Binding the EU: Peer-to-peer trading using smart contracts

What largely binds the EU together is the trading of physical goods. One could argue that the easier the trade, the stronger the bond. So Europe would really benefit from taking away the current boundaries in international trade. The boundaries are not just physical though. A large part of every transaction takes place at the information level. For every crate of Chianti shipped from Italy to The Netherlands a large number of documents are written, contracts signed and mails sent. This means that making trade less cumbersome means taking the hassle out of the informational side of transactions.

Fortunately recent technological advances could enable transactional parties to autonomous come to an agreement (contract) that is legally backed. In a peer-to-peer manner, ¬†without the need for trusted third parties. For example, say an Italian company wants to ship their Chianti to The Netherlands. But they have several requirements regarding price, speed, maximum temperature fluctuations during the shipment, insurance, etc. This could be partly solved by writing ‘smart contracts’, which are blockchain based contracts that are executable, but the problem is they have to be written in regular programming languages. It is unrealistic to expect regular parties to be able to express their intent in code. They should be able to express their intent in a language that is meaningful to them.

The Italian company for instance should be able to specify their requirements in their own domain language. A language that they understand and can confidently express their intent in. Innovative proof of concept tools built by Contracts11 enable the translation from the requirements in the domain language to an machine-executable format. This means the Italian company can devise a contract for the shipment of their Chianti to The Netherlands and (part of) that contract will (partly) enforce itself because it is an executable contract (a ‘smart contract’ on a blockchain).

During a period of transition from the old way of transacting based on hand-written contracts to a fully autonomous way based on peer-to-peer constructed smart contracts, a hybrid model is needed. A model where common contracts and smart contracts go hand in hand. In the long run this could result in a shop where parties can express their requests on a semantic level after which the shop compiles those into (partly) executable contracts stored on a blockchain.

Solving this problem is a prerequisite for enter a future where parties autonomously can come to a transaction. In the transport example it would take away the need for a lot of middlemen in the informational side of the transaction. This is innovation of not only the digital but also physical net, and an important step towards a tighter integrated and smoother operating Europe.

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