Ricardian Contract – The Smart Contract KillerImagine you visit a website, an exchange quite possibly, which turns out to be a Rug-Pull (fraudulen...
Imagine you visit a website, an exchange quite possibly, which turns out to be a Rug-Pull (fraudulent) one. They have the smart contract mechanism in place, laced with website content that says send 3 ETH to our exchange, and we will repay in millions. You take the bait as you have read about smart contracts — which are written in a machine-readable language, but given the buzz around it, you become sure that it must be legitimate.
Unfortunately, it will not take long for you to realize that you just dumped your precious ETH into a scammer’s wallet.
You forget the incident, labelling it as a norm in the crypto world, and then you come across a P2P crypto-run marketplace involving smart contracts that get immediately executed when you purchase a physical asset over it; sounds futuristic?
Wait until you get to know that the person selling that asset does not actually own it.
What is the solution?
Ricardian Contracts; but before they came into the picture, people floated the idea of having an application read the code in smart contracts and display the meaning in the human-readable form to the user dashboard so that users will at least get a first-hand understanding of what is going to happen on the distributed ledger.
All was going well except for the following two issues:
- The app associated with the platform may show false data to the user for undisclosed monetary gains from the platform
- Even decentralized apps were not smart enough to read the actual transactions happening on the blockchain.
So the issues lingered on, and everyone who once thought that smart contracts are poised to make data collaboration between various agencies easier and faster took a backseat. Also, establishing the provenance of a product in the supply chain industry using smart contracts was debated for a while, without ever being introduced to the real world.
The uninitiated beings in the smart contract space can take it as an agreement happening between two or more parties that executes the given set of instructions. E.g., your access card to office premises or key card for the hotel room, wherein they are pre-defined by a set of code linked to a database; the only difference is that the data this time would get stored in an immutable fashion on a blockchain (Distributed Ledger Technology).
The data will remain accessible for an eternity and will perform some pre-defined tasks as per the set of conditions.
E.g., imagine a person selling an NFT artwork on a marketplace and mentioning 3% as the royalty fees, which they will automatically receive whenever the artwork gets resold, all thanks to the smart contract.
Smart contracts can implement a complex set of instructions in an immutable, autonomous, and automatic fashion.
Although they offer a great value proposition, they still lack one crucial aspect of any contract, i.e., a legal framework, since it is an agreement that has been written as a code but not the actual agreement.
Now, what would happen if there was a way to store an actual legal contract over the blockchain, which can be read by the people before falling into the traps of fake ICOs and Ponzi schemes?
That’s where the Ricardian contract comes into the picture!
Ricardian Contracts: A Brief Introduction
Essentially, a Ricardian Contract is a legally binding contract that both humans and machines can read. This means that it is a legal contract written & deployed by a lawyer and can be produced in front of a judge when a dispute arises.
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