Today, the generally accepted legal international framework for the operation of smart contracts has not yet been settled. This aspect leads, in turn, to different approaches to the definition of this term. So, in scientific articles of Harvard University it is noted that a smart contract (hereinafter referred to as SC) is a computer code that automatically executes part or all of the agreements. It is presented on a platform made according to Blockchain technology.
However, taking into account the nature of the Blockchain – confirmation of any actions (transactions, fixing property rights, etc.), placing them in a distributed registry, openness of the terms of smart contracts, we understand that without the participation of a blockchain lawyer it is impossible to prescribe the conditions for the needs of a particular project. This is especially important for legaltech and fintech startups.
DEFINITION OF A SMART CONTRACT
From the point of view of the legislation of most countries, the UK is not an agreement, but it is a matter of time. In fact, it has all the attributes that allow it to replace conventional contracts. A smart contract is a program code, or rather its special description, which determines the procedure for processing information and transactions in Blockchain technology. A way to exchange value without involving a third party. At the same time, to prepare the conditions for the UK, it is better to involve lawyers who understand Blockchain.
A legal smart contract is a smart contract that has legal force. In fact, this SC has the same legal force as the license agreement that you sign when you install any software product. Or any contract concluded between the parties in accordance with the legislation of a certain state and certified by a notary.
LEGAL CONDITIONS OF A SMART CONTRACT AND ITS CREATION
When drawing up and signing a smart contract, the parties prescribe the terms of the transaction in it, taking into account the tasks of the online platform. For example:
- Duties of the parties;
- Assignment of copyright to NFT;
- Payment of royalties;
- Penalties for non-compliance;
- Deadlines, other things.
If necessary, you can put electronic signatures. A smart agreement can itself determine whether the specified conditions are met and decide whether to terminate the transaction, impose sanctions or close access.
Since a smart contract is a computer algorithm, knowledgeable lawyers prescribe the conditions for it, and programmers program. Lawyers themselves cannot translate complex legal language into a smart contract. The creation of the SC will require close collaboration of both categories of specialists. Before preparing an agreement, the parties will need to develop a legal strategy for automating the legal process, to establish what exactly will be regulated by the UK.
WHY DO WE NEED BLOCKCHAIN IN SMART CONTRACTS?
Blockchain is a database with transactions, which includes a sequentially created chain of digital blocks. Each of them stores data about the past and next blocks. The main advantage of Blockchain is that it is completely transparent. Anyone can get acquainted with the internal data, but nothing can be changed or deleted.
The technology is used in various fields, including smart contracts. Thanks to SC, Blockchain is able to track the entire list of supplies and verify, for example, the authenticity of tea leaves: where they were grown and by whom, when they were brought to the store. This makes it possible to completely eliminate the counterfeiting of tea, find out its freshness and even check whether the production corresponds to the moral and ethical values of the end consumer.
WHY IS A SMART CONTRACT NEEDED IN NFT?
NFT – non-fungible token – digital intellectual property. It is used for:
- real estate;
- collectibles;
- arts and music;
- transport and more.
Tokens are created using a smart contract located on the Blockchain in Ethereum. The NFT has a unique code and metadata that distinguishes one token from another. This is the difference between his work and cryptocurrencies. NFT smart contract is part of the program code, which allows the network to store data transparently and without changes. After all, it is this code that controls the digital asset, in this case the NFT. Allows you to own, sell, buy, exchange a digital NFT asset on online platforms, where provided.
WHAT IS ETHEREUM AND SMART CONTRACTS IN IT?
Ethereum is a blockchain platform, one of the first to run Turing-complete smart contracts. Turing completeness in smart agreements makes it possible to carry out mathematical functions. Ethereum has gained wide popularity among users, because it can be used to issue tokens and create decentralized applications.
The possibilities for creating smart contracts are flexible, the scope of their use is very wide. The platform provides not only those functions that the developer put into it, but also those that were needed later. Different logically presented ideas are realized with the help of this network. Ethereum is one of the most commonly used cryptocurrencies among developers today and is best known for the number of decentralized applications. Ethereum is a platform developed on the basis of Blockchain. Here, the parties, using cryptocurrency, can enter into a programmed relationship.
As a rule, smart contracts are formed on the basis of Ethereum, since it is one of the most reliable crypto platforms today. The specifics of the local smart agreement is that there are already ready-made samples here. There is no need to completely write down the program code. You only need to enter the transaction data in the fields provided for this and confirm the execution.
EXAMPLES OF USING AN ETHEREUM-BASED SMART CONTRACT ARE AS FOLLOWS:
- Issuance of NFTs;
- Insurance (optimization of the process of its consideration);
- Voting (SCs provide automatism and transparency);
- Deliveries (here, such an advantage of the UK as speed has a prevailing value);
- Storage of records (secure encryption and storage of archives);
- Registration of ownership.
SMART CONTRACTS FOR CRYPTOCURRENCY
Smart agreements, including those used for transactions related to the purchase and sale of cryptocurrency. In these cases, the parties to the smart contract have opened accounts on the Blockchain platform or on one exchange. The Blockchain concept, which is used in cryptocurrency, implies saving in each transaction a chain of data on all previous operations.
Such a registry is not located on the main server, but on each network member, called a “node”. Smart contract in cryptocurrency – security, safety and speed of the transaction. Through a smart contract, it will be possible to purchase almost anything: from cars to furniture sets and from food delivery to rare antiques.
WHAT IS GITHUB AND WHAT IS IT FOR?
GitHub is a project and code variation management system. In addition, it is a social networking platform made for developers. Online code storage and synchronization service for programmers. The main purpose of Github is to support collaborative project development and version control.
Taking into account the fact that any smart contract is considered as a joint project of two or more participants, the SC can be placed on platforms such as GitHub, which were originally designed for coworking. Having fixed the fact of the first publication of his creation. Our first legal contracts for the NFT can be viewed here .
DEVELOPMENT OF SMART CONTRACT CONDITIONS FOR THE CUSTOMER’S GOALS
Currently, several important features and conditions that are characteristic of smart contracts are being defined. So, we are talking about the presence of a decentralized system. The conditions in it, originally laid down, are carried out automatically, without the intervention of the human factor. In such a situation, any condition of such an agreement must be real to be fulfilled within the boundaries of the system without the risk of someone else preventing the fulfillment of the specified conditions.
As already mentioned, today smart contracts are used in different segments. Programs fulfill the terms of contracts by writing off or freezing funds on accounts. In addition, they decide whether to provide a loan or not, confirm the onset of a certain situation.
Typically, smart agreements are developed entirely in code. Contracts are placed in a system where none of the parties controls the fulfillment of the conditions on their own. Both parties (or all, if there are more) are only participants. They can rely on Blockchain and computer algorithm. During the preparation of such contracts, the standards of the current legislation of the state, the laws of which the parties concluding this contract want to be guided by, are taken into account. By the way, it is possible to back up a smart agreement with a paper counterpart, but in the future there will most likely be no need for this.
