Hello dear participantsI am Hasret Ozan Sevim from Hacettepe Law SchoolI am studying at last grade today I am going to present you smart contracts and their future effect on legal processes Here it isour presentation content I guess most of you heard about some thingsabout smart contracts and I am pretty sure about that all of you know many things aboutBitcoin or blockchain, now First let's look at the purpose of this presentationcontract law is fundamental for market economy and civil societyso the change of formalization and implication of the contracts affects thestructure of economies structure of business models companies and -ofcourse-our daily lives so if the smart contracts could be developed enough in the future thistechnology will be changing many things this is the surface of one of the softwareabout smart contracts, smart contracts actually the transformed of the realcontracts into the digital platform so if we look at the history of smartcontracts actually the idea of smart contracts were actually designed a long before the blockchain and bitcoin, Nick Szabo, he is a legal scholar and expert on softwares, was for the first time in 1993 designing the idea of smart contracts and let me give you a secret thatSzabo is most likely the founder of Bitcoin Nick Szabo realizedthat the contracts could be transformed into computer language and they can becontrolled and used so his purpose was to create more security and less costbecause you know going to an attorney to draw up a contracta little expensive for businessman so it dependsSzabo has many studies and also his followers developed the ideathose are my sources I used in my article and in this presentationthere are a few studies in Turkey One of the academician who is studying on smart contracts is İsmail KIRBAŞ Actually I strongly* recommend you to read this articlesSo if we look at closely to smart contracts and their characteristics what are the characteristics for smart contracts The wills of parties are included in smartcontractsbecause at least one of the parties has to draw up a framework about thecontracts or two of the parties have to sign smart contract to execute orperformance it secondly a machine mediates toestablish a smart contract so there is no any real man such as a wholesaler,retailer or broker, agent, attorney there is no any intermediary inthe system of smart contracts, only a machine could help you to perform thecontractand the third one a transaction cannot recover back in smart contracts because all of the transactions which are made in thesystem of small countries are recorded to many ledgerswe will look at that furtherand the fourth one is payment by electronic units its most popularcharacters of smart contracts because you know Bitcoin or Ethereumyou can use when you want to pay someone on electronic platform but the Ethereum platform -on the right side-actually the most useful one because it has beenestablished for only purpose only purpose is to perform smart contracts Ladies and GentlemenHere is the most important part of smart contracts It is the crucial part of smart contracts because this is why we call them smart Smart contracts can perform terms of the contract automatically, byitself, so here is our slogan 'The more confident we have for a transaction theless operational cost you have to pay' If there is an automatic execution youdon't have to hesitate about other party will be going to give* some money to me or anything else because the execution ismade automatically in the system so what do we need to establish a smartcontract or apply smart contract We need four elements first one of coursethe subject of a contract because in every type of contract you have to choose any service or any goods and secondly you need to have yourown private keythey are really similar to your real signs actually they are more securedthan your real signs because they are encrypted by using cryptographyso that's why it provides security so we need private keysand thirdlyyou have to enter the terms of the contract into the systemand the last one the decentralized platformwhat is decentralized platform Actually at this pointwe face blockchainblockchain is a peer-to-peer data collection web which is not centralized such as government registries every transaction made onthe blockchain or smart contracts is processed by every computer included inthe system consequently the blockchain is like actually we can say thatit is a giant recording book of any company or an enterprise but the difference isthat in blockchain these recordings this accounting recordings, accounting forother transactions are not made by employees those are made by computers oryour software or your machines which one you prefer -I do not know- Let's understand how smart contracts workwe will look at the working process through an example because it may be alittle hard to understand without an example so right now we have an vehiclesales contract in our hand (B) has a blockchain address and wants to sell a carfor this year then (B) determines the term of the contract by transforming theterms into computer language (B) is transformingthe terms of the contract into the digital platform by writing some nodesand after creating the contract (B) signgs that these all the step until right nowis called as drawing up a contract the first step and the second step(B) leaves the