fintech week

There's a lot of buzz around terms like "smart contracts" at the moment, evidenced by the amount of people crowded into a dedicated session on the topic yesterday at London's Fintech Week 2015.

Adi Ben-Ari, founder Applied Blockchain, who was giving the smart contracts presentation, consults with companies about use cases they might have for private blockchains.

He told IBTimes: "There's a lot of hype, there's a lot of talk, there's a lot of people feeling threatened by blockchain and think they need to be doing something.

"So we do get a lot of people coming to us who have maybe not fully understood the underlying workings of blockchains.

"We will be the first ones to come back and say, well actually, you are better off doing that with an Oracle database, IBM integration, whatever it is. It's not necessarily a problem that really in practical terms a blockchain will solve.

"This could include accountants, people in the banking world - where we don't think it's a good idea is when it's all inside an organisation and effectively it's centralised, when you break it down it's a centralised solution.

"If you are looking at cloud solutions where you are going to put something all in the middle then you probably don't need a blockchain to do it."

Ben-Ari said his company is very familiar with the different blockchain platforms that are out there. As far as automated digital contracts goes, Ethereum has offered developers "another world", he said.

Ethereum is a public blockchain like Bitcoin but its code base has been developed from scratch to allow much more data rich and complex operations. Comparing Bitcoin to Ethereum, the analogy of a pocket calculator to a general purpose computer has been used.

The public blockchain of Ethereum and its native currency ether has no relevance to Ben-Ari's business model, which concerns private chains, where permission must be granted to participants who know one another's identity.

He said: "There are certain things we like about Ethereum and specifically the smart contract virtual machine, and that's what we work around; actually some of the rest of it, isn't really optimal for the type of solutions we do, but it's still the best that's out there from what we have seen.

"So we are not trying to tie or solutions to Ethereum - we are decoupling them as much as we can.

"We are saying we will build a solution and when the next iteration, the next set of blockchains come along, this is what we think will be there. And we think the Ethereum virtual machine or something similar, is here to stay.

"We have an underlying assumption that you are going to have an Ethereum-type smart contract facility on blockchain.

Smart contracts are digital contracts enforced on the blockchain. An obvious use case is financial contracts involving assets and collateral that can be enforced on the blockchain – a small subset of contracts that are not really dependent on legal jurisdiction.

Ben-Ari pointed out that Ethereum allows developers to create their own rules and data in the blockchain itself.

"Instead of just dealing with an asset or currency, you can go where ever your imagination takes you, you can put whatever data you want in there, in theory as much as you want, so it could be like a database which you are now sharing between parties.

"On top of that you can then put permissions around it. So you can say, this party can do this to the data and the other party can't see it, or they can only come in at a later stage, you can build a workflow, so you can have a series of events.

"You create the contract, another party can come along and view it and sign it, and only then can you go and do something else on it. To our mind, that hasn't even been tapped into yet."

Ben-Ari said there is also interest from outside the world of finance where startups and people trying to solve problems across organisations, bringing organisations together.

"Whether it's things like supply chain or things in the consumer space, there is a common thread, and that is different organisations doing important transactions, which may or may not be financial, where it is more efficient for them not to have a third party in the middle to manage those.

"There is trust in that they know who is participating in the blockchain, but there isn't trust at the transaction level. For instance, one company doesn't know that another organisation might have a rogue employee who is fiddling with the database."

People have speculated that in this new trust-minimised environment there might be less need for lawyers, and that it could be a good idea for them to start learning to code.

"They will probably get guys to do it for them," said Ben-Ari.

"Also, they probably won't have to because I think it will become simpler, just like other industries where there is underlying code but the business can deal with graphical tools and templates and those sorts of things."