While studying blockchain and smart-contract development one will eventually run into the term ‘self-executing’. Statements might be similar to these:
- “Smart contracts are self-executing computer programs that live on a blockchain” ¹
- “smart contracts are used to automate the implementation of agreements for parties to achieve near-instant finality without the involvement of a third party.” ¹
- The code is run and executed by all computers in the network. If a term of the contract is satisfied and it is verified by all participants of the blockchain network, then the relevant transaction is executed. ²
The problem with all these statements in the context of a computer program is that one might infer that a smart-contract runs automatically, by itself. Not only is this NOT the case but self-execution refers to something far more important than automation.
History of the term ‘self-executing’
The term ‘self-execution’ comes from law, specifically referring to self-executing treaties. A self-executing treaty is an agreement between parties which upon signing, immediately becomes enforceable by the law and the judiciary system. A non-self-executing treaty on the other hand needs additional legislation to become enforceable.
“At a general level, a self-executing treaty may be defined as a treaty that may be enforced in the courts without prior legislation by Congress, and a non-self-executing treaty, conversely, as a treaty that may not be enforced in the courts without prior legislative ‘implementation.’” ³
The term in its original context has no relation to computers, programming or software automation. It is merely the act of signing a document which then can immediately be held up in the court of law. Furthermore, checking the dictionary for ‘execution’ we can see these two distinct meanings ⁴:
- (computer science) the process of carrying out an instruction by a computer.
- (law) the completion of a legal instrument (such as a contract or deed) by signing it so that it becomes legally binding and enforceable.
‘Self-executing’ smart contracts
Back to smart contracts. Smart contracts are essentially computer programs — procedures — deployed to and executed (run) by the blockchain network. When a computer program is deployed on a blockchain it gains unique qualities which make it possible to trust the program without further inputs, checks or external validation. This means that the program could be used to represent a contract between counterparties — what we get is a self-executing contract.
The use of a blockchain is important for several reasons when it comes to self-executing smart contracts. First, a blockchain provides a decentralized and immutable ledger that allows the terms of a contract to be recorded and enforced without the need for a central authority or intermediary. This ensures that the computer program and its encoded rules are secure and transparent, and that it cannot be altered or tampered with once it has been deployed.
Second, a blockchain provides a way for the agreement to be executed (go into effect) automatically, without the need for any further input or intervention from the parties involved. This allows the contract to enforce its terms in a trustless manner, ensuring that the terms of the agreement are followed without the need for trust between the parties.
Overall, the use of a blockchain provides the necessary storage, access rights, and trustless execution environment that is required for a contract to be considered self-executing.
Real world examples of self-executing smart contracts
Here are few examples of self-executing clauses in a digital agreement:
- A smart contract that automatically releases funds to a seller when a buyer receives a product. The trigger may be the buyer’s confirmation that they have received the product.
- A smart contract that automatically distributes profits to investors in a crowdsourced project according to their agreed-upon ownership stakes. The trigger may be the completion of the crowdsourced project
- A smart contract that notifies about a security upgrade on a network of connected devices when a vulnerability is detected. The trigger may be the submission of a patch for a security vulnerability.
More examples of self-executing smart contracts can be found at www.toolblox.net.
Smart contract automation
What about running smart contracts automatically — making them execute on their own? For example, if in the contract there is a clause that an agreement or promise expires at a certain point of time or some other kind of external event should dictate a state transition in the contract… There is no built-in functionality in blockchains to achieve any of that but there are several approaches to handle these situations: cross-contract calls or oracle (off-chain) automation can be used for example.
One must be careful when using the term ‘self-executing’ in context of blockchain programming and indeed there is a lot of literature using the term in a misleading way (‘self-executing computer program’?). While there are ways to automate code execution on blockchain, it instead refers to the properties gained from running programs on top of a permissionless distributed ledger.
An agreement between two parties can be executed — signed and put into effect. But the agreement, it turns out, can be executed in another way as well: the rules in the agreement can be coded into a computer program and deployed on to a blockchain. This agreement can then be called a self-executing smart contract:
- It is ‘self-executing‘ because it does not need a central authority, employs digital signatures and its state is immutable.
- And it is ‘smart’ because it is a computer program with many ways to integrate it into our daily lives instead of a paper document that lives in the drawer.