car in a garage which is secured by a smart lock because we have to be surethat the subject of the contract is secured so we have to leave the car intoa carriage which is under control of blockchain or smart contract or the smartlock of the garageso (A) would like to buy a car and (A) finds the car on the internet then also (A) has enough money, enough digital assets,this is not like our actual money we know in our daily lives but in smart contracts there areelectronic units such as Ethereum So (A) has enough money in his/her own private wallet then (A) signs smart contract which is prepared by (B) so the wills of the parties are metthe smart contract has been established so this step is called as consideration the second process and after this step the verification will be made by acomputer in order to detect the machine will be looking at'the car is safe' and the other party has enough moneyin his or her own wallet if it's not these transactions will be nullifiedbut if these conditions are met then the computer will be executing or performing the terms of the contract so this is thelast step performance so you don't need to wait the other parties toperformance his/her obligation or anything elseso the performance is automatically made in every transaction on this process arerecorded to ledgers -giant books- which is recorded by millions of computers in the blockchain system if you look at the next thing how can webe sure about that the subject of the contract is not defectivewhat if it's broken Here we face with internet of thingsinternet-of-things helps us with the advance of sensors andscammers in the both garage and the car the situation of the good can be easilydetermined by internet-of-things so if there is a broken thingor the car is broken in our previous example internet of things will be answering* thatthe car is not ok You shouldn't buy this car so that we saidok so I'm not going to sign this smart contract by my own private keybut we thought internet of things it's really hard to detect that the good orservice which is subject of the smart contract is not broken or notok let's look at case study let me say something that actually in yourdaily life you are using one of the smart contracts which is vending machinevending machine is the basic the most usual one we we have seen in our livesif a vending machine operates properly when you insert a coin into the machinethe machine automatically takes the money and gives you a drinkit is a smart contract it's the automatic performance There is no any intermediaryonly machine helps you to acces the drink And another example is car rentingand this one is used by an Arizonian company in U.
The name of the company is C.
G Acceptance Corporation The company offers rent a car service And the company use a devicewhich combined with car's starter So when the debtor is in defaultthe debtor does not pay the money The starter of the car become disable automatically And the debtor cannot use the car anymore It is an example of smart contractsBecause if you do not the money The contracts is not executedBut if you pay the money The contract will be performed And last exampleActually this example is really controversial one Because it is not suitable with our ethical values Sometimes long proceedings should be followed to evict a tenant Some people consider that smart contracts could be applied if the tenant does not send enough money to landlords electronicwallet in that situation for example the tenant does not pay the rent to the landlordthat time if the smart lock by looking at the Internet understand thatthe money has not been paid that timethis smart lock is automatically automatically works then the tenantcannot enter into the house so it's really actually tough example butespecially among the libertarian academicians may be recommending this existing example anyway application of scope of smart contracts I'd liketo point out that small contracts cannot that could not apply to all types ofcontracts in neither Turkish law and other law systems for examplean labour contract cannot be performed by smart countries why becausea machine can not force someone to work a real person it cannot do that so that'swhy it's not proper, it's improper for smart contractsfor application but insurance contract, profit distribution, rent a car sector, those are really easy to be applied by smart contracts and the mostimportant part of our presentation the comparing board actually smart contractshas many advantages than traditional contracts but also there are some troubleswe will look at that first one because if you wanna act a contract or establish a contract or apply a contract you have to some sometimes if thecontract is a little complex you have to go to the attorney to draw acontract so if you have to pay the fee of attorney if it's an important you haveto go notary and you have to pay the fee of notary and if there is any dispute soyou have to pay and much money to your lawyer or the other judgment costsbut in smart contracts there is* onlytransaction fee, what's that? For example if you want to pay someone in exchangewith any service or good only thing you have to do that a click and pay forexample 0.
001 Ethereum to the Miners Who are miners? Miners are who operate the millions of computers Blockchain system and the transaction fees reallycheap for a sample as I say 0.
