Smart contract: Difference between revisions

{{G}}{{A|tech|}}Smart contracts cleave to [[Lawrence Lessig]]’s coinage in his terrific {{br|Code: Version 2.0}}: “[[Code is Law]]” — you code legal rights into the electronic operating parameters between the parties: “enforcement” of the contract is a matter of electronic affordance. If coded delivery parameters are X, Y, and Z, then that is all you can do, the machine polices that in practice by refusing to allow through anything else. The thus your legal terms become matters of fact, rather than abstract [[metaphysical]] considerations agreed amongst legal eagles, committed to paper at inception and then put away, filed and forgotten, never to be looked at again, ''until it is too late''. Legal terms that float free, high above your messy actual interactions with your counterparty are a fat lot of good: wouldn’t it be great to code them directly into your [[API]], so to speak, so everything was deterministic, automatic and utterly ''certain''?

But we’ve had [[smart contract|smart contracts]] for a while. ''Whenever'' counterparties interact electronically, as they do when posting collateral under a [[CSA]], for example: the [[algorithm]]s, thresholds and validation sub-routines embedded in the technological infrastructure, rather than the abstract ones set out on paper, that, in practice, govern what, when and how much collateral the parties exchange. Everything happens fast, ''deus ex machina'', and there is no articled clerk with a quill monitoring the data flows and cross-checking each transfer against the agreed eligibility criteria written in the [[CSA]]. All of that coded into the machine.  

So all a [[smart contract]] amounts to is the insight that ''that operational handshake'', rather than the bit of paper you first wrote it down on, is what matters. It is no big leap to ditch the need for abstract textual reflections of operating parameters in separately executed “legal terms".