Not that smart
Smart contracts, a key ingredient of the decentralised blockchain, are neither smart nor contracts, according to Rob Knight of Mattereum.
A smart contract allows transaction processing without the need for third parties, which is trackable but irreversible. The code though may have a bug which can be exploited. Not so smart.
Knight explained to IGTV’s Victoria Scholar at this month’s Blockchain Technology Summit that, although a smart contract is computer code aimed at enforcing a contract, it is not a legal contract in itself either.
Ricardian contracts marry code and legal contracts
Mattereum describes itself as a legal-technical interface that connects digital assets on the blockchain with goods and services in the material world. Such so-called Ricardian contracts define a legal agreement that is both readable as text, as well as executable in software. These were invented by Ian Grigg in 1996 and named after the British economist David Ricardo.
Confidence to subcontract
Knight says with such legally smart contracts in place it will enable business to be more decentralised and more confident to subcontract operations.
Smart contract risks
As has been seen with the pitfalls, the likes of TSB has faced updating its legacy banking systems, Knight says, code needs to be written much more carefully in the future if it is to be used with confidence for financial applications.