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Recommended: Legal Technology and Smart Contracts: Blockchain & Smart Contracts (Part IV) (
Much has been written on blockchain recently, even in legal. We continue our series with Mark Oblad, VP, Legal and Finance at JW Player, who has coded a number of tools for automating transactions. Last time we talked about open source and industry source of information for contracts here.  

This time, we look first at smart contracts. The concept of the “smart contract” has taken hold and is becoming increasingly the focus of legal technology groups, such as the Computable Contracts Initiative at Stanford Law School’s CodeX, Cardozo Law School’s Tech Startup Clinic, New York Law School’s Center for Business and Financial, and Computational Legal Studies.

Mary: What is a smart contract?

Mark: The principal aim of the smart contract is a tamper-proof, unambiguous, computable contractual relationship whose payout (or other outcome) automatically occurs after some pre-specified event and that once started cannot be stopped, even by injunction.
The concept of an automated contract is not new.

An option to purchase IBM stock at $100 on December 1 will result in an automatic payout on the contract calculated on the actual trading price of the stock on that date, is automated, but not novel. What is new and interesting with smart contracts is the attempt to generalize the concept for a wider class of contracts and to use a newer set of technologies, such as decentralized blockchains and oracles, to strictly enforce the contracts.

Mary: Okay, what is the blockchain? 

Mark: The blockchain in itself is a very promising set of technologies. In very broad strokes, the blockchain is a growing sequential list of data entries that is available for anyone to copy and maintain (i.e., redundant and distributed).

The patterns and computational rules for adding new entries to the list allow anyone running the software to update the list quickly and openly, with efficient and immediate mechanisms for resolving conflicting updates.

Mary: So, blockchain can eliminate the need for regular currency. How does it work?

Mark: The data entries in the various blockchains range from transfer and ownership information of cryptocurrencies such as Bitcoin, to “Hello World” statements by developers playing around. Another example more relevant to contracts generally is to enter the hash or digest of a contract into a small data section (OP_RETURN) of a non-spendable transaction and then record the transaction in the Bitcoin blockchain.

Because the data of the transaction shows up on every server or computer maintaining a copy of the blockchain, the contract participants can point to the blockchain to prove the existence of the content of the contract at the time stamped in the blockchain....continue reading: