Conventional corporations and their contracts

In conventional corporations, the simple understanding of any contract indicates any spoken or written agreement. These are enforceable by law. A vital perquisite for any contract is that the involved parties have been voluntarily engaging the establishment of consensus. For most of the business cases, contracts denote documents that recognize the contracting parties uniquely. It is the service offered for some compensation which is usually monetary. It includes set of extra clauses like penalties for delivery failure, service-delivery dates, different compensation clauses and many more. Here, the subsequent transactions are based on trusts and various contracting parties consider contracts as the metaphor for a current business deal. Further, another problem with conventional corporations is that the traditional for to set up and manage contracts that are often underspecified (Swan, 2015). To be precise, the conventional contracts never deliver enough details regarding the real processes of transactions. Thus it results in frictions between contracting parties. For example, as any party assumes any product “product certificate “ before providing partial compensation, then another party might assume the reverse. Here the final deadlocks result in high conflict resolutions and even collapse of the entire contract transaction. Moreover, the enforcement of conventional contracts has been proving to be very complicated, impossible and time-consuming. This is apparently certain in international circumstances.

A solution for the issues discussed control conventional contracts has aimed for automation as a form of smart electronic contract. This governs business transactions taking place between different decentralized autonomous companies or DAOs. Smart contracts are computerized transaction protocols for executing contract terms and technologies of the blockchain. It is suitable to achieve non-repudiation with the tracking the truth of consensual agreement for smart-contract. Blockchains are distributed databases to verify the chain of artifacts ownership independently. These are done in hash values resulting from different cryptographic digests. In recent years, experiments on DAO are more developed with the technology of smart contract of Etheteum1 (Norta, 2015). The first DAO has served as a crowdfunding project and got hacked due to security flaws that have resulted in a loss of 50 million dollars. This incident proves that it is not sufficient to merely equip the layer of a protocol on the top of blockchain along with a Turing-complete language like solidity. This is to realize secured smart contract management.

For a conventional Bitcoin-style autonomous corporation, a complicated stack of technologies and various human-machine systems are put in place for creating a functioning autonomous infrastructure. On the other hand, at the present situation, DAO has been materialized as a piece of code or smart code that is executed over the rising opaque stack of various distributed consensus and networking technology (Jentzsch, 2016). Examples of this include similar blockchain and Enthereum blockchain.

Smart contracts and their benefits

The idea of decentralized organization considers the concept of conventional organizations. Further, they have been decentralizing it. Apart from  this a smart hierarchical structure is been managed through a set of human beings interacting individually and then controlling property through the different legal systems, FinTech has been involving a various collection of individuals making interactions with each other as per as protocol specified within the code and then enforced over block chart.

However, on the other hand, DO or Decentralized Organizations might not make use of legal systems regarding protection of their physical property. However, this type of usage has always been secondary (Norta,  Othman  & Taveter, 2015). For instance, one can consider shareholder-owned corporation above and then transplant that entirely over the block-chain. Further, long-running block-chain based contracts have been maintaining a record for every individual holding of shares. Moreover, on-blockchain voting always allows shareholders in selecting a position of various board of directors and employee. Furthermore, these smart property systems could be integrated to different blockchains directly. This has been potentially allowing DOS in controlling vehicles, buildings and safety deposit boxes. Besides, DAOs are also considered as the holy grail of Dos. Hence it is the entity living on the Internet and existing autonomously (Garrod, 2016). However, it has been highly depending on hiring people in performing activities which automation cannot do alone.  

As per conventional corporations are considered, they are needed to be decentralized for many people in the era of cryptocurrency and blockchain. They never possessed any centralized leadership that indicates that there has been no CEO or manager to run the show daily. At present business world, these kinds of concepts are virtually unthinkable. It business structure has been relying on various formal voting processes and rise to the level of self-organization. Here, some employees feel secure with one leader above them, rather than being involved directly in decision making and the process of voting.

A Decentralized Autonomous Organization, on the other hand, has been meant for the people who see advantages of a decentralized organization. However, they have been wary of various voting processes. Mainly, the business model has been automating governance to a certain degree. It has been freeing up more time spent on getting tasks done. However, it has needed a massive leap of faith by every involved party.

