Smart Contract and Sidechain: tools at the service of the future
The Smart Contract, conceived in 1996, long before any blockchain idea, by Nick Szabo, would seem to represent a quick and dynamic solution to many regulatory relationships, and serve in a context where several parties do not trust each other: they are self executable software on blockchain platform, with no possibility of default.
“It is a “computer program” that operates on distributed registry-based technologies and whose execution automatically binds two or more parties on the basis of predefined effects.
A smart contract is a digital agreement that imposes itself. The common example is a vending machine. Enter money and you can either get your money back, or buy goods.
These “programs” use hash encryption, composed of unidirectional mathematical algorithms (therefore not modifiable), which establishes their unchangeability and integrity.
Nick Szabo had the idea of “incorporating” in software and hardware a series of clauses to automate the obligations and make the risk of default almost null and void. The solution passed through cryptography techniques and electronic signatures, which made the actors who carried out the actions and possible transactions defined and secure. (An attempt in this sense was represented, by the old Ricardian Contracts, aimed at identifying the intentions of the parties before the execution of the existing obligation, creating classes or patterns, corresponding to the various types of contract, thus generating automatism capable of standardizing the formal document and the actions of the two actors).
In itself, the blockchain cannot access data outside the network: for this purpose the oracles, third party agents who stand between the blockchain (and therefore the smart contracts) and the real world, intervene in order to pass information to the smart contracts as soon as some external condition occurs. They then provide the blockchain with external data and trigger the execution of smart contracts as soon as a certain condition is met, which requires information not known at the time of writing the contract. Trust in the oracle and a detailed representation of the data format it will send us and how it has been extracted from the real world play a very important role. A trust that the oracle will earn with time. Everything happens in a totally automatic way: there is no “referee or arbìtration” and the compensation is paid in crypt that arrives directly in the wallet of the insured as soon as the oracle has transmitted the data.
The University of Cagliari, in Italy, wanted to use the potential of “smart contracts”, to “armor” the degree certificates from fraud or forgery. The University, in partnership with a computer firm, has created a system, by virtue of which, after each graduation session, the certificates will have digital signatures, registered on the Ethereum blockchain platform: in this way, if the signature owned by the student coincides with the one registered by the University, the document will be totally authentic!
The working world will be able to base its selections on certain and authenticated documents.
Not only that, the same University has made use of Sidechain for a first electronic voting project.
At this point it is necessary to take a small step back and explain what SideChains are: the Sidechain functionality has a huge potential to improve the capabilities of the current blockchain.
A sidechain is a separate blockchain, and connected to the parent blockchain (also called the “main chain”), through the use of a bidirectional peg, which allows the interchangeability of resources at a predetermined speed between the parent blockchain and the sidechain.
Let’s take an example that can make the mechanism better understood: a user of the main chain sends his “crypto-asset” to an output address, where it is blocked so that the user is not able to spend it elsewhere; once a transaction is completed, a confirmation is sent, followed by a waiting period for greater security, at the end of which, the cryptovalue is released on the sidechain, allowing the user to access and use it. The control is carried out by the so-called “federation”, a group that determines when the coins that a user has used are blocked and then released, and which acts as an intermediate point between the two blockchain systems, the main one and the subsidiary one.
The sidechain technology is promising for a better scalability of the blockchain.
The University is developing a voting system, using two concatenated and separate blockchain, a private blockchain and a sidechain, thus separating the management of votes from their counting, making a service that will also allow the absolute anonymity of the voter.
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Raffaella Aghemo, Lawyer