Decentralised storage and authentication of contracts using blockchain technology has greatly increased the potential of Smart Contracts in recent years. Our experts Frederik De Breuck and Elenice Macedo answer the questions about the definition of Smart Contracts and how they work in practice.
Frederik De Breuck is Presales Director for Fujitsu Belgium and Luxembourg, managing a team of Lead Architects and Engagement Managers working on proposals for complex managed infrastructure projects and business and application solutions. Frederik has more than 20 years’ experience in the IT industry, having held technical, presales, and corporate management positions. With in-depth knowledge of both business and general IT landscapes, his career has been focused on enabling customers to implement solutions that increase revenue and improve operational efficiency. Frederik also serves as Head of Innovation in Belgium. In this role, he established the Fujitsu EMEIA Blockchain Innovation Center in Brussels in March 2018.
Elenice Macedo is the Head of Financial Services Solutions, EMEIA, a role she has held since 2016. Elenice works with customers in the banking and insurance sectors, where she is focused on leveraging Fujitsu’s expertise and innovations to support customers on their digital transformation journeys and to improve their users’ experience.
After specialising in software systems for banking in Brazil, Portugal and Spain, Elenice joined Fujitsu in 2007 in a European role designed to provide customers with easier access to Fujitsu’s solutions for retail banking. She played a key role in the definition and deployment of Fujitsu’s new Retail Banking Vertical unit in 2013 for the WEMEIA sales cluster, where she defined the solution portfolio and co-designed the go-to-market strategy.
Blockchain, DLT and Smart Contracts
A major characteristic of blockchain and distributed ledger technology (DLT) is that it offers high reliability and transparency by preserving a record of all past transactions between parties on multiple computers participating in a network to mutually verify and record data, making it virtually impossible to alter.
Blockchain and DLT are remarkable because they achieve this without any specified trusted organisation, central authority or central server. This is why the technologies are highlighted as a foundational architecture for next-generation information systems and business models, and expected to be applicable in a variety of fields.
At the heart of this next generation is the Smart Contract. These are a protocol or coded instructions (typically event driven) on blockchain computers (nodes) that make it easier to verify and execute specific terms and conditions which exist in contracts between parties that are typically individuals, corporations, governmental agencies or other entities with a clearly defined legal type.
It is possible to go one step further and create highly sophisticated, autonomous code that creates even smarter Smart Contracts. We are already seeing the emergence of autonomous parties connected to Internet of Things devices, which are executing Smart Contracts, without human intervention.
Definition of Smart Contracts
At its core, a Smart Contract is an agreement in a different form factor to anything available today, between two or more parties, stored on a distributed ledger network. The term ‘contract’ can be misleading though, as to date it is not yet a contract in the conventional and legal sense, which often leads to confusion.
“Smart Contracts are able to automate all kinds of processes and operations such as payments and events subject to initial payments between parties.”
A Smart Contract can be transformational power by enabling the automation of business processes in a trusted way, allowing all stakeholders to process and validate contractual rules as a group, through an agreed and predefined consensus mechanism.
Put Smart Contracts into Practice
So how does it work in practice? Assets or their tokenized assets and relevant contract terms are coded and put into the distributed ledger network environment. This contract is distributed and instantiated on each participating node in the network. After the contract is triggered by an event – a transaction – then it is executed in accordance with the defined terms embedded in the Smart Contract file. This code checks the execution of commitments automatically. On platforms such as Hyperledger Fabric, Smart Contracts are implemented by a mechanism known as Chaincode.
Some examples where Smart Contracts come into their own include:
Self-sovereign digital identity: allowing individuals to control and edit their personal data and tokenized assets. Selective disclosure can be managed via Smart Contracts.
Data recording companies and governments can use Smart Contracts to automate and simplify data recording and tracing, allowing for more transparent reporting and automation of audit trails.
Contract automation: specific contracts can be codified to allow two or more parties to automate contractual agreements.
Tracking in supply chains: by combining with Smart Contracts and using tags or immutable IDs on supplies and materials, it is possible to ensure the validity of captured information and certify its authenticity.
In the insurance industry, it is easy to predict the success of Smart Contracts since they can regulate and automate the processing of claims for pre-defined conditions – saving personnel costs and reducing bureaucracy.
Frederik and Elenice are confident that Smart Contracts have the potential to introduce a new way of exchanging value between businesses, institutions and individuals. Despite its many advantages, much work is still to do in terms of matching the standard natural language contract with pure code contracts, and everything in-between, and in ensuring that the international legal and compliancy framework is ready to enable real adoption.
Fujitsu is the leading Japanese information and communication technology (ICT) company, offering a full range of technology products, solutions, and services. Our comprehensive business encompasses the development, manufacture, sales and maintenance of the cutting-edge, high-quality products and services. Co-creation is central to Fujitsu’s partnership approach. In a digital world, bringing together previously unconnected fields of expertise to realise innovation and value creation at scale, becomes an imperative. Fujitsu is working collaboratively to rapidly evolve organisations’ business processes and create new services and products, providing the widest range of IT solutions to the customers. Approximately 155,000 Fujitsu people support customers in more than 100 countries. We use our experience and the power of ICT to shape the future of society with our customers. Fujitsu Limited (TSE: 6702) reported consolidated revenues of 4.5 trillion yen (US $40 billion) for the fiscal year ended March 31, 2017.
Global Female Leaders 2017: A Thorough Look Back
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