Smart Contract: Concept, Financial Essence, World Experience and Opportunities of Practical Use

2021 ◽  
Vol 27 (8) ◽  
pp. 1871-1893
Author(s):  
Vasilii A. DADALKO ◽  
Vladimir V. NIKOLAEVSKII ◽  
Andrei D. NEKRASOV ◽  
Dar’ya S. SHERSTNEVA
Keyword(s):  
Banking Sector ◽  
Systems Approach ◽  
Essential Element ◽  
Utilization Efficiency ◽  
Smart Contracts ◽  
Financial Instruments ◽  
Complex Concept ◽  
Smart Contract ◽  
Fundamental Possibility ◽  
The Moment

Subject. The article considers smart contracts as digital financial instruments, their financial and economic essence, which is defined as digital instruments for the settlement of financial relations. Objectives. The aim is to introduce into scientific use such a system concept as digital financial instruments and mechanisms based on the consideration of their economic, legal and financial essence. Methods. The study rests on systems approach that enables to present a smart contract from a technological, economic, legal and financial position as a set of elements with their specific functions defining its complex concept. Results. We reveal the nature of financial relations, arising at the time when bilateral or multilateral transactions are concluded and smart contracts are presented as ways to automatically settle them. Completion of a smart contract is a confirmation of the completion of the transaction and the moment of termination of financial relationship. The article shows the fundamental possibility of using smart contracts in the system of budget relations as a tool for the settlement of a multilateral transaction. Conclusions. Currently, smart contracts are an essential element of a new stage in the development of financial technologies. Specialists in the financial and banking sector recognize the emerging opportunities for their use in the system of financial relations. The paper shows an example of possible use of smart contracts in the settlement of budget relations and in improving the utilization efficiency of budget funds.

scholarly journals Smart contracts in OTC derivatives trading: Legal aspects

2020 ◽  
Vol 1 (3) ◽  
pp. 51-64
Author(s):  
Kirill A. Bobkov
Keyword(s):  
Legal Aspects ◽  
Smart Contracts ◽  
Flexible Tool ◽  
Over The Counter ◽  
Market Participants ◽  
Otc Derivatives ◽  
Smart Contract ◽  
Practical Matter ◽  
Quantum Leap ◽  
The Moment

The articles focuses on opportunities and problems connected with implementation of smart contracts into “over-the-counter” derivatives trading. The importance of success of professionals who work on this cannot be underestimated: the volume of “over-the-counter” derivatives market is huge, its automatization and transparency provided by implemented smart contracts could dramatically increase its economic efficiency. In this study, the author aims at answering the following question: what aspects of “over-the-counter” derivatives trading could take a quantum leap because of the implementation of smart contacts and, per contra, what aspects could not benefit from implementation of underlying technologies at all. The author starts with the overview of “over-the-counter” derivatives market, investigates the matter of its internal design, main features and the structure of legal documentation used by market participants. Then the article provides the analysis of smart contract phenomenon, summary of its engineering aspects and difficulties connected with the implementation of smart contracts as a practical matter, including underlying legal issues. The third part is a synthesis of ideas indicated in previous parts. Herein the author examines the perspectives of adoption of smart contracts in “over-the-counter” derivatives trading, identifies the problems that cannot be resolved yet: different parts of legal relations existing between market participants shall be structured in a flexible way and shall be subject to revision under specific conditions. Smart contracts in their turn cannot be considered as a flexible tool and the revision of their terms requires the input from highly experienced specialists that dramatically increases the costs of their implementation and maintenance. As a matter of conclusion, the author gives recommendation to potential developers of smart contacts to implement them only in relation to the automatization of payments and deliveries as at the moment the clearing can be considered as the most appropriate area for the implementation and use of smart contracts.