For example the comparison between Lunyr as DAO and Wikipedia as a conventional organization can be considered in this study. Lunyr is a latest crowdscale project having primary aim offering more focused and peer-reviewed alternative for various online encyclopedias such as Wikipedia. The later one has been regarded as one of the most popular achievements made on Internet, for many years. However, Wikipedia has not been that much perfect. There has been notable degree of inaccuracies present in their article (Brettel et al., 2014). This is because the site has been lacking various professional peer-reviewing systems which have been important for all scientific endeavors. Here all the articles submitted has been constantly reviewed and been edited by various other Wikipedia users. However, the method to review the process has not been meeting every requirement. These requirements are meant for professional academic-level peer reviewing systems.

Decentralized Autonomous Organizations (DAOs)

On the other hand, Lunyr has been guaranteeing accuracy of their article. It has been designed to fulfill the significant gap left by Wikipedia. The reason has been that Lunyr has been involving all real financial transaction within its system. Further, Wikipedia has been totally money-less. For years, the site has faced dilemma in providing a completely free encyclopedia. Lunyr on the other end has been able to attract peer reviewers present among academicians with their profitable system (Atzori, 2015). 

To answer the following questions, a commercial use case for “Ethereum cryptocurrency” network is chosen here along with its blockchain technology. This use case comprises of how smart contracts could be put together for achieving particular financial goals like pooling resources in case of Decentralized Autonomous Organization.

First of all, DAO is the organization which is defined by various smart contracts. These smart contracts indicate distributed computer programs. They are kept alive through blockchains. Hence, the code is executed in a decentralized way and its state is maintained through a consensus within the system.

All these contracts are denoted as the “programmable money”, using the source code in implementing every available transaction, rights rules and cash organization. For example members of FinTech could be recorded and managed according to smart contracts. Further, they can interact internally with the organizations. They can be listed from then on in the history of the blockchain. This can be seen as a database. Affiliations of them with FinTech are always investigated with block-chain theory (Harper, 2015). To achieve that, necessary Smart Contracts are needed to be expanded and deployed over time. It has been meaning that a previously existing group of people has been developing the basis for actual DAO and assuring that it could be built on it. Thus, modification of DAOs happens though alterations in the code. It has been thus meant to be integrated again, then tested, examined and at last deployed. The states like decisions, finances and members and so on are changed through transactions over blockchains in connection with the current smart contracts. It has sounded very futuristic and abstract and it must be looked at few examples and use case for DAOs (Massetti & Schakel, 2016).

Examples and Use Cases:

The DAOs, so far are found at FinTech sector. The primary focus has been on digital currencies that can take advantages from sophisticated and high-speed organisational structure under a fast-moving and volatile market. Any public and pursuit instance of this is Digital Cash or Dash. It aims to be a smart digital crypto-currency. It has been fast, thoroughly, digital secure and avoiding double spending. Future development of Fintech’s project and its funding is proposed publicly and then decided by communities. Here, proposals could be voted and submitted by the community. People running master nodes have been keeping up their network having a particular role in those voting (Lee,  Kozlenkova & Palmatier, 2015). Operators should be freezing massive capital within Dash having a specific function under those voting. In this way within a relatively short period, decisions often consider projects and companies like FinTech, months or even years. These are made under a relatively short time. It has seemed to be work great for Dash. This is because of its excellent incorporation of various external contractors who are also paid within the Dash currency.

Examples and use cases of DAOs

Another bitterly remembered instance of use case is “The Dao”. This is a fund of venture capital that is implemented by “Ethereum Smart Contract”. During the token sale in 2016, where investors could buy shares, a serious vulnerability within the code was exploited. Here, about one third of the completely funded investments were stolen by those attackers. The event has been still considered to be controversial and leading to hard fork for “Ethereum Blockchain” that has been resulting in different projects currencies and blockchains. They are Ethereum and Ethereum Classic (Alonso, Clifton & Díaz-Fuentes, 2015).

Another example of this is the Steemit of social media platform that is run by DAO. Here, the aim is to reward the creating of good social media content and draw attention to them. Readers, entrepreneurs and bloggers are brought together and then rewarded for their activities. In this case, rewards get transferred to their currency and could be used to or paid out to reward other people. A needed infrastructure of that platform is then also deployed in a decentralized way and is more scalable than Reddit. By listed examples and generic nature of blockchain and DAOs, it has been clear that there have been no limitations for the possible users. DAOs also map process, a flow of money, shares and decision and various aspects of the blockchain (Mattila, 2016). Future projects can be organized in such manner. Besides, it must be reminded that here wholly new concepts are discussed. Hence risks and potentials of this innovation are not known yet. Thus, FinTech must look at the decisions of the current market scenario and through light over the various benefits and drawbacks.

