smart contract follows the logic of IFTTT - If This Then That - which means the codified clauses will self-execute when quantifiable conditions are met.
Fran Strajnar, founder and CEO of bravenewcoin.com, stresses that smart contracts need input for next stage execution, and therefore are “useless for the real-world without real-world data being put in”. In this foundational article explaining the inception of smart contracts, Nick Szabo compared the next gen contract to vending machines: changes and products are only dispensed at the price displayed when coins are being put in, enabled by a simple mechanism programmed into the machine.
When asked about the future vision of this Blockchain MOU, the 3 parties involved presented much bigger plans next. “Once these kind of contractual agreements are widespread, we can then start to ‘codify’ the actual clauses of the contract and put that logic onto the Blockchain.” says Moskowitz. “In the near future, the Smart Contract can also act as an Escrow and disbursement mechanism for funds”.
So will binding agreement on the Blockchain become an alternative or substitute to the traditional legal contract? In a seminal article by Nick Szabo, he states that smart contract ”gives us new ways to formalize the digital relationships which are far more functional than their inanimate paper-based ancestors.” With this Blockchain MOU between ACCESS and BLOCKCON, we are already seeing signs of paper contracts being replaced with Blockchain agreement. But when it comes to legal enforcement, both Moskowitz and Strajnar commented that enforcement and legal interpretations are no different from traditional contracts. When it comes to non-quantifiable clauses, Moskowitz says “these will default back to arbitration or other human decisioning component.”
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