26 Jul 2017

Denis Aleinikov: "Implementation and legalization of smart contracts can be real revolutionary breakthrough"

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Recently National Bank announced that it had created information network in Belarus that will work on blockchain technology, one of the important features of which is the ability to implement the principles of smart contracts. That means information exchange and performance of treaty obligations on the given algorithms without human intervention.

Denis Aleinikov, a senior partner of Aleinikov & Partners, in his interview “Probusiness” reported on the principles of smart contracts and what their legalization can give to Belarusian business:

—The ancestor of a smart contract (or MVP) is a vending machine. You put money into the bill acceptor launching the algorithm of the automated transaction. As a result a cola can come out of it.

The same principle of action underlies a smart contract today. You send data - "transaction" to a smart contract thereby launching the algorithm of automated execution of the transaction. Only transactions in this case will be rather more complex than retail trade of cola. And they are carried out in transaction block (blockchain) register.

Blokchain as an environment can be used not only to carry out various transactions, but also to organize management in business entities, copyrights and transfer of copyright to intellectual property, items of immovable property and for many others. In turn, a smart contract can be a mechanism for the execution of all operations that take place in blockchain system.

From legal point of view, a smart contract is still just a program code (algorithm) that actually manages business resources.

But the world of blockchain wants to see a smart contract as a real contract - an independent, autonomous and automatically executing transaction. Technologically this problem has been solved. The best legal minds of the world's leading countries are working today on legal decision - the legalization of a smart contract and its implementation into economic turnover.

I took part in a number of working discussions on the future of the blockchain, which were held by new director of Hi-Tech Park Vsevolod Yanchevsky. There were not only representatives of National Bank who took part in them, but also icons of the blockchain world from other countries. And here it was the idea from our foreign colleagues that: Belarus has all the chances in this sphere indeed, without any exaggeration, to be in the same position as the most advanced countries.

Now we are working intensively on this together with Hi-Tech Park, National Bank and colleagues from Russia, Switzerland and several other countries.

In fact, the project of the decree on Hi-Tech Park, which is talked about currently, can be the first step on the way of a very large-scale work - transfer of business and government transactions to a smart contract.

And in this case we share and support the initiative of Hi-Tech Park and National Bank - they try to do everything themselves rather than waiting for other countries to "adopt international experience." If the attempt succeeds in implementing and legalizing of this new technology, Belarus can really make a revolution and become an example for imitation for many countries - they will learn from our experience.

What can legalization of smart contracts do to the country today? Even now a smart contract is the main mechanism for "making transactions" in the international ICO market. But this is the case when technology is developing faster than law - a legislator of any of the world countries has not yet determined whether a smart contract generates legal consequences. Meanwhile, investments are getting to hundreds of millions of dollars equivalent.

From the present day point of view, it may seem that a smart contract is such a luxury, curiosity and "classics" will be enough. But you need to look to the future and just compare a few things - the beginning of Internet of things era, the development of blockchain and the development of artificial intelligence. When the "participants" of contracts will be our things (autonomous robots) the only possible contract among them will be a smart contract.