001 Ethereum means 1.
7 dollar if you want topay anyone abroad you have to pay actually at least $45 for Western Unionso it's a very cheap one, the cheaper to pay a smart contracts and there is no any intermediary,real intermediary, no real human no real man in smart contracts, there are only computers so this could avoid the human-made mistakesand the third one, this one is the disadvantage of smart contracts there ismost efficient regulations for smart contracts and blockchain and so that'swhy it's very risky to invest into this technology and the fourth one isperformance as I said this is why they call them the smart and you don't have towait the other party to perform his/her obligations which arise from thecontract and the last one is modification in smart contractsis impossible because the transactions are recorded to millions of computerin blockchain system so this is why we cannot recover back whole the millions of transactions back, it is almost impossible other adventages of smart contracts, in my opinion ladies and gentlemen,civil law system is more effective in smart smarts than AngloAmerican law because in civil law system the judges are tightly bound with thestatutory regulations but in the Anglo American law system the judge can decide in notin favor of the contract so if the judge sees any wrong things in contract even if thecontract is not in contrary with statutory, judge can decide contrary withthe contract, at the second is decentralized systems make safer the smart contract systemand formalized smart contracts could be used over and over again it's verysimilar to standardized standard form contracts in Turkish 'Genel İşlem Koşulları'so smart smarts can be used like that, and this topic shows usenforcement law and procedural law are going to be less in the future because ofthe smart contract system especially attorney for failure to data andblockchain technologies will become prominent when smart contracts arewritten into the system when you are visiting any communication Departmentinstitution you will be seeing in the future there are many teams, each of them is including one attorney and one engineer, a computer engineerbecause of this type of smart contracts Thank you for your attention Please ask me your questionsbecause I know it is a little hard to understand Thank you again 'Thank you for your presentation Can we use smart contracts as an application?' If I can show you the computer,you can use as an application actually, every application is a software, right? So for a sample,It is a software, you can upload this software to your phone or to your laptop and just you have to writethe terms of the contractand you need to have enough electronic units in your blockchain addressso you can use it by an application 'What if there would be a mistake based on machine?' Actually, it is not impossible face any problem with the machine That is rightand actually this problem is out of this topic but I can say that the troubleswith the machines are really less in the system of smart contracts for example if they encounter with a thousand of disputes which were arising from somesome mistakes by softwares you can only ten percent of that can be seen in smart contracts system 'But there is still a possibilityIf it happens, who would be responsible?' for example the encrypting system,cryptography, 'şifreleme', this makes the system more secured and more properso that's why as I say this possibility -ofcourse- exists but it's really hardalmost close to* impossible 'Is there no solution for that?' The solution is about computer scienceSo it is not about the same question but this question exceeds my knowledge becauseit's about computer science the trouble with software but I can'tsay that legally and there is almost no problem which can not solveby legal perspective 'Is it paying mandatory by Bitcoinor it is just a simple necessity?' thank youactually it's not mandatory but the blockchain system is muchmore as security mechanisms so using cryptocurrencies are safefor example when the smart contracts was the first time designed by Nick SzaboThere was no blockchain system of bitcoin before in 1993 but there was a 'Bitgold'it was similar to blockchain but it was not watching so if it's not blockchainsecurity side would not be such stronger so that's why is not mandatorybut I think it should be preferredThank you 'We're considering Bitcoin is not protected and stable currency So how it that actually affects smart contracts?' Very good question, thank you First of all I have to say thatit is out of our topic but it is really fine question there are many stable coins, the cryptocurrienciesright now, which are processed by many stock exchange so that we cancreate stable ones but if you have Bitcoin, it is not stable anywayso even if it's not stable you can do any transaction which is may in onesecond so you cannot effect by the fluctuating in price so if there isa performance generally you don't have to hesitate about the fluctuationof the price THANK YOU! (Appreciate KU Law Club =).