Security tokens: architecture, smart contract applications and illustrations using SAFE

2019 ◽  
Vol 46 (6) ◽  
pp. 735-748 ◽  
Author(s):  
Hemang Subramanian
Keyword(s):  
Relational Algebra ◽  
State Transitions ◽  
Smart Contracts ◽  
Financial Instruments ◽  
Financial Instrument ◽  
Content Type ◽  
Advantages And Disadvantages ◽  
Smart Contract ◽  
First Time ◽  
Unique Mechanism

Purpose Blockchain technologies have pervaded modern crowdfunding and capital sourcing through a variety of financial instruments implemented as smart contracts. Smart contracts provide a unique mechanism not only to create a unique one-of-a-type financial instrument, but also to enable unique innovations atop existing financial instruments due to underlying efficiencies. The smartness comes from the flexibility that programs provide which can create extremely unique financial instruments that are often complex to implement, yet easy to create, maintain through versioning, trade and destroy. The purpose of this paper is to describe the security token architecture as an application of smart contracts. Further, the author illustrates the implementation and design of a commonly used financial instrument known as Simple Agreement for Future Equity (SAFE) using the security token architecture proposed and smart contract functionality. The author then models the transaction using relational algebra, and, models the utility maximization. The author shows how on account of reduced information asymmetry between the investors and SAFE users (i.e. startups) utility is positive when smart contract-based security tokens are deployed for each state in the SAFE contract. Design/methodology/approach Using an existing well-adopted instrument called a SAFE contract, the author illustrates the architecture of a smart contract-based security token system. The author illustrates how different components of a SAFE contract can be implemented as a smart contract and discusses the advantages and disadvantages of applying blockchain-based smart contracts to design SAFE instruments. The author deploys two methods: a state space diagram to explain state transitions and a utility model to explain the utilities. Findings The key findings of this research study are the design of a security token architecture, which can be used to convert any the physical or contract-based financial instrument to a smart contract that runs on the blockchain. However, there are limitations to the implementation of the same which can be overcome. The model illustrates the positive utilities derived for all economic actors, i.e. the contractors, the utility providers, etc., in the market. Originality/value This paper is an original paper. For the very first time, the author explored the architecture of a security token system. Using a well-known financial instrument, namely the SAFE, the author describes various components, e.g. the four contracts that form SAFE and then model the utilities for the system.

scholarly journals Problems of Smart Contracts Application in Transactions in Virtual Property

Lex Russica ◽  
2019 ◽  
pp. 108-118 ◽  
Author(s):  
E. E. Bogdanova
Keyword(s):  
Computer Code ◽  
Legal Regulation ◽  
Smart Contracts ◽  
Domain Names ◽  
Virtual Property ◽  
Smart Contract ◽  
Legal Nature ◽  
The Will ◽  
The Subject ◽  
The Moment

The author examines the features of the use of smart contracts in transactions in virtual property, taking into account the fact that the smart contract is a way of fulfilling those obligations in which the transfer of property provision takes place in the virtual world with the help of appropriate technical means. It should be recognized that the list of virtual property is open, at the moment it includes, for example, cryptocurrency, domain names, «game property», virtual tokens.The question of the legal nature of objects related to virtual property is relevant: are they a new independent type of property requiring special legal regimes, or are they a form of known property rights? The paper also notes that smart contracts differ in both vulnerabilities in computer code and insufficiently effective legal regulation. Smart contract, in the opinion of the author, is a kind of written (electronic) form of a contract, the peculiarity of which is that the will of the subject is expressed by means of special technical means in the form of program code. In this case, the will to conclude the contract simultaneously means the will to its execution upon the occurrence of certain conditions of the contract circumstances.In conclusion, the author shows that the automation of performance of obligations in particular and the digitization of contract law in general should not create obstacles to the implementation of the fundamental principles of good faith and contractual justice, to assess the proportionality of the distribution of rights and obligations of the parties, the equivalence of their property.

