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Tuesday, May 10, 2022

Ricardian Contracts vs Smart Contracts

 Brought to my attention, unsure as yet how broadly the definition is used at this time, can see the need for the understanding of such an agreement by human and machine means.

The Ricardian contract, as invented by Ian Grigg in 1996, (Wikipedia)  is a method of recording a document as a contract at law, and linking it securely to other systems, such as accounting, for the contract as an issuance of value.[1][2] It is robust through use of identification by cryptographic hash function, transparent through use of readable text for legal prose and efficient through markup language to extract essential information.

A Ricardian contract places the defining elements of a legal agreement in a format that can be expressed and executed in software.[3] The key is to make the format both machine-readable, such that they can easily be extracted for computational purposes, and readable as an ordinary text document such that lawyers and contracting parties may read the essentials of the contract conveniently.[4]

From a legal perspective, the use of markup language embedded within a mostly legal prose document leads to reduced transaction costs, faster dispute resolution, better enforceability and enhanced transparency.[4][5] From a computing perspective, the Ricardian contract is a software design pattern to digitize documents and have them participate within financial transactions, such as payments, without losing any of the richness of the contracting tradition. Publication of the content and reference to that content by the unique cryptographic message digest eliminates frauds based on multiple presentations.[5]

The method arises out of the work of Ian Grigg completed in the mid-1990s in contributions to Ricardo,[6] a system of assets transfers that was built in 1995-1996 by Systemics and included the pattern. The system and the design pattern was named after David Ricardo in honour of his seminal contribution to international trade theory.  .... '  

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