If you hang out in blockchain circles for more than a moment you will undoubtedly hear about smart contracts. In 2017, when blockchain was the disruptive technology du jour, crypto pundits at the time claimed that smart contracts would quickly disintermediate escrow companies, freight forwarders, medical insurance claim processors, financial clearinghouses, and middlemen across all industries.
Five years later, none of these “disruptions” have happened nor are they close to happening. Traditional intermediaries continue to enjoy their place in their respective industries. While Ethereum, the crypto network which is the basis for the nascent but heavily hyped DeFi (Decentralized Finance) phenomenon, and the overhyped NFT (Non-Fungible Tokens), has come a long way in terms of market value, few smart contract applications founded on it have scaled to a degree to pose a threat to traditional contractual media or networks.
Maybe the crypto incarnation of smart contracts needs more stewing before they make sense, but what about non-crypto implementations of smart contracts? Is there potential for smart contracts to change the way we think of edge computing and distributed applications?
What are Smart Contracts?
The term “smart contract” was coined in 1994 by Nick Szabo, a computer scientist and cryptographer.
Smart contracts are secured stored procedures or programs that reflect transactional policies that are machine-readable. The protocols that are codified in a smart contract execute when certain conditions are met to enact the terms of a transaction or agreement. Technically, smart contracts are a set of database triggers and are coded to automatically enforce the clauses of a contract.
Despite its close association with Ethereum, it is very important to understand that smart contracts don’t require a cryptocurrency or blockchain to implement, though I am sure that there are plenty of folks who will insist that they do. We are implementing what are smart contracts today without blockchain. Many intermediaries have used electronic documents and notary services in contracting that use digital signing and automated document workflows for years.
The other misconception about smart contracts is that they are legally binding and enforceable by default. They are not. Smart contracts are only as legally viable as the authorities, centralized or otherwise, allow. The matters of jurisdiction, entitlement, intellectual property rights, and enforcement are fast-growing areas of concern regarding NFTs that not only put into question their value but their utility.
While smart contracts can automate the administration of transactions and the terms and conditions of such transactions, they will likely rely on central legal and regulatory authorities to make them valid and useful. Again, as I mentioned in my prior article, governance is the most important design element of a smart contract application whether it is on a blockchain or not. That includes framing the legal aspects that authorize transactional terms and conditions and make them enforceable across jurisdictions of law.
Permissioned Blockchains for the Enterprise Edge
Smart contracts based on permissioned blockchains, and a private network of participants may be more appropriate for localized and less public enterprise needs. Besides, Ethereum, which is the most popular crypto blockchain network for smart contracts, has varying transaction costs that have hit levels above 200 USD making it uneconomical to use at times and too volatile for most enterprise applications that require a low and stable transaction cost.
Historically, industry exchanges and trade hubs have engaged trusted and known parties. They have been around at least since B2B eCommerce craze of the early 2000s. Emerging industry blockchain applications such as TradeLens, which was jointly developed by IBM and Maersk, use permissioned blockchains. Members of these platforms are considered “Trust Anchors” who are known to the network unlike largely anonymous participants in trustless blockchain networks such as Ethereum. In simple terms, many of the asserted benefits of permissionless blockchains don’t really resonate as well for enterprise use cases.
Luckily for enterprise architects who are tasked with evaluating blockchain technologies for their exchange applications or hub platforms, there are several blockchain architectures and platforms to choose from. Here are some notable ones:
Hyperledger Fabric is a permissioned blockchain platform software originally conceived and contributed to the Linux Foundation as the Hyperledger Project by IBM and Digital Asset. Developers can create distributed applications (Dapps) that can execute on the Hyperledger blockchain and be used to implement smart contracts, called chaincodes. No crypto required.
Corda is another permissioned distributed ledger platform developed by R3. Much like Hyperledger Fabric, Corda networks are comprised of authorized nodes. These trusted nodes are validated by a master node called The Doorman. Transactions are validated by a number of Notary nodes that determine validity and uniqueness. Again, no crypto is required although a crypto-based variant is possible.
Ethereum happens to be a great option for permissioned blockchain applications. Quorum is a permissioned version of Ethereum that was developed by J.P. Morgan and acquired by blockchain software company ConsenSys in 2020. Quorum allows enterprises to deploy private permissioned blockchain networks. J.P. Morgan’s JPM coin digital currency is one of the most notable implementations of Quorum.
Can Smart Contracts Enable New Distributed Computing Models?
The question of how smart contracts can enable new distributed computing models and architectures is a tricky one. A blockchain node might be collocated at one of many local edge data centers or cloudlets of an enterprise’s edge cloud network. If this is the case, several interesting possibilities can be considered that capitalize on the unique features of smart contract on blockchain.
One of the characteristics of blockchain that is highly relevant for edge computing is the redundancy of data across a network of nodes. Blockchain nodes provide a complete local copy of a smart contract or policy register. Blockchain nodes located in proximity to an edge environment could enable high-speed policy lookups and updates needed for low-latency distributed applications that have only begun to be explored.
Smart contracts on blockchain present several interesting propositions for trust functions and services within an infrastructure or platform. Smart contracts have strong potential for service provisioning, user authentication, identity and credential management, access management (authorization), and resource/asset sharing application with entities internal or external to an enterprise. These use cases have been and continue to be explored by the telecommunications industry to enable new roaming and network sharing models as well as multi-party security.
As mentioned earlier, B2B exchange and commerce hub applications such as TradeLens as well as financial intermediary/settlement platforms such as J.P. Morgan’s JPM Coin have adopted permissioned blockchain frameworks to foster commercial trade models that were difficult to realize in the past.
Permissioned blockchains provide a unique framework for the decentralized governance of a known network of parties internal and external to an enterprise. Decentralized governance paradigms are particularly interesting for fostering a wide range of commercial networks that have been historically difficult to realize due to governance design constraints that limited stakeholder buy-in.
The application of novel models of decentralized governance of distributed and shared systems, resources, and applications across enterprise boundaries seems to be a promising frontier to explore. Blockchain technologies could very well enable new distributed computing architectures that shape the future of edge computing and of industries.
There you go. My brainstorm on the potential of smart contracts to revolutionize edge computing. This was a tough one. I certainly look forward to your constructive feedback and input on this thought-provoking topic. This is an important area of innovation that we can all learn through sharing and some healthy debate.
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