Smart Contracts Presentation to ACC 18 th October 2016 Sean Murphy
What is a blockchain? How do blockchains operate? What are the benefits of blockchains? What are smart contracts? How do smart contracts work? 2
What is a blockchain? Party A s lawyers Third parties Party B s lawyers Party A Shared ledger Party B Party A s bank Land registry Party B s bank 3
A blockchain is a digital, distributed transaction ledger, with identical copies maintained on multiple computer systems controlled by different entities. David Schatsky and Craig Muraskin, Beyond Bitcoin: Blockchain is Coming to Disrupt your Industry, Deloitte University Press, 2015
What makes up a blockchain? Digital Cryptography Ledger Platform: www Component elements Distributed: shared Consensus not always used Consensus equals > 50% Consensus
What are the performance characteristics? Transparency Time stamped Immutable No single point of failure Irrevocable Programmable
What is a permissioned blockchain? Different ledger technologies vary in their degrees of centralisation Permissionless, Public, Shared Systems (eg Bitcoin) Permissioned, Public, Shared Systems Permissioned, Private, Shared Systems Today s Typical Systems 100% Decentralised Distributed Ledger Technology Covers a Broad Set of Usages Centralised Ledgers 100% Centralised UK Government Chief Scientific Adviser, Government Office for Science, Distributed Ledger Technology: Beyond Blockchain, 2016
What is a smart contract? I hear more and more people talking about smart contracts these days. But when you push them to define the term, the concept often dissolves in their hands. Richard Gendal Brown, A Simple Model for Smart Contracts, Gendal.me, 10 February 2015 A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises. Nick Szabo, Smart Contracts: Building Blocks for Digital Markets, 1996
How does a smart contract work? Transactions Sending value to the contract Smart contract Transactions Sending value to the contract Events Sending information to the contract Events Sending information to the contract Value State Replicated, shared ledger - blockchain (reprinted here from Richard Gendal Brown, A Simple Model for Smart Contracts, www.gendal.me, 10 February 2015)
A spectrum of possibilities? Smart contracts lie on a spectrum Contract entirely in code Contract in code with separate natural language version Split natural language contract with encoded performance Natural language contract with encoded payment mechanism 100% Code is Contract Encoding Natural Language Automation Automated Performance
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