Legally Enforceable Smart-Contract Languages

2021 ◽  
Vol 54 (5) ◽  
pp. 1-34
Author(s):  
Vimal Dwivedi ◽  
Vishwajeet Pattanaik ◽  
Vipin Deval ◽  
Abhishek Dixit ◽  
Alex Norta ◽  
...  
Keyword(s):  
Literature Review ◽  
Systematic Literature Review ◽  
State Of The Art ◽  
Grey Literature ◽  
Smart Contracts ◽  
Smart Contract ◽  
Decentralized Autonomous Organizations

Smart contracts are a key component of today’s blockchains. They are critical in controlling decentralized autonomous organizations (DAO). However, smart contracts are not yet legally binding nor enforceable; this makes it difficult for businesses to adopt the DAO paradigm. Therefore, this study reviews existing Smart Contract Languages (SCL) and identifies properties that are critical to any future SCL for drafting legally binding contracts. This is achieved by conducting a Systematic Literature Review (SLR) of white- and grey literature published between 2015 and 2019. Using the SLR methodology, 45 Selected and 28 Supporting Studies detailing 45 state-of-the-art SCLs are selected. Finally, 10 SCL properties that enable legally compliant DAOs are discovered, and specifications for developing SCLs are explored.

Administrative risks challenging the adoption of smart contracts in construction projects

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Asli Pelin Gurgun ◽  
Kerim Koc
Keyword(s):  
Construction Projects ◽  
Risk Mitigation ◽  
Research Question ◽  
Group Discussion ◽  
Mitigation Strategies ◽  
Risk Category ◽  
Smart Contracts ◽  
Content Type ◽  
Smart Contract ◽  
Criteria Weights

PurposeAs a remedy to usually voluminous, complicated and not easily readable construction contracts, smart contracts can be considered as an effective and alternative solution. However, the construction industry is merely known as a frontrunner for fast adoption of recent technological advancements. Numerous administrative risks challenge construction companies to implement smart contracts. To highlight this issue, this study aims to assess the administrative risks of smart contract adoption in construction projects.Design/methodology/approachA literature survey is conducted to specify administrative risks of smart contracts followed by a pilot study to ensure that the framework is suitable to the research question. The criteria weights are calculated through the fuzzy analytical hierarchy process method, followed by a sensitivity analysis based on degree of fuzziness, which supports the robustness of the developed hierarchy and stability of the results. Then, a focus group discussion (FGD) is performed to discuss the mitigation strategies for the top-level risks in each risk category.FindingsThe final framework consists of 27 sub-criteria, which are categorized under five main criteria, namely, contractual, cultural, managerial, planning and relational. The findings show that (1) regulation change, (2) lack of a driving force, (3) works not accounted in planning, (4) shortcomings of current legal arrangements and (5) lack of dispute resolution mechanism are the top five risks challenging the adoption of smart contracts in construction projects. Risk mitigation strategies based on FGD show that improvements for the semi-automated smart contract drafting are considered more practicable compared to full automation.Originality/valueThe literature is limited in terms of the adoption of smart contracts, while the topic is receiving more attention recently. To support easy prevalence of smart contracts, this study attempts the most challenging aspects of smart contract adoption.

Trust but Verify: The Oracle Paradox of Blockchain Smart Contracts

2021 ◽  
Author(s):  
Abdullah Albizri ◽  
Deniz Appelbaum
Keyword(s):  
Internal Control ◽  
Process Management ◽  
Weak Link ◽  
Design Science ◽  
Science Research ◽  
Third Party ◽  
Smart Contracts ◽  
Independent Verification ◽  
Smart Contract ◽  
Control Application

Although research shows that blockchain provides fairly immutable virtual provenance workflows, proof that the Blockchain accurately represents physical events lacks truly independent verification. This dilemma, the Oracle Paradox, challenges blockchain architecture and is perhaps one reason why businesses have hesitated to adopt smart contracts. Blockchain proponents claim that people can serve as trusted Oracles in a smart contract. However, auditing research shows that people are the weak link in almost every internal control application, including those pertaining to blockchain. People are susceptible to collusion, bribery, error, and fraud and these tendencies are not entirely mitigated by blockchain technologies (Balagurusamy et al. 2019; Nakamoto 2008). This research proposes a framework to mitigate the paradox of the Oracle: A Business Process Management (BPM) model of a Blockchain Smart Contract-enabled Supply Chain with IoT as the sole "third-party" Oracle participant, utilizing Design Science research.

