That's what smart contracts are: if you do not pay a car fee, you can not open it anymore | Economy

That's what smart contracts are: if you do not pay a car fee, you can not open it anymore | Economy

The buyer of a car stops paying the fees agreed with the financier. Automatically, the contract issues an order through the Internet that blocks access to the vehicle, so that it can no longer be used. The terms of the agreement are registered in an unmodifiable register and the default data come from a reliable and secure source. Thus, it is not necessary to go to trial so that the agreement is executed and the processing costs are minimal or nil. A dystopia? Absolutely. Systems like this already work in the United States thanks to intelligent contracts or smart contracts.

In them, the traditional drafted contract is replaced by a computer code of conditional type, in which the parties program different results for a variety of possibilities ("if you pass A, do B, but if C is given, execute D"). But in addition, the identity of the parties, the conditions of the agreement and the circumstances of compliance are accredited by a network of impartial observers. This is what is called distributed registration and there are several modalities of it. The best known is the chain blocks or blockchain.

Through this technology, a set of third parties unrelated to the business (the nodes) act as notary of what others do, in conditions that ensure the identification of the parties and prevent the modification of the agreement or alteration of what happened. Once the network validates an event, it assigns it an unalterable identifier or hash. As José María Anguiano, partner of Garrigues, points out, "the incorporation of the code into the registry guarantees its inalterability", because nobody can modify it.

Once the code in which the contract is reflected has been incorporated into the distributed registry, we can only wait for the arrival of the data that feeds the established variables, coming from reliable sources called oracles. If these coincide with the expected event (for example, the reception by the seller of the amount of the agreed price for the sale of a good), the expected result is generated (the transfer of ownership of that good). From both facts there is an "irreversible and permanent" record in the record.

According to the experts, these incipient technologies are called to play a very important role in the future. David Maeztu, partner of 451 Legal, highlights its advantages: By "replacing the human assessment of the data collected by more neutral, fast and efficient systems", it allows dispensing with intermediaries (both to verify if the agreed upon is fulfilled and to execute the consequence agreed), "with the consequent savings in intermediation and / or management costs".

For this reason, Pablo García Mexía, adviser to Ashurst, points out that their potential uses are infinite. For now, it is making its way into the financial environment (fintech), "where it is used with great intensity to implement launches of blockchain initiatives". But it is also being used in the corporate sphere, "as a mechanism of articulation of the so-called Decentralized Autonomous Organizations (DAOs)", and in international trade or that of consumer goods connected to the Internet of Things (IoT). But "it can cover any activity that can be articulated contractually," he adds.

However, Anguiano warns that the growth of smart contracts will depend on the development of the IoT. Only when this is extended "will they succeed for mass contracting," he predicts. For that reason until the moment there are no clear examples of its use beyond the financial sector, the one of the bets and some simple insurance. "The finance will be the first to leave, because they have the necessary oracles ready," he predicts.

Consumer protection

Despite the name with which they are known, jurists do not just agree on the nature of these operations. The most widespread thesis considers that they do not constitute authentic contracts, since behind one of these intelligent documents there must always be a conventional agreement between humans. García Mexía considers, however, that smart contracts are fully valid, "because the code contains within itself the articles and the parties know that they bind themselves through a self-executing and irreversible code".

In this sense, and from the point of view of consumer protection, Maeztu warns of the risks that the contracting party "also determines the programming of the execution mechanism, which can lead to problems of abuse of that position". Therefore, it considers it necessary to provide the other party with additional information to ensure an adequate level of protection. "The execution mechanism should be part of the essential elements of the contract," he says.

On the other hand, we must not forget that blockhain is basically a probative mechanism of some facts but, as Anguiano points out, it can only be invoked, because it does not issue certificates (something that is done by other records of a centralized type, not distributed, such as Logalty ). And, precisely, certificates are the type of documents that judges understand best in case of litigation. This expert also warns of the tax consequences of the use of these contracts, because in his opinion they will allow to avoid (that not defraud) many taxes "or will automate many of the consequences derived from taxes".

Possible uses

Commerce. Once the arrival of the goods has been verified by geolocation, the payment order is automatically generated.

Rental. Through an intelligent lock, the landlord could block access to the apartment to the tenant once the contract is concluded.

Real estate. A similar system can allow the company to open the door to a specific subject to visit the house without having to send a commercial.

Insurance The data collected by the sensors of a smart car can be incorporated directly to the part of an accident.

Transport. An intelligent contract can allow the immediate payment of the compensation to the passenger of an airline in case of delay or cancellation of his flight.


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