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Smart as a contract. Cryptography against corruption
Material posted: Publication date: 22-04-2016
"Smart contracts" that execute themselves, can rid the world of theft, corruption and litigation, as well as to give fair elections, without putting a single official.


It is believed that to get rid of corruption and theft succeed, only by changing society itself and the institutions. However, it can be done much easier with the help of computer technology, from which it will be impossible to hide. We are talking about "smart contracts". Today in start-UPS associated with them, have invested millions of dollars (mostly in the U.S.), and optimists predict the next IT-revolution, like the one that made the Internet itself.

"Smart contract" is not a multi-page paper document with the signature of the parties and the details and program. Or more accurately — the algorithm. Assuming you decided to buy a new car, but I'm afraid that the seller will cheat you, just give him the money. Signing smart contract, you get rid of this problem: the seller pays you locked your car key, which opens at the moment of receipt of funds in his account. Such algorithms (the basic "if / else") can be used in sweepstakes and simple transactions of sale and purchase.

"In Russia there are no such contracts, and abroad only first attempts have been made, says activation? partner of law firm "Simpler" Anton Vashkevich.— For example, smart contracts are trying to use for payment of services to promote sites in the Internet (SEO). The program monitors your search engine, and once the website gets on the first page, she withdraws money from the account of the customer. Should be the objective result that is easily digitized".

Another example is a mortgage. If the debtor stops paying, the "smart contract" can lock your car, turn off the electricity and stop to open the door of the house. Of course it sounds scary and looks like a great reason to sue the Bank to court. But if the Bank will reduce the interest rate on the loan, many will find it beneficial and fair trade.

The chain of truth

Required for "smart contracts" infrastructure — the blockchain ("the blockchain") — only recently grown to ensure that such contracts can be implemented EN masse.

In short, the blockchain is a distributed database that is virtually impossible to rewrite, due to a serious encryption. The data is not stored on the server of some company or public authority, and on the computers of all participants in the system — the principle derived from the torrents. If the entry once got into such a database, erase it from there is impossible, and to check easily, as it is public. So, no more bribes for the change of property rights, counterfeiting of documents and hostile takeovers.

Now the blockchain basically uses the cryptocurrency bitcoin to save transactions history. To put someone bitcoins, you must first obtain proof of the transaction — all in banks. But those who will be involved in a distributed system? In bitcoin it is done by special people, or "miners", and not all users, as is commonly thought. They are paid an honorarium in the amount of 25 bitcoins ($10.3 thousand at the current exchange rate) plus a fee for the transfer (that is, bitcoin is mined like gold). Unlike Wikipedia, where test articles are altruists, everything is based on competition and pure capitalism.

The miners (over 7 thousand) new transactions are grouped in blocks of 200-300 pieces for easy storage and search of necessary information. Hence the name blockchain "blockchain". They sure lied to a user browsing a payment history, and then begin to encrypt the blocks so that no one was able to rewrite them.

This is done by using a hash function, which, ironically, was invented by American intelligence agencies to encrypt sensitive documents. The meaning of it is that the information of any volume, be it a name or encyclopedia, it maps a line length of 64 characters. For example, here is such and such "7f83b1657ff1fc53b92dc18148a1d65dfc2d4b1fa3d677284addd200126d9069". Then the computer must solve the riddle: how to modify the original information so that the resulting output is a new hash began with three zeros (000). This requires huge computing power, as options — trillions. Who finds the number first gets the reward, the block is closed, and the name of the next block begins with the digits which finishes.

The trick of the hash function in that the addition of at least one point in the source text completely changes the cipher. If someone wants to "improve" the recording, made sometime in the blockchain he will have to carry out the same great job of closing the block and then all other blocks, as they are all connected. The miners will be every ten minutes to add new blocks, and the cracking process will be infinite: the system will always assume the right is the longest blockchain.

It is believed that the blockchain can't work without miners and, accordingly, without reference to bitcoin or any other cryptocurrency. A startup canadian-Russian programmer Vitalik's Etherium Buterin promises to solve this problem, but it is not very clear how. By itself, the blockchain without cryptography and complex protection system to work, of course, but sense in it a little — except to use it for own needs of companies.

If all the problems are solved, with the help of bloccano it will be possible to identify the individual, to make the voting completely transparent and quick, to fix permanently the right of ownership. In Estonia, for example, conducted an experiment on the introduction of the blockchain to the records on citizenship. Get rid of the passport system yet, but already allows you to register the nation's business, at all without visiting Estonia.

The judges horrified

It is enough to imagine the expression of some Russian judges in the form of a "smart contract", which even you can't touch it, and once it becomes clear that in Russia this story is certainly never "shoot".

Theoretically, a direct prohibition in Russian legislation on the conclusion of "smart" contracts no. "Moreover, article 434 of the civil code expressly provides for the possibility in some cases of conclusion of the contract through exchange of electronic documents transmitted via communication channels that allow to reliably establish that the document proceeds from the party to the contract",— says the lawyer of legal firm Vegas Lex Cyril Nikitin.

Automatic execution of the contract too is not unique, according to the EA law office "Egorov, Puginsky, Afanasiev and partners" Elena Avakian: "In practice the transfer of offered stock to the principle of settlement "delivery versus payment" outside of the exchange environment and its implementation in the world of real things. This was possible due to the development of electronic technologies that allow you to control not only banking and Depository accounts, and goods in automated warehouses, passenger and freight flows".

According to Nikitin, the automatic debiting of money from the account is permitted and on the basis of conventional paper-based contract (like disconnection of electricity for non-payment). Agree with him, the lawyers of "Pepeliaev group" who believe that "it's all in the agreements."

And yet, despite this, the courts are unlikely to accept "smart contracts". "In practice seems highly problematic even proving the fact of conclusion of the contract",— said Nikitin. And, according to Avakian, "automatic generation of contracts, their signature abstract signature of the legal entity, as well as the formation of orders without the participation of the will of the individuals of the representative, is highly controversial".

There are other difficulties, says Anton Vashkevich from "Simpler". One of them is the novelty of the technology: convenient services while some even abroad.

Another problem is the inconsistency of "smart contracts" with tax and accounting legislation. For example, such contracts are not able to create source documents, or their documents are not suitable for Russian accountants. Moreover, if the parties are dissatisfied with each other or how the contract worked, they would have to prove not only the fact that the contract itself was concluded, and on what terms.

Finally, there is the danger that the courts would be inundated with claims due to a failure or error in the program code of "smart contracts". According to the artist, this problem can be solved by external experts, after all, and now the judges are attracted to specialists for consultation on challenging cases. If the demand for "smart contracts" will be great, the Russian legislation will be tightened, he said. Subject to change as the profession, which will be a lawyers-programmers and new, simplified programming language created specifically for writing smart contracts.

The main danger for this know-how — in the face of the state itself. The blockchain is still strongly associated with bitcoin and can get under the prohibition on money laundering and legalization of funds obtained by criminal means. So, for the company.

Artem Nikitin


Tags: finances

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