By Santiago Rivera García
Understanding Blockchain and Smart Contracts in a Real Life Scenario
“Smart contracts are unprecedented methods of ensuring contractual compliance, including social contracts.” [page 47, Blockchain Revolution by Don and Alex Tapscott].
“Implications for the Blockchain Economy: As an economic design principle, enforcing rights must start with clarifying rights. In the field of management science, the holacracy movement is an interesting, if not controversial, example of how members of organizations are defining the work that needs to be done and then assigning rights and the responsibility to do this work as part of a whole. Who did we agree should have this set of decisions and activities at our company? The answer to that question can be codified in a smart contract and placed on the blockchain so that the decisions, progress toward the goal, and incentives are all transparent and reached by consensus.” [page 48, Blockchain Revolution by Don and Alex Tapscott].
For the purpose of clarity, let’s understand uniformly what Holacracy means and how it relates with the blockchain. According to investopedia, a “holacracy is a system of corporate governance whereby members of a team or business form distinct, autonomous, yet symbiotic, teams to accomplish tasks and company goals. The concept of a corporate hierarchy is discarded in favor of a flat organizational structure where all workers have an equal voice while simultaneously answering to the direction of shared authority.” https://www.investopedia.com/terms/h/holacracy.asp I’m going to take a limb on this one and assume that, if a company implements a holacratic structure, it is either to achieve goals faster or to be able to achieve multiple goals at one time, or dynamic ones. This structure would be completely different to a hierarchy—a clear example would be the military.
In a hierarchical organization, decisions are taken from top to bottom and if the economics of the organization are properly aligned, information flows seamlessly from bottom to top – this way top management “knows” what it needs to know in order to make sound decisions. As I write these words down, I know that there is a big problem in this model—the good old fashioned agency problem. Human beings being human beings. This is another assumption I’m making when I say that the larger the organization in human numbers, the larger the risk of it creating agents seeking their own benefit.
If we could only solve this conundrum with a standardized technology – thoughtful emoji – …
Enter blockchain and smart contracts. Acording to https://blockgeeks.com/guides/smart-contracts/, “smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman”. Conditions and actions attached to the outcome of these conditions can be codified.
Here’s a probably bad example of a smart contract, for clarity purposes: A money bet between Player 1 and Player 2 on what the weather will be like for a given day in the future according to x or y weather network—if it rains, then Player 1 wins, if not Player 2 wins. This bet could be codified in the blockchain not only for the code to provide the outcome [who wins] but on making sure that the effects are fulfilled—transferring the right amount of money to the winner in a timely manner. The laymen will read this and think: well, can’t the Internet do that? Answer is yes with an asterisk—yes it can but it still depends partly on human decision along the way. With blockchain, that human decision is no longer needed, because in reality it is not a decision, it is an administrative process of checking already public information (according to this example) and transferring funds to the rightful winner. If Plato would have been right (in his romantic phase where everyone is good and willing), then we would have no problem with the actual system, but we all know humans are highly corruptible, especially in certain cultures and societies – cough cough Mexico (not the only one obviously).
The bet example on the weather is a very basic, straightforward example – life does not work that way (even if there probably is such a software or similar), reality always presents tricky and hard-to-solve variables.
In WeeSign we use Smart Contracts. We use Hyperledger Sawtooth to build our blockchain network. The way we use the technology is not to be able to transfer money through a smart contract, but to use the capacity that this technology of smart contracts brings us in order to solve a complicated legal problem: the inalterability, integrity, and trustworthiness of a signed documents. There are many ways of committing fraud through a forged signature, so physical autograph signatures are far from a failsafe from corruption. Traditional electronic signatures such as Adobe, or Docusign are flashy and great to use, but none of them can assert with a 100% certainty degree whether a document signed through their platform has been tampered with or not. Whatever functionality they may have in this sense falls short because it was not originally perceived as a blockchain solution – it is old technology. Whatever functionality they may have in this sense falls short because it is not using the ideal technology for it: a distributed ledger codified in such way that it can detect even the slightest modification in a document (a comma, an accent, a cero wrongly placed which can be catastrophic). Besides – everyone knows you don’t use a beach umbrella to a windy place because we lose it in a matter of seconds. Tropicalization and country adequacy is key to provide precisely what our legislation requires in matters of electronic signature –this is precisely what we do in WeeSign: the electronic signature proudly made by Mexicans, for Mexicans. Our legislation is very sui generis, to say the least.
In other words, in WeeSign, we use smart contracts to make sure that any signed document (with us) is, in fact, in its original sate and absolutely nothing has been done to tamper with it.
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