Legally-Relevant Smart Contracts on a Stateful Blockchain

Abstract

In the Machine-to-Everything (M2X) economy, machines, organizations, and people transact autonomously across organizational boundaries. Smart contracts, which are programs that execute the terms of an agreement on a blockchain, are central to this vision because they provide the transparency and security that such coordination requires. In regulated domains, however, a smart contract is useful only if it is also legally relevant: recognizable and enforceable as an agreement in law. Two obstacles stand in the way. First, the languages used to write smart contracts express computation rather than legal structure. Thus, the parties, obligations, and rights that make an agreement enforceable are left implicit. Second, most existing blockchains store application data inside shared contracts over a single global state. Due to this feature, transactions that interact with the same contract are, therefore, processed one after another. Even logically independent agreements run sequentially, which caps throughput. We study the requirements for solving both problems in this study, and analyze how they can be solved by means of a stateful blockchain, whose accounts hold their own persistent objects and divide their work across parallel shards. This solution, paired with a declarative notation for legal contracts, the Smart Legal Contract Markup Language (SLCML), allows us to overcome both limitations. We formalize the design and evaluate it by means of a discrete-event simulation, and exercise a prototype on a case study focused on data access consent in healthcare. Because each agreement is its own group of objects, the model permits independent contracts to be processed concurrently across shards, unlike on single-state platforms, while the parties, permissions, and obligations that procedural code leaves implicit become explicit. Our study evaluates the applicability of this state model and assesses the conditions under which it can exceed the performance of existing alternatives.