Bunch of contracts never denote a meaningful organization on their own. FinTech should be able to undertake decisions smoothly without any barrier. They must communicate to internal and external bodies.  This is because money should get into that organization, services and employees and this must be paid. Thus interaction with rest of the world must be possible (Marks & Lebel, 2016).

The following parts are considered from the various perspectives of current Decentralized Autonomous Organizations along with synergies with Blockchain technology. This must be helpful regarding seeing what additions to the future blockchain world has been providing for FinTech.

Parts of the network	Discussion
Autonomy	Every component should be implemented through blockchain and its mechanisms. Here, the source code is the common property and is seen every people. Further, there has been no central body administration. Though FinTech has been developed by someone without parts of DAO in place already, it is needed to be guaranteed that there has been no central activity within the system which is seen as “backdoor” (Cuadrado-Ballesteros, 2014). Provided with this autonomy, influence from the outside world over FinTech could be kept as minimal as possible.
Currency	For tying that entirely to a core currency, an ecosystem of DAO must be provided with their currency known as tokens. It is utilized for payment, external investments and at last creation of resources within FinTech. DAO is thus liquid internally. Financial interactions outside of the world using fiat currency are performed through exchanges. Further, any indirect point of contact along with classic currencies such as euro or dollar has seemed to be unavoidable.
Proposals	For FinTech to develop further, decisions about their future are needed to be made. However, firstly there must be space where a community can discuss that and then submit ideas. It could be implemented democratically utilizing proposals that any member of FinTech or any particular role can provide and then vote on (Bahga & Madisetti, 2016).
Transparency	For FinTech’s members, every mechanism and processes should be transparent. Hence, everyone can participate and then work collaboratively on that proposal. Through capturing every processes and aspect over block-chain, it is also delivered and manipulation is done theoretically. Hence, here the outcome is a trust under the FinTech, thoroughly.
Vote and consensus	Members must also be permitted to vote democratically over budget, implementation and concepts from the community. Here, members should reach an agreement. They might be of different perspectives. However, they should, at last, agree on consensus to find out the state of the blockchain. For example, at bitcoin, miners must have same understanding regarding what payment history has been valid and is accepted truth (Tapscott & Tapscott, 2017). Additionally, as in a case, Fintech is already is in a situation to undertake decisions and then operate in the real world.
External contractor	Members of Fintech can influence the development of an organization and of course must be included in implementing of various accepted proposals. As per as different rules applied, they must also be rewarded. However, it is essential that FinTech required help in performing software development, marketing and other sectors are within the business (Espinosa & Lindahl, 2016). Besides, external service providers from the perspective of the central world have been possibly unavoidable. Here, payments should be made on their currency or through partial liquidation to fiat currencies.

Intelligent agreements help in exchanging property, money, shares or anything that is valuable entirely in conflict-free, transparent way avoiding any interaction from the third party. The best approach to designing smart contract is too compare it to a vending machine (Umeh, 2016). With intelligent agreements, one merely drops a bitcoin to bending machine or ledger and driver’s license, escrow and whatever is dropped to account. Further, smart contracts define penalties and rule across any agreement in the same way in which conventional contract does, enforcing those obligations.

Digital currencies and their incorporation in DAOs

It is the resource or currency that is transferred to a program. This program run codes and then automatically validates condition and determining whether this resource must move to a particular person or return back to other (Delmolino et al., 2016). In the meantime, this decentralised ledger also replicates and stores documents that provide particular immutability and security.

Because of the infrastructure created by Ethereum, the smart contract is unable to various functions. However, its smart construction allows individuals people in storing single number accessible by any person worldwide instead of any feasible way. This prevents the people from publishing that number. For instance, in the code discussed below, anyone can just call “set” repeatedly with a distinct value and then they can overwrite that number (Clack, Bakshi & Braine, 2016). However, the number gets stored in the “blockchain” history. Then access restrictions are imposed such they one that person can alter the number.

In the following line, the first line refers to the fact that the mentioned source code is been written for anything newer or the “Solidity version 0.4.0”.  This never breaks the functionality. This must be up to and never include version 0.5.0. Further, it is assured that those contracts have never been suddenly behaving distinctly with the latest compiler version. Here, this coding term “pragma”, is called in this manner as because these pragmas are thevarious instructions for compiler. It has been regarding the way of treating that source code like pragma (McCorry, Shahandashti & Hao, 2017).

