Smart contract smart? Look at the basic problems of the block chain

nn nnnRampage comment: from the legal contract of the offer, commitment and consideration of the three elements, you can examine whether the chain chain of intelligent contract legally binding. The limitations of artificial intelligence technology make the implementation of intelligent contracts are limited, so the intelligence is not complete. The definition of legal contract in US law is not limited to written form, but also in electronic and code form, so the smart contract is legally enforceable. But the current legal framework has been able to meet the requirements, and will continue to follow.n
nnTranslation: Annie_Xun
nDavid M. Adlerstein is a lawyer at Wachtell, Lipton Rosen u0026 Katz, a law firm in New York, with mergers, corporate, securities, and regulatory matters.n
nAdlerstein explores the current state of the smart contract and suggests a useful concept that he believes can answer the key issues of this emerging technology.n
nI invite the reader to carry out a simple experiment. Ask five people who have some experience in the block chain to list the five potential benefits of the technology.n
I bet that at least three people will fill in a smart contract. And then ask these people to give the definition of the smart contract, the answer is also at least three (possibly from the block chain asset transfer protocol to the implementation of the code on the chain chain, and then to the truth of the “code that is the law”).n
nAlthough it is known that the technology will bring new legal agreement formulation and implementation, it is not possible to unify the definition of smart contracts that people talk about. This will of course lead to confusion, including the legal status of smart contracts.n
nThis paper attempts to get to the point of view, assuming a viable smart contract legal definition, as a framework for the technical staff and lawyers interested in the three questions to provide a preliminary answer: smart contract is a contract? Smart contract smart? Is the smart contract recognized by law?n
nThe definition of a viable smart contract is that at least two consensus agreements, through code or specific circumstances, objectively define satisfactory and dissatisfied independent, automated business results.n
nAt first glance this definition, first of all, it is prescriptive, I do not think it describes the current general use case of smart contracts. And while the chain chain can support such contracts, the subject of a smart contract can also go beyond the custody or transfer of assets in order to think that a smart contract can exist in the chain chain context.n
nIt is important that, in my own definition, non-consensus or unilateral agreement is not a smart contract (equivalent to the legal definition of the contract, which will be discussed below). A protocol that either makes a preset result or predicts whether or not the result occurs requires someone to intervene beyond the scope of the agreement, nor is it a smart contract.n
nUltimately, “independent business results” is part of the definition, simply because the computer code always contains a deterministic “if-then” language (for example, I play video driving game, the control panel to the left, the enterprise Move to the left, but it is obviously not a smart contract).n
nIs the smart contract a contract?n
nWithin the US legal system, the contract is “an agreement between two or more parties that provides for enforcement or recognizable obligations in accordance with the law (for example, the agreement that the elderly can not invest in the dogecoin) ” To make the contract enforceable, you must have three elements:n
nnThe terms of the contract must be approved by the offeror;n
Accept (promise) the relevant terms;nnValue exchange, that is, the so-called “price”.n
nLegally binding contracts detailing contract parties and themes, including mutual commitments that must obey the contents of the terms. Must be textual, including the electronic format or oral format (unless otherwise limited) to be mentioned below.nnFinally, the legal system provides a remedy for a breach of a legally binding agreement, a mandatory requirement for payment of damages, or, in some cases, the court’s decision to enforce it.n
nIn my opinion, according to the above feasible definition, the smart contract may be a legally binding contract, but not necessarily.n
nNick Szabo’s classic concept that the vending machine is a smart contract prototype that conforms to this viable definition: investing in a dollar that automatically provides a jar of soda. The contract here is clearly legally binding.n
nIn the vending machine in the storage of drinks, inviting passers-by coin to buy, is the offer. In fact, coin means accepting an offer. A dollar and soda water are the price. Although it is not worth the prosecution, but if the machine took the money not to soda water, I can carry out legal recourse.n
nBut smart contracts may only be part of a legally binding contract, not all.n
nIn accordance with the above definition, according to the bank concessions automatically reduce the amount of interest rates mortgage can be a smart contract: if the reference exchange rate changes, the amount of payment will be automatically raised or lowered.n
nBut this adjustable payment mechanism is only part of the mortgage loan contract, not all. For example, although payment provisions mean that there is an offer, commitment and consideration; it does not mean that these elements or other loan elements exist, such as mortgage property, mortgage loans are actually paid, the dispute is resolved.n
nProve that the binding of the contract can be in electronic form (the click rate agreement is typical). In the block chain technology environment, the encrypted hash value of the protocol or protocol can be recorded as a metadata.n
nAlthough this can give itself or outside the advantages, especially for the later definite terms of the agreement. But recording a binding contract in the block chain does not create a smart contract.n
nUnless the code, according to the objective of the default situation, the automatic implementation of the contract, there is a smart contract.n
