27 Sep Defining Smart Contracts in Regulatory Context: Contrasting with Automated Data Sharing Agreements
In the rapidly evolving tech and regulatory landscape, precision in defining terms is crucial, especially for innovative tech like blockchain and smart contracts. Regulatory ambiguities can lead to misunderstandings and legal challenges.
INATBA’s Privacy Working Group members Wiktor Pinkwart (token.com, Co-Chair of the Privacy Working Group), Mariana de la Roche Wills (IOTA Foundation, Co-Chair of the Social Impact and Sustainability Working Group & Member of the Board of Directors), and Dave Zein (Block-Staff, Co-Chair of the Privacy Working Group), devised a Policy Position Report focused on defining ‘smart contracts’ in the context of the EU’s Data Act.
What is a Smart Contract?
A smart contract is essentially a self-executing contract with the terms of agreement directly encoded into a computer program. This code dictates the execution of the contract, making transactions transparent and irreversible. Smart contracts can function on both public and private blockchain networks, providing transparency in transactions.
Crucially, smart contracts can operate without a central authority, but they can also possess varying degrees of centralization depending on the specific use case. Smart contracts are essentially computer programs executing predetermined instructions, and their behavior is entirely determined by their programming.Smart contracts are self-executing agreements encoded in computer programs, executed transparently and irreversibly on blockchain networks. They can operate without central authority, with varying degrees of centralization.
Automated data sharing agreements automate data exchange with predefined conditions. They may not rely on blockchain technology. Smart contracts are primarily designed to execute conditions of a contract automatically when predefined criteria are met. Automated data sharing agreements aim to automate the process of data exchange based on predefined conditions, focusing on regulated data sharing.
Key differences between smart contracts and data sharing agreements:
- Access Control: Smart contracts lack access controls in decentralized systems, while data sharing agreements have centralized control.
- Immutability: Smart contracts on blockchain offer immutability; data sharing agreements typically don’t.
- Infrastructure: Smart contracts rely on blockchain; data sharing agreements use standard web systems.
- Purpose: Smart contracts execute contract conditions; data sharing agreements automate data exchange.
- Security: Smart contracts offer high security due to blockchain; data sharing agreements’ security is based on centralized control
Clear definitions are essential for regulation. Regulators should align terms to foster growth and understanding in the blockchain ecosystem.
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