Ethereum is defined as a decentralized computer network built on blockchain technology and is the technology that allows you to send your cryptocurrency (Ether – ETH) to anyone, paying only a small commission for the cost of the transaction (so-called gas fee). Furthermore, Ethereum is the basis of applications, as specified by the creators themselves, that anyone can use and that no one can send haywire. Finally, Ethereum is also that virtual place for the management of smart contracts and the creation of Nft (Non Fungible Token) .
Smart contracts, a brief history
The origin of smart contracts , in the current sense, is traced back to the 90s of the last century, when Nicholas “Nick” Szabo used this expression giving it the meaning of ” computerized transaction protocol that executes the terms of a contract “.
At the beginning, there was therefore no necessary connection between blockchain and smart contract also because the latter, as conceived, are supported only by the second generation blockchain.
It is in fact with the advent of Ethereum, whose functions include the execution of smart contracts , that it was possible to witness the creation of an increasingly intense link between these two technological tools, so much so that today we hardly speak of smart contract outside the blockchain technology, since, due to its characteristics, it allows its full operation.
Indeed, smart contracts extend the functionality of the blockchain on the immutability of data and, from a technical point of view, they are executed by what is defined as a multitude of nodes, which reach a unitary vision on the result obtained. In other words, they are well-defined sequences of steps represented in source code form. In the case of Ethereum, smart contracts are written in Solidity , which is a programming language. For this reason, smart contracts are difficult to understand by non-technicians. Mind you, a mere translation of a normal contract, in the classic sense of the term, into a smart contract it presents not a few pitfalls and it is not enough: the English language above all – but alsoTurkish one – presents ambiguities and nuances that give rise to more interpretations that do not conform to the linearity of smart contracts .
Smart contract in the Italian law
In particular, as dictated by this article, the term smart contract means a “computer program that operates on technologies based on distributed registers and whose execution automatically binds two or more parties on the basis of predefined effects “.
From this it is possible to deduce that the smart contract is a tool by virtue of which certain legal effects are produced upon the occurrence of the conditions that the parties have foreseen and codified within the blockchain, automatically and without the use of intermediaries.
The smart contract , therefore, is the result of a set of clauses codified by the parties according to the “ If – Then ” structure, so that it is able to “execute itself” in the presence of certain previously established circumstances.
These circumstances may also consist of real-world events which, once they have occurred, are communicated within the blockchain through the so-called. “Oracles” which, on the other hand, belong to the outside world. The oracle is in fact a tool that determines the connection between the external world and the blockchain by transmitting information to the latter, so that, once the input is received, the smart contract is susceptible to execution and therefore the legal consequences predefined by the parties can be produced.
Oracles provide data to the blockchain so that it can be used by smart contracts. Of course, being an influence that comes from outside, if we can say so, the question of trust arises, because oracles could provide incorrect data to condition smart contracts . The oracle, therefore, must necessarily be trusted or provide proof of authenticity of the information communicated.
Having said that, the automaticity that characterizes smart contracts would lead to the affirmation that, with respect to them, it is difficult to speak of non-fulfillment, since, as we have seen, a specific performance by the “signatory” parties is not required, whose will on the contrary, it is irrelevant for the purposes of executing the contract and producing the related legal effects.
Smart contracts and contracts
There is no doubt that the advent of smart contracts – thanks to the terminology used – has led to questioning the relationship with what we usually call “contract”, the agreement of two or more parties to establish, regulate or terminate a legal patrimonial relationship between them, endowed with the requisites envisaged, that is the agreement, the cause, the object and the form, when it is prescribed by law under penalty of nullity. We therefore spoke of a ” smart legal contract ” to indicate smart contracts which, on the one hand, can be traced back to the definition and on the other, present all the essential elements listed in laws.
In this regard, the legislator has addressed the relationship between smart contract and formal requirement. As is known, the form is the modality of manifestation of the will of the parties and, sometimes, the legislator foresees the adoption of a particular form for the validity of the deed, or for the relative proof.
What happens if instead of entering into a “traditional” contract for which the written form is required, the parties decide to enter into a smart contract ?
It is recognized that the suitability of smart contracts satisfies the requirement of the written form, provided that there has been the prior IT identification of the parties. The peculiarities of the phenomenon, however, prevent the indiscriminate application of the rules provided for contracts to smart contracts, on which instead the interpreter will be suitably called to question himself from time to time, considering the specific case.
The applications of smart contracts on Ethereum
However, the uncertainties regarding the legal framework of smart contracts have not prevented these digital tools from finding expansion on the Ethereum platform, in the face of the automaticity, transparency and immutability guaranteed by blockchain technology. Thanks to the “chain of blocks”, the stored data cannot in fact be altered or deleted, making the clauses non-modifiable and accessible, also reducing any information asymmetries between the parties. Furthermore, we have seen how automatic execution is ensured when the conditions established by the parties are met.
These characteristics have favored the use of smart contracts in various sectors.
To cite a few examples, it has been observed in the insurance sector that smart contracts could accelerate claims management. In particular, decentralized policies have been developed which provide for automatic payments when the insured risk occurs. For example, we can recall the policy made operational on Ethereum to cover flight delays with respect to the scheduled departure and arrival times: upon the occurrence of the delay on the scheduled time, communicated to the blockchain through the “oracles” mentioned above , a refund is automatically issued to the passenger.
Another sector in which the diffusion of smart contracts is viewed favorably is represented by logistics, in order to improve the traceability of products.
The areas in which smart contracts can be applied do not stop here: for example, we talked about smart contracts with reference to corporate transactions, the real estate sector, the protection of intellectual property and the sale of goods, in particular when it is envisaged. payment in installments for the products.
A possible smart contract that requires an oracle, as mentioned above, is the one that provides for the automatic payment of a sum from X to Y as consideration for a supply of a good.
In this hypothesis, the management of the payment is entirely carried out on the basis of information present on the blockchain such as, for example, the check that X has the necessary funds to make the payment.
However, the simple logic present in this smart contract ( If X receives the good, then the transfer of the sum from X to Y is carried out) requires information, vital for the conclusion of the legal transaction, which is not present on the blockchain: the receipt of the goods by X.
Here, the figure of the oracle solves this problem: the same could verify the signature of X who received the good being, the oracle, connected with the transporter.
Always following the same example, the smart contract , in this case, would verify the identity of the carrier, his signature and, last but not least, that of X.
Conclusions
In conclusion, if the blockchain can be defined as an architecture born and designed for a fungible good, Ethereum, on the other hand, is the place for the management of smart contracts and the creation of Nft.
NFTs allow creators of digital content to have full control over them: they are a digital property title, a certification based on guarantee and uniqueness cryptography. This is possible because an NFT is a token , therefore a token with its own unique, unrepeatable and non-divisible value, which includes a series of information that cannot be changed.
If on the one hand an NFT can serve as a work or digital asset, on the other hand it is a contract of ownership of the same work or asset: the smart contract .
This, the smart contract , makes the NFT unique in ownership and authenticity by including all information including, a fact of no small importance when it comes to art, any transfer of ownership of the work. This even if it circulates freely on multiple channels – think of the dynamic works that can be purchased on OpenSea or SuperRare and then shared on the web – because, if we can say so, it will be a unique work (with all the guarantees and certainties that derive from it ) in the face of multiples, to always use a classic term of art, which they can circulate, although without intrinsic value.