scholarly journals Prospects for the development of the «green» bond market (Review)

2020 ◽  
pp. 102-114
Author(s):  
Svetlana Kodaneva ◽  
Keyword(s):  
Climate Change ◽  
Banking Sector ◽  
Bond Market ◽  
Paris Agreement ◽  
Financial Instruments ◽  
Market Review ◽  
Limited Government

In the context of limited government budgets and the capacity of the banking sector, there is a need for new financial instruments to attract investment for the implementation of the Paris Agreement on Climate Change. One of such instruments is «green» bonds. The review analyzes the reasons for the growth of the «green» bond market in different countries and the prospects for its development.

scholarly journals SMART CONTRACT AND CHALLENGES TO LAW

2020 ◽  
Author(s):  
Gergana Varbanova ◽  
Keyword(s):  
Civil Law ◽  
Smart Contracts ◽  
Program Code ◽  
Advantages And Disadvantages ◽  
Smart Contract ◽  
The Law

Are the technologies advanced enough to replace lawyers and the judiciary in the negotiation and enforcement process? Is it possible for a program code to be a contract that binds the parties named in it? What is a smart contract and what challenges does it pose to the law? The present study aims to clarify and show the advantages and disadvantages of using smart contracts in civil law.

scholarly journals Sharing communities – Community currency in the sharing economy

2020 ◽  
Author(s):  
Eszter Szemerédi ◽  
Tibor Tatay
Keyword(s):  
High Speed ◽  
Essential Element ◽  
Sharing Economy ◽  
Ease Of Use ◽  
Smart Contracts ◽  
Efficient Operation ◽  
Blockchain Technology ◽  
Community Currency ◽  
Efficient Alternative ◽  
Further Development

AbstractFor the further development and more efficient operation of the sharing economy, a fast and inexpensive peer-to-peer payment system is an essential element. The aim of this study is to outline a prototype that ensures the automation and decentralization of processes through smart contracts without blockchain technology. The model has been built based on the narrative that a community currency created through smart contracts can promote genuine practices of sharing as opposed to the profit-oriented approach that most of the currently operating sharing economy platforms have. Features of the model, such as ease of use, high-speed transactions without transaction cost are benefits that can provide a more efficient alternative to the traditional or to the cryptocurrency-based centralized sharing economy platforms.

scholarly journals العلاقة بين التحفظ والتحوط المحاسبي دراسة تطبيقية في عينة من المصارف العراقية

2022 ◽  
Vol 17 (55, 1) ◽  
pp. 18-36
Author(s):  
مصطفى بدر عماش ◽  
علي حسين
Keyword(s):  
Banking Sector ◽  
Stock Exchange ◽  
Market Value ◽  
Accounting Conservatism ◽  
Financial Instruments ◽  
Independent Variable ◽  
High Level ◽  
Value Model ◽  
The Relationship

The research aims to test the relationship between accounting conservatism and hedging in the Iraqi banking sector. The research dealt with a sample of (12) banks listed in the Iraqi Stock Exchange from 2009-2019, with (132) views, and the(unconditional) accounting conservatism was identified. As an independent variable andaccounting hedging as a dependent variable, the (unconditional) accountingconservatism was measured through the market value model to the book, while the accounting hedging was measured as a dummy dust, and the results indicated a statistically significant correlation between accounting conservatism and accounting hedging.  orientation of the study sample towards proactive accounting conservatism according to its unconditional scale leads to a reduction in the adoption of accounting hedging tools in managing the risks of financial instruments. The reason for this may be due to the presence of a high level of accounting conservatism that makes the bank safe sort of a lot of dangers. Which contributes to reducing reliance on accounting hedging tools.However, this relationship turns out to be negative, that is, the increasing

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