UK banking giant Barclays and University College London have set forth their initial vision for smart contracts in a new position paper.
Released this week, the 15-page research effort explores the definitions of key terms surrounding the emerging blockchain application and its terminology, aiming to cut through the layers of hype that have arguably lead to irrational market expectations for the technology today.
Report author Lee Braine, of the investment Bank CTO Office at Barclays, said the aim was to search for "narrower definitions" of commonly used terms such as "automation" and "enforceability" as a means of moving forward with its work on smart contract templates for use by institutions.
In this light, the position paper can be viewed as a necessary step back, one that finds the bank and its partner university examining how smart contracts will be used, and how they can be best architected to meet those anticipated needs going forward.
Braine told CoinDesk:
Braine said that this exercise proved useful in exposing some of the problematic thinking that has developed around the nascent concept. While he didn’t name The DAO specifically, Braine hinted that the public blockchain space offered examples of challenges inherent in the deployment of smart contracts today.
For example, Braine cited the idea that smart contracts should be "tamper-proof", arguing that while contracts that are resistant to change may be preferred in some instances, in others it could prove problematic.
"How would you stop such a smart contract from executing if it was necessary? How would you change its behavior to reflect a defect that had been fixed, and you then need to deploy a corrected version?" Braine asked.
Braine noted that this is relevant to Barclays and its work developing smart contract templates, as these scenarios are likely to occur frequently for regulated entities.
For the bank, the paper marks a continuation of an investigative process it began at the end of last year with the intent to create a smart contracts proof-of-concept.
That project, which leveraged then-new technology from banking consortium R3CEV, was eventually demoed in April during a exhibition at its accelerator in London.
Ultimately, the paper puts forth the idea that Barclays believes it will need to encourage innovation in smart contracting languages in order to best develop the tech it believes could be leveraged in global finance.
He noted that while there are existing languages (Java) and new languages (ethereum's Solidity) that have been created or that can be used for this purpose, the market will perhaps best benefit from a healthy competition between alternatives.
"One of the things we were aiming to do was to remain agnostic of the target platform. This means remaining agnostic of the target language of the detailed business logic," Braine said, adding:
"As long as they conform to the smart contract, the prose could delegate to the implementation," he continued.
On the business side, the paper also aims to ensure that the technology is being developed in a way that is "faithful" to existing processes for legal documentation.
As such, it states that it believes the term "smart contracts" should encompass two definitions – executing both obligations, possibly within a shared ledger framework, as well as informing operational aspects such as how legal contracts are written and their prose interpreted.
The paper’s definition of smart contracts reads:
Elsewhere, the paper makes a distinction between "smart legal contracts" and "smart contract code" in statements that arguably move away from the idea popular in the open-source community that code can serve as law.
In this way, it is seeking to encourage a definition of smart contracts in which traditional means of enforcement, such as a court of law, are considered.
Going forward, Braine said Barclays and its partners intend to pursue a strategy that encourages open innovation, and he cited this new paper as evidence it is seeking to give back to those working to move forward smart contracts in other ways.
For example, Braine said that Barclays intends to put out another paper this year that will expand on the CLACK language being developed by report co-author Christopher Clack of University College London.
Barclays, he said, also intends to leverage its network to capture more mindshare for smart contracts development. To date, this has included working with the R3 consortium, which it joined in September of last year, and presenting its work to consortia such as the Post-Trade Distributed Ledger Group.