Friday, February 10, 2017

Arizona Bill Enabling Smart Contracts

This came up through CoinDesk (an excellent source which everyone reading this should also be reading) and interestingly uses very similar language to that of electronic signatures (a signature may not be deemed invalid simply because it is electronic).

Unpacking a little bit further, we see that a contract cannot be denied enforceability merely because it includes a smart contract term. Further down in the bill, the term Smart Contract is defined as "Smart Contract means an event-driven program, with state, that runs on a distributed, decentralized, shared and replicated ledger and that can take custody over and instruct transfer of assets on that ledger."

I like that we are starting to define Smart Contracts as they are (automated computer code) and getting away from the goofy notion that they are knowing beings that will put attorneys out of business. I'm a little more confused, though, by the use of the language "take custody over" in conjunction with "instruct transfer of assets on that ledger." One could argue that each time I enter into a casino I do the same - I can put my money in a machine, and agree that depending on the outcome of an event, my assets will be transfered accordingly with no further input or recourse by myself or the house. The main difference is that no slot machine is run by distributed ledger (that I'm aware of) and interestingly the slot machine generates its own outcome data, theoretically the blockchain does not.

For my part, I'll enjoy following this one as it moves through the legislative process and seeing what commentary arises. The full text of the bill is available through Scribd here.

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