There is vast complexity in
generating, deploying and managing smart contracts. Many businesses are still
only just discovering the power of blockchains. Implementation will be a far
more rigorous step, involving time and financial investment. Also, many organizations
are required by law to have a legal contract for every transaction performed.
The smart contract is only the
execution of an agreement that already exists between parties and is not, in
itself, the basis of the deal. Additionally, smart contracts are encrypted and
unreadable by humans, so a smart contract does not represent a legal agreement
that can be easily read and audited by a human.
Complex transactions are
dependent on the parameters and rules defined in the contract. If circumstances
change and parties agree to something different, paper-based agreements can be
easily altered. Smart contracts are not so flexible. Current use cases of smart
contracts work well in an “if-this-then-that” scenario but become cumbersome in
more complex situations.
recently attempted to
test these constraints by coding tax law into an employment-offer letter using
smart contracts. However, this attempt concluded that the smart contract is
unable to address all the complexities of the use cases.
The Ricardian contract was first conceived of by
financial cryptographer Ian Grigg in the 1990s. It is a contract that is
represented both in plain text and in digital code. The plain text
representation can be read by humans in the same way a paper document can be
read, while the digital version makes it readable by machines. It is digitally
signed, meaning it has the same basis in law as a standard legal contract.
In 2015, Grigg produced a paper discussing the
intersection of Ricardian and smart contracts further. He defines the role of
the Ricardian contract as a document that attempts to recognize the intent of
the agreement between the parties, while the smart contract is the machine that
executes that agreement. Converging the Ricardian contract together with the
smart contract creates a more complete digital representation of a legal
contract and its execution then when each is used separately. One such example
of this already in practice is seen in OpenBazaar, a blockchain marketplace
using Ricardian contracts in the invoicing, acceptance and payment processes.
A further element of the
real-life contract not yet explored by these solutions is adaptability.
Real-life contracts are frequently subject to amendments, usually due to
changes in circumstances or situations not foreseen by the original agreement.
To incorporate the element of adaptability into smart contracts, blockchain
company SciDex is developing a Ricardian
Adaptive Smart Contract (RASC) protocol.
The SciDex protocol addresses challenges faced in the adoption of smart
contracts. The Ricardian element produces a legible contract document that can
be audited by a human. The adaptive element means that the contract can be
changed according to circumstances. Finally, the smart contract mechanism
performs the automatic execution of the agreement.
In this way, the RASC protocol
can be deployed by businesses in areas such as trading, to ensure compliance
with the requirement for legal documentation to support the transaction. The
system also allows for input from oracles — nodes that can verify real-life
occurrences that influence the execution of the agreement.
Example Use Case for RASC
SciDex is already proving one
use case of the RASC in the SciDex Marketspace, a decentralized exchange for
scientific data. Users can access a collection of scientific data, as well as
monetize their own contributions.
For example, an agricultural
company is conducting a scientific study to assess the benefits of a particular
seed treatment on its seed products in four different locations. In addition to
collecting data from growers, the company also wants accurate data about
prevailing conditions such as climate and soil quality.
The SciDex Marketspace allows
the company access to meteorological and soil quality data available on the
platform and can also put out a call to action, asking for contributors to
provide data that may be available to them. The data exchange transactions are
governed by RASC protocols that represent the real-life agreements between the
parties over the use of the data.
Smart contracts are still very
much in the infant stages of maturity. However, there are plenty of innovators
working to accelerate development and overcome issues like corporate compliance.
The current pace points to the possibility of mainstream adoption by businesses
happening sooner, rather than later.