Smart Contract Templates: foundations, design landscape and research directions (1608.00771v3)

Abstract: In this position paper, we consider some foundational topics regarding smart contracts (such as terminology, automation, enforceability, and semantics) and define a smart contract as an automatable and enforceable agreement. We explore a simple semantic framework for smart contracts, covering both operational and non-operational aspects, and describe templates and agreements for legally-enforceable smart contracts, based on legal documents. Building upon the Ricardian Contract, we identify operational parameters in the legal documents and use these to connect legal agreements to standardised code. We also explore the design landscape, including increasing sophistication of parameters, increasing use of common standardised code, and long-term research.

• The paper explores the foundations of smart contracts, differentiating between legal enforceability and automated execution, especially within financial contexts.
• It proposes a semantic framework separating operational and non-operational contract aspects to balance automation with the need for human intervention and legal interpretation.
• The authors analyze smart contract templates as a way to standardize contracts, aligning legal prose with computer code, and suggest research directions for formal languages integrating law and logic.

Overview of "Smart Contract Templates: Foundations, Design Landscape and Research Directions"

The paper "Smart Contract Templates: Foundations, Design Landscape and Research Directions" by Christopher D. Clack, Vikram A. Bakshi, and Lee Braine provides a comprehensive exploration into the foundational aspects of smart contracts with a focus on their application in financial systems. The authors define smart contracts in terms of automation and enforceability and address the semantic representation needed for these contracts within a legal and operational framework. Importantly, the paper explores the development of smart contract templates as a means to standardize and streamline the creation, negotiation, and execution of legally enforceable agreements.

Key Points and Contributions

1. Terminology and Definition: The authors clarify the diverse use of the term "smart contracts." They differentiate between "smart legal contracts," which explicitly connect to legal documentations, and "smart contract code," which are software agents focused on operational execution without a formal legal backing. They propose a high-level definition where smart contracts are automatable and enforceable agreements.
2. Automation and Enforceability: The discussion around enforceability is split between traditional legal methods and the concept of non-traditional tamper-proof execution. The authors underscore the importance of legal enforceability due to real-world complexities that cannot be handled entirely by automated systems, such as variations and exceptions frequently seen in financial contracts.
3. Semantic Framework: A two-pronged semantic view of smart contracts is offered, segregating operational aspects that are automatable from non-operational aspects that often require human intervention and legal understanding.
4. Smart Contract Templates: The paper explores the design and role of smart contract templates, emphasizing the importance of standardized legal documents and electronic representations equipped with parameters that connect legal prose to the corresponding computer code. This alignment with "Ricardian Contracts" provides a legally-enforceable foundation.
5. Design Landscape: The authors identify key areas for development in smart contract design, such as increasing parameter sophistication and code standardization. They propose moving towards encoding complex logic within parameterized templates, reducing ambiguity, and potentially allowing such logic to replace corresponding legal prose in courts.
6. Research Directions: The paper outlines future research avenues including the potential for developing formal languages that integrate legal prose and operational code. This language could lead to enhanced automation and more robust interpretations of contractual semantics.

Implications and Future Directions

Practically, the insights offered in this paper aim to support financial institutions in adopting technology-efficient processes for contract management while conserving legal integrity. Moving forward, the standardization of smart contracts through templates could prove to be beneficial in ensuring fidelity and reducing counterparty risk in transactions across decentralized platforms.

Theoretically, this groundwork opens doors for further exploration into the semantics of contracts and their relationship with computational logic and law. There is an explicit interest in the industry towards creating formal languages admissible in court, revealing an interdisciplinary challenge that incorporates computer science, law, and financial systems.

The paper serves as a pivotal point in the conversation about smart contracts, proposing methodologies that align technological innovations with established legal practices. By focusing on the balance between automation and enforceability, and outlining a roadmap for future developments, the authors provide essential guidance aimed at bridging the gap between contractual obligations and their digital performance.