nSmart contract smart?n
nAlthough the use of contracts for some uses is automatic (such as regular automatic payments), complex business contracts have many “if / then” terms that are independent of the actual circumstances that can be objectively verified, often requiring manual management, easily misused and accidentally The impact of the applicable situation.n
nSo intelligent performance of intelligent contracts, to provide effective automated compliance, reduce human error and potential risk of controversy.n
nHowever, the upgrade potential of artificial intelligence is limited, and the use of smart contracts is limited to the fact that the degree of compliance of a particular scenario can be objectively determined by an external data source (forecast). In a commercial contract, the computer can program and use predictions to determine LIBOR movements.n
nThis is not to say that a smart contract is simple, and it actually contains a series of complex results based on different inputs. But the computer can not be programmed to determine (at least not currently), such as whether the contracting party of the merger has made reasonable efforts to obtain a regulatory license. So, smart contracts are not really smart, but deterministic.n
nThe potential of the block chain and the smart contract is not essentially a talent or a computer as a lawyer.n
nBut the chain chain through the expansion of the scope of the contract to improve the efficiency of the potential, the implementation of the contract automation as a variety of assets, service capabilities and block chain development of the link (especially the arrival of things).n
nHowever, many aspects of complex business contracts are not easy to automate, including matters that require objective human judgment, interpretation of complex contracts requiring manual services, or resolution of disputes.n
nThus, while some relatively simple contracts can usually automate compliance (including through block chains), for more complex contracts, only a few independent elements may be automated in the near future. So the terms of the smart contract may be more suitable terms.n
nLikewise, for lawyers, the block chain technology is like a woodworking power tool, not a driver’s autopilot.n
nSince the computer code is prone to errors, legally binding contracts must be subject to judicial supervision, with the increase in the use of smart contracts, the context of complex contracts, must maintain a security mechanism, may override the terms of the court or dictator (In the area of ​​the chain chain, perhaps in the form of a private key).n
nThat is, irrevocable automation, and “wise man” can not interfere with the pattern is dangerous.n
nDoes the smart contract be approved by law?n
nBlock-chain technology has increasingly become the focus of Zhou’s legislation (especially Delaware), and some states have recently signed smart contract projects. It should be noted that in March 2017, Arizona launched a law enforcement legal contract (legal provisions for “an event-driven program, the state in the distributed to the central shared copy of the books to run, you can manage and guide the books Transfer of assets “).n
nUnlike the viable definition above, Arizona’s Smart Contract definition refers to block-chain technology, limiting the applicability of hosting and asset transfer, and is a narrow definition, but is well suited to the emerging use cases of the technology.n
nNevada’s block-chain-related new regulations recommend smart contracts as “electronic records that can be verified using block chains” (but the definition is removed after the entry into force of the regulations).n
nAlthough there are no popular state legislatures, there are common law and existing legal basis in the form of electronic or code that can be referred to by the court for the execution of legally binding contracts or parts thereof as long as these electronic and code forms Into a written form.n
nUnder the long-standing common law contract principle, external text may be integrated into a legally binding contract. As long as the smart contract represents a binding contract element, the contract written in the written contract is legally binding. Such as a written loan contract that provides a collateral guarantee and is reflected in the chain chain, the mortgage can be automatically lifted after the loan is repaid, and the court should execute an automatic deregistration contract containing executable code.n
nnThe Federal Signature and Global Commerce Act 2000 provides that a contract, signature, or record can not be determined by its electronic form only, but the record must be used for future reference reproduction. Although the author knows that there is no special case to consider the problem, there is no reason to think that the code form of the electronic contract is not executable. As long as the contract side, the subject and terms are clear, can be translated into English, can prove that the relevant code using the composite consensus, the contract side to provide each other.n
nnnAccording to the Uniform Electronic Transactions Act, which is used by 47 states, transactions can be conducted electronically, so the Act legally recognizes electronic signatures, records and contracts.n
nnnIn accordance with the Uniform Commercial Code Section 9-105 (All 50 State Transactions), the Guarantor may control the Electronic Timetable Document as long as the system proving that the transfer of benefits is reliably made by the Guarantor People, and a unique authorization record must be unique, identifiable, and irrevocable.n
nnTerminology and precedent, new technologies, especially block-chain technology, must have a significant impact on the proof and enforcement of legal contracts, but the current concept of legally binding contracts will continue to be used, complex commercial contracts Will also continue to exist in the communication and management.n
nWhile we welcome well thought out legislative projects, the existing legal framework may have provided a strong enough enforcement basis.n

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