Any of such contract as per as sense of solidity is considered, its various functions or different  collection of codes and data or its numerous  state that sustains over at a particular place of address over Ethereum blockchain.

The following code illustrates a simple smart contract about storage:

pragma solidity ^0.4.0;

contract SimpleStorage {

    uint storedData;

    function set(uint x) public {

        storedData = x;

    }

    function get() public constant returns (uint) {

        return storedData;

    }

}

In the code, the line “unit stored data” is declared as the state variable known as “stored data” of “unit” type. Further, in this case, the various functions “get” and “set” could be utilized for retrieving and modifying the variable’s value. For accessing the state variable, one requires the prefix “this.” Since this is common for other languages.

Smart contracts are used across a chain of financial services to healthcare to industries like insurance.

Like various ideas of blockchain industry, there has been general confusion regarding smart contracts. New technologies have made that possible through public blockchains. They are hard to make sense since the word gets confused with its core description (Bogner,  Chanson & Meeuw, 2016).

While any standard outlines this term of relationship commonly that is enforceable by law, it enforces different relationship. This is done with the cryptographic codes. Differently put, these smart contracts refers to programs, the aspects that are needed to be executed precisely as they are set up by their creators. Here the users are able to incorporate data to value and then receive a finite item from any particular machine. Merely stating, their users can send ten ethers to any friend or a particular data through smart contract. In such case, the user can create a contract and then push that data to the contract so that it can be executable for the command intended. Moreover, this Ethereum is a platform which is designed mainly for developing smart contracts (Zhang et al., 2018). However, these tools are never intended to be utilized alone. Additionally, they are also able to form building blocks that as per as decentralized applications or an entire DAO like Fintech is considered.

It is noticeable that bitcoin has been the innitial one has been to support various primary smart contracts. This has been in the sense that the network is able to transfer value from any individual to another. Any network of nodes just validates transactions as particular pre-conditions are met. However, bitcoin has been restricted to only the currency use case. Ethereum, on the other hand, replaces the more limited language of bitcoin. It is a kind of scripting language of hundred or scripts and then returns that with any language. Moreover, it has been permitting developers for writing their programs (Covaci et al., 2018). Further, Euthereum has been allowing developers in programming their different kinds of smart contracts or any autonomous agents. This is done as referred to ethereum white paper. Here, the language is a “Turing-complete” indicating that it has been supported with a more comprehensive collection of various types of computational instructions.

Smart contracts have been functioning as a multi-signature account. It is designed in this way  such that funds are only spent as any needed percentage agree upon that. It is also able to control various agreements taking place between users, the time when one buys insurance from others. In this case, providing utility to various other contracts is been similar to the way how software library has been working. Further, it effectively stores information regarding application like membership records and domain registration information. Smart contracts have been likely in the necessity of assistance from various other intelligent contracts (Nugent, Upton & Cimpoesu, 2016).

Running of every contract needs transaction fees of their depending on the quantity of required computational power. Ethereum has been running smart contract code while users or another contracts has been sending a message comprising of a sufficient amount of transaction fees. Here, Ethereum Virtual Machine has been executed for smart agreements regarding various bytecode or series of zeroes or ones. Thus this could be read and then gets interpreted through networks. Smart contracts have been working on automated conditional performance. While any contractual obligation is met, then corresponding obligation gets triggered (Watanabe et al., 2015).

For instance, any obligation can be triggered by a specific event. Like as “X” happens, then “Y” is in action. Other the obligation is triggered by a specific date or at the expiration of a particular period like at “X” date, “Y” is in action.

To understand this vending machine is a common example of how conditional performance works. While any buyer inputs money, vending machines transfer chocolates automatically through releasing that to the buyer physically. Thus, smart contracts allow ownership of various real assets to get controlled digitally. Through using blockchain technology, it has no longer needed to retain goods physically till a condition gets satisfied. Instead, blockchains stored multi0-verified records of transferring of ownership (Chen et al., 2017).

Ethereum blockchain’s structure comprises of a shared record of every transaction history. Each node of it stored a copy of that history. However, a significant difference with ethereum is that all its nodes save a most current state of every smart contract apart from every ether transactions. For every their application, network requires tracking of state or current information of all kinds of uses. This has been including user’s balance and every smart contract code and places it is stored.

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