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Cryptocurrency, blockchain and smart contracts are perhaps the most revolutionary technological innovations of our time. This mantra is already well known among people in the cryptography industry who have fully embraced and invested in technology.
Even so, governments and regulatory agencies have taken a cautious approach in this area. However, just recently the major US regulatory agency, the Commodity Futures Trading Commission (CFTC), has shown a deep understanding and interest in smart blockchain contracts.
The CFTC has released a page of 32 pages Primer detailing the use cases, risks and challenges of blockchain-based smart contracts. The primary objective is to provide a well-studied and studied document on smart contracts to accelerate the learning curve for US regulators, investors and policy makers.
Smart contracts defined by the CFTC
The CFTC has defined smart contracts as a set of coded computer functions able to automatically execute the results of a contract based on specific criteria satisfied or not. They have clarified it smart contracts it does not have to be a legally binding contract and therefore have more cases of use.
The report also exposed 3 main attributes of an intelligent contract:
- It can authenticate the identities of the counterparties, the ownership of the assets and the claims of right
- It can access or reference external information or data to trigger actions
- It can automate the execution processes
Further on, the report detailed the interconnected nature of smart contracts and distributed registries (blockchains). He explained how blockchains are platforms that memorize smart contracts and distribute them through a decentralized network. He also explained that the decentralized aspect of the blockchain helps to ensure the validity of the smart contract.
If the recognition of the decentralized blockchain technology report is not enough for you, they also mentioned the points of view of Vitalik Buterin, the co-founder of Ethereum.
"An intelligent contract is a mechanism that involves digital goods and two or more parts, in which some or all parts enter resources and activities are automatically redistributed between those parties according to a formula based on certain data that are not known at the time the contract it started. "
They also cited computer scientist Nick Szabo and others to provide the context of brilliant minds on what the smart contracts are.
CFTC recognizes the advantages of Smart Contracts
In the report, the CFTC lists the potential unexpected benefits of smart contracts along with detailed details and examples.
The main advantages of the smart contracts listed by the CFTC are:
- Standardization
- Safety
- Economy and speed
- Certainty
- Business innovation
- Regulatory innovation
Importance of the CFTC Primer on Smart Contracts
The CFTC is a well respected regulatory agency in the United States with a mission to promote open, transparent, competitive and financially sound markets. Therefore, now they have formally released a primer on smart contracts and recognized their potential benefits, it is a sign of what is coming.
Now regulators, policy makers and investors have a reliable source of information that details important information about blockchain technology and smart contracts. You can read the full report Here.
