Australia, meet blockchain-enabled ‘smart contracts’

Published on the 07/09/2018 | Written by Jonathan Cotton


Blockchain enabled smart contracts

All aboard the hype train, the great Australian blockchain experiment is underway...

Forget about cryptocurrencies. Everything from the way we count votes to the way we appraise in the luxury goods market and indeed the entire wider business landscape is up for grabs – if you believe the hype.

And there’s lots of that, especially with the announcement of a new deal between CSIRO, law firm Herbert Smith Freehills and IBM.

According to the firms involved – heavy hitters all – the new consortium marks the beginning of Australia’s first large-scale, enterprise grade and industry-agnostic digital platform, something that could see Australia positioned as a best-in-show destination for efficient, streamlined business.

“It could see Australia positioned as a best-in-show destination for efficient, streamlined business.”

Simply put, the companies plan to build digital platform that can provide businesses with ‘smart legal contracts’ – a secure, cost-effective means to digitise contracts, exchange data and confirm the authenticity and status of legal contracts.

Once completed, the project known as the Australian National Blockchain (ANB) will, according to CSIRO, enable organisations to digitally manage the lifecycle of a contract, from negotiation through to signing, then over the term of the agreement, with transparency and permissioned-based access among parties in the network.

“ANB will provide smart legal contracts (SLC) that contain smart clauses with the ability to record external data sources such as Internet of Things (IoT) device data, enabling these clauses to self-execute if specified contract conditions are met.”

By way of the example, the group offers this scenario: “Construction site sensors could record the time and date of a delivery of a load on the blockchain and trigger a smart contract between the construction company and the bank that would automatically notify the bank that terms have been met to provide payment on that load delivery.”

In essence, such a platform would allow organisations to use blockchain-based smart contracts to trigger business processes and events, simplifying supply chains and enabling the quick and secure sharing of information with customers and regulators (and maybe even eliminating the worst offending by those remaining paper-producing offices).

The announcement may be sudden but the thinking isn’t. Data61 has been mulling over just such a project for some time, publishing twin reports last year (funded by the Australian Government’s National Innovation Science Agenda and with the assistance of The Treasury) that highlighted the opportunities created by smart contracts in Australia.

If successful, the platform could have a significant impact on Australian business, and they’re not the only ones looking to unleash the power of blockchain and in particular, smart contract tech in Australia.

The ASX has just announced it intends to replace its legacy CHESS: The Clearing House Electronic Subregister System with a new distributed ledger technology platform.

The move will replace the centralized CHESS system – a stable but error prone system which sends messages back and forth about buying and selling securities – with a decentralised, shared ledger similar to bitcoin’s blockchain, creating a single source of truth database held by ASX.

The cost of equity clearing and settlements under CHESS is estimated to be around AU$100m. The ASX estimates the new system could save AU$23 billion in fees currently paid by Australian firms for investment services. Furthermore, according to the ASX, the enriched, real-time and verified information that will be available has the potential to create a whole new ecosystem of services for the industry.

The new system was originally slated to go live in the fourth quarter of 2020 but following a public consultation has been pushed back to March-April 2021.

“Whereas there was continued widespread support for delivering new scope on Day 1, respondents questioned whether the proposed implementation window of Q4 2020 to Q1 2021 was achievable when considering the significance of the technology change and the range of new scope being introduced,” said the ASX in a statement.

“ASX considered this feedback and has modified the plan”.

 

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