Days before the UK issued a landmark statement recognising smart contracts as lawful agreements, Cayman’s digital community met to discuss smart contracts – their potential, the implications, and practical uses.
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts are evolving systems of trust, where contracts are housed on a blockchain instead of company or personal machines. But don’t brush off the lawyers just yet, smart contracts are certainly transforming the way we work, but there is still plenty of mistrust and many misconceptions and myths that are yet to be resolved.
The Tech Talks discussion was led by Brendan Magauran, Director of Operations at Chainlink who was joined by a panel of industry professionals including; Samir Bandali, Chief Strategy Officer at Island Mining SEZC and Head of Business Development at Gamesult; Brandon Caruana, Partner at Cartan Group and member of the Blockchain Association of the Cayman Islands; and Darwin Lo, Co-Founder and Chief Technology Officer of Digital Consulting Group SEZC, a subsidiary of Insights Network.
We regrouped with Brendan and Samir for some key takeaways and factors to consider.
CEC: Brendan, you mentioned that thoughtful design is essential when developing and implementing smart contracts. What is ‘thoughtful design’ exactly and what are some aspects relating to designing of smart contracts that every individual entering into such contracts should know?
Brendan Magauran: Thoughtful design to me is planning ahead of time so that you will have a high degree of confidence that your smart contract will execute as intended. One key aspect of thoughtful design, assuming the smart contract needs non-blockchain inputs such as the price of an asset or the location of a shipment of goods, is how do you securely retrieve the required inputs for your smart contract from the desired off-chain resources? At Chainlink, we spend a lot of time thinking about these types of problems. We work with users to determine if multiple sources of data inputs (generally in the form of application program interfaces (API’s)) are available for the use case, as multiple sources provide redundancy and increased security at the data generation level. We then work with users to think about the data retrieval from the API’s and how many node operators they want for each API, as multiple node operators provide redundancy and increased security at the data retrieval level before aggregating the responses on chain for the smart contract to trigger a state change. Some other thoughtful design aspects include how frequently updates are needed for the smart contract, what is the length of time the smart contract needs to run, and how has the code of the smart contract been audited.
CEC: Samir, you mentioned the importance of a single source of truth and how smart contracts can achieve this. Can you give us an example or use cases which illustrates key advantages of smart contracts? And how, in your opinion, are smart contracts able to positively impact global charity work?
Samir Bandali: One of the most important developments in smart contract technology today is the tokenization of securities. This goes for both public companies that will be traded on exchanges, such as what Tzero is trying to accomplish, and also for private equity and share cap table management for small to midsize private companies. This can cover everything from setting up a company, issuing share certificates, employment contracts and even executing trades. I believe that having one single source of truth, one transparent and immutable record of shareholders in a company and the rights that accompany each share will drastically change the industry’s efficiency while also combating shareholder disputes and reducing legal fees and complications.
Smart contract technology is still very much in its infancy stages. We have not perfected decentralized consensus models, and as an industry are currently engaged in many collaborative initiatives trying to find solutions that make sense for the future. I do not believe that smart contracts will replace lawyers or notaries, however the technology will make stakeholders jobs easier and cut out a lot of intermediaries and ancient methods of data storage. Key advantages of smart contract technology in business management include simplifying the creation and management of corporate documentation, offering a clean and reliable audit trail, eliminating version control issues, and offering self-executing reliable confirmations.
One prime example of corruption that takes place because of lack of transparency is the global charity industry. Statistics have shown that often over 90% of incoming donated funds are misappropriated by the organizational custodians. One of my personal favorite implementations of smart contract technology is with Giveth.io, a free and open source platform created to bring much needed transparency to the charitable donation space. Smart Contracts are put in place on all incoming funds allowing the person donating to view their charity of choices real time planning and decision making with expenditure. Within this framework the givers are able to hold these foundations accountable via transparent spending. The smart contract locks funds in after a certain period of time, however until that time has elapsed, the giver is able to withdraw any donated funds should they be unhappy with the maker. Ultimately, this technology is evolving to build frictionless and transparent systems that will be capable of changing the world as we know it.
The discussion, which took place 14 November 2019 at The Greenhouse, was part of an ongoing series of monthly ‘Tech Talks’ by Cayman Tech City in partnership with Digital Cayman. Tech Talks are open to members of the public working within the Cayman Islands’ technology sector. For more information and to register your interest email email@example.com.