What is a blockchain ‘SMART CONTRACT’?
Action Cyber Times™ simple definition: A blockchain ‘smart contract’ is computer code, or ‘depcode’, that is dependent upon the original distributed ledger blockchain code protocol to activate its instructions autonomously and thereby perform some additional function required by the original blockchain programming.
Basics of a Smart Contract
The blockchain and smart contracts have been previously reviewed. To start, not only is use of the term ‘smart contract’ confusing in this business context with the blockchain technology, but there is more than one definition in use and no universal agreement at this time. For this discussion, we will utilize the generally accepted definition stated above.
Second, a ‘smart contract’ in blockchain terms has nothing to do with a ‘smart’ contract in legal terms thought up by humans to complete a transaction in goods or services. In that sense, it is an unfortunate choice of words producing endless argument and confusion.
To explain ‘smart contract’ blockchain functionality, an analogy to the normal written business legal ‘contract’ is that the blockchain ‘smart contract’ computer code contains a separate set of instructions that when completed provide the agreed upon result (in that sense just like a written business legal ‘contract’). Second, it is ‘smart’ because the instructions execute automatically when initiated by the blockchain code, usually without further human input.
Chain-code
We note that the Hyperledger blockchain protocol eschews the term ‘smart contract’ and uses the term ‘chaincode’ instead. For example, the Hyperledger blockchain code may contain an additional ‘chaincode’ transaction processor function that initiates a subsequent program as part of the original blockchain protocol. This subsequent program may then include actions required by a dependent legal contract. See the Hyperledger Composer and Cicero initiatives for a more in-depth explanation.
Dep-code
However, a better term would be ‘depcode’ (dependent-code) instead of ‘smart contract’, as it is a subset of code dependent upon the original blockchain instructions to execute, and the term ‘chaincode’ is descriptive of the same original blockchain instructions, and thus the term ‘chaincode’ does not differentiate. But, ‘depcode’ sounds like esoteric computer speak and is not as interesting as ‘chaincode’ or ‘smart contract’. Besides, investors like to think they are smart because their investments have ‘smart contracts’! What could go possibly wrong with a ‘smart contract’?
Master – Servant Code
Blockchain and ‘smart contracts’ could also be characterized as a ‘master-servant’ code relationship. But although accurate, it sounds too much like lawyer-speak and would never be adopted.
Let Confusion rain and reign
In conclusion, ‘smart contract’ dependent code in the blockchain protocol contain instructions to initiate a subsequent action. In a more robust design, one or more fully functional computer programs could be activated autonomously from a preprogrammed time or event on the blockchain. One significant advantage is that these dependent protocols may be triggered automatically, or with minimal human involvement, such as the need for a digital signature prior to transaction completion. In the Hyperledger Cicero example, a sophisticated set of dependent chaincode instructions could activate a subsequent set of instructions required to initiate, support and/or conclude a legal contract.
Commentary by Attorney Timothy F. Mills, Editor / Action Cyber Times™ © 2018 All Rights Reserved.
Action Cyber Times™ provides resources for cybersecurity, data privacy, compliance, breach reporting and risk management, intellectual property theft, and the utilization of emerging technologies such as artificial intelligence, machine learning, blockchain DLT, advances in cryptographic applications, and more.
Disclaimer: The content available on the web site and in the blog posts is for informational purposes only and is not intended to, and does not, provide legal advice. Contact and retain an appropriate professional for legal advice. Use of this content or any of the links contained within the site do not create an attorney-client relationship. The opinions expressed are the opinions of the author.