Using Blockchain for Smart Contracts

Introduction

Blockchain can be described as an encrypted information program using a unified web transaction log, and it is this that has been designed in a decentralised way to eliminate the need for an intermediary or centralised recording system to track data exchange. This also has eliminated the need for third party or intermediary intervention, and it is according to technology that the largest distributed and open digital record allows for the transfer of the origin of property from one party to another simultaneously, without the need for a broker.

More than a decade has elapsed since the first knowledge of countries and institutions using Blockchain as a guarantor through a reliable and secure database, and, although Blockchain represents the new era of our current and future technical lives, it is still growing and needs more time so as to build user confidence.

The progress of countries relies on the provision of different services to their citizens, including those within the health, scientific, and financial sectors—and it is Blockchain that has facilitated the transfer of funds between different countries in an easy and fast way. Blockchain has also massively contributed to the fight against corruption in all its communities—particularly that of financial corruption—through the conclusion of ‘smart contracts’, which control the movement of digital financial assets between the parties concerned in different countries.

With the above in mind, this chapter will review the use of Blockchain in the conclusion of smart contracts in terms of the novelty of Blockchain technology and the lack of stable technical or legal frameworks at the local and international levels. This, in turn, should create a general theory that governs this modern technology. Notably, smart contracts purpose to maintain transparency in all financial agreements by making all financial transactions more transparent and visible to all, citizens thus being able to monitor the actual allocation of funds and monitor the disbursement of these funds by governments to help reduce corruption—or even future tax evasion.

In order to achieve more logical, realistic, and feasible results, this inductive and descriptive approach will be followed by extrapolating the various facts and events about it on the local and international arenas; indeed, although the attitude of governments, financial regulators, and banks globally range from extreme caution to rigorous acceptance when it comes to cryptocurrencies, the technology behind them (i.e., Blockchain and smart contracts) has been widely accepted as revolutionary, and have been implemented on all levels.

As an example of this, in order to enable cross-border money transfers, a consortium of sixty-one Japanese and South Korean banks successfully tested Blockchain and smart contracts; additionally, Russia's state-controlled Sberbank has assessed Blockchain and the smart contracts that enable it—such an assessment being of high value considering Sberbank has joined a consortium of more than one hundred companies, including leading organizations such as Cisco, Microsoft, etc. In order to make it more accurate and to develop and implement smart contracts for specific companies, the Alliance aims to develop the Blockchain network.

Notably, that there are currently some difficulties and challenges being faced as a result of the traditional methods of concluding contracts (e.g., the absence of laws, legislation, and special regulations), ultimately leaving the banking and commercial arena a safe haven for money laundering. It is because of this that it has become harder to go to smart contracts through the use of Blockchain; indeed, it will contribute significantly to doubling the volume of E-Commerce, as well as to the elimination of piracy and cyberattacks. This will also contribute to the elimination of administrative and financial corruption by combating money laundering.

Despite the support of Blockchain technology as a result of smart contracts, the modernity of technology still brings about a wealth of questions: how will the government decide to regulate such contracts? How will they be taxed? What happens if the contract cannot reach the subject of agreement, or something unexpected happens? If this were to happen when a traditional contract was concluded, it could be cancelled in court, but Blockchain makes the contract applicable regardless of any trying circumstances due to the ‘code is law’ policy. However, the majority of these issues exist only because of the novelty of smart contracts in the form of technology. With this promise, technology will surely be perfected over time, and will ultimately become an integral part of our society.