Smart Contracts Presentation to ACC 18th 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?

What is a blockchain? Third parties Party A’s lawyers Party B’s lawyers Party A Party B Party A’s bank Party B’s bank Land registry Shared ledger

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 Distributed: shared Consensus not always used equals > 50% Component elements

What are the performance characteristics? Time stamped Immutable No single point of failure Irrevocable Programmable Transparency

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 Distributed Ledger Technology Covers a Broad Set of Usages Centralised Ledgers 100% Decentralised 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? Replicated, shared ledger - blockchain “Smart contract” Value State Events Sending information to the contract Transactions Sending value to the contract (reprinted here from Richard Gendal Brown, A Simple Model for Smart Contracts, www.gendal.me, 10 February 2015)

A spectrum of possibilities? 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 Automation Encoding Natural Language Smart contracts lie on a spectrum 100% Code is Contract Automated Performance

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