The benefits of self-executing smart contracts are just being discovered. Whether it is to execute by-laws of an organization (DAOs), track offers and shipments, report ESG (environmental, social, and corporate governance) metrics, run binding auctions, execute escrow transactions or digitalize other business processes. Blockchain is not only the technical enabler (with storage, payments and runtime built in) but, more importantly, it enriches the social protocol.
Visit toolblox.net to find out more about the benefits and build self-executing smart contracts and blockchain applications without using any coding skills.
Silver // Toolblox
- Plugin for Bubble™ & ChatGPT
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Toolblox™ offers the flexibility traditionally found in custom development combined with the ease of no-code platforms.
Smart-contract templates, while seemingly convenient, often don't cater to all asset classes or jurisdictions, can stifle business process innovation, and become costly when adapting to specific needs due to re-audit requirements. Custom smart-contract development, on the other hand, is a lengthy and expensive process, requiring specialized skills, and the auditing phase is both costly and time-consuming.
Our smart contracts provide tailored solutions for specific assets, jurisdictions, or business nuances, all while being cost-effective to audit and easy to understand through visual workflows. This ensures you get a precise solution without the associated overheads or limitations.
Tokenization transforms traditional business protocols into self-executing smart contracts, streamlining operations and ensuring clarity.
- Efficiency in Operations: Self-executing contracts automate processes, speeding up operations like reconciliation, administration and settlement.
- Reduced Miscommunication: With every term and condition explicitly coded, there's less room for misunderstandings or disputes.
- Clarity in Business Protocols: Tokenized assets come with predefined rules and protocols, making business operations clearer and reducing ambiguities.
- Liquidity: Assets, even traditionally illiquid ones like art or real estate, become easily tradable, enhancing their accessibility.
- Fractional Ownership: Tokenization divides assets into smaller units, allowing more investors to partake in high-value asset ownership.
- Transparency: Every transaction is transparently recorded on the blockchain, ensuring verifiability by all stakeholders.
- Security: Blockchain's robustness safeguards tokenized assets, minimizing fraud risks.
- Global Market Access: Tokenized assets on Toolblox™ can be traded internationally, expanding market reach and opportunities.
- Supply Chain: Tokenize individual products for transparent tracking from manufacturing to sale.
- ESG Reporting: Ensure verifiable and trusted environmental, social, and governance data points.
- Financial Settlement: Streamline the trade and settlement of financial securities.
- Certified Credentials: Authenticate jewelry certificates, diplomas, and other achievements.
- NFT Marketplaces: Facilitate the creation, listing, and sale of unique digital art.
- DAO Governance: Automate company by-laws and decision-making within decentralized organizations.
- Asset Monetization: Tokenize real estate, land, or data sets for easy trading and verification.
- Ticketing Systems: Secure event ticket sales, verification, and anti-fraud measures.
- Insurance Operations: Simplify the insurance claim process, from filing to settlement.
- Document Timestamping: Verify the existence and integrity of documents with a secure timestamp.
- One-Time Smart Contracts: Create custom contracts for specific buy/sell/service agreements.
- Business Model Innovation: Develop new token-based business models for diverse industries.
- Smart Contract Auditing: Tokenize the auditing process, ensuring transparency and accountability in smart contract reviews.
- Proof of Physical Work Contracts: Manage contractor tasks, milestones, and handovers with tokenized contracts that verify completed work.
- Consultation Services: Tokenize consultation hours or packages, allowing clients to purchase and redeem services seamlessly.
- Subscription Services: Implement token-based subscriptions for content, software, or other services, ensuring automated renewals and access control.
Think of Toolblox™ as a hammer. We help you build your digital house (the smart-contract), but once it's built, the house stands on its own.
While we provide an auto-generated user interface and offer hosting solutions, the ownership and operation of the smart-contract and its data are entirely yours. This ensures seamless integration with any external system and guarantees robustness and adaptability for the future.
Additionally, for those who prefer no-code platforms, we provide an open API and plugins, including compatibility with popular platforms like Bubble. This ensures a seamless integration tailored to your business needs.
Absolutely. Toolblox™ is primarily designed for no-code solution developers who understand business needs, are familiar with no-code tools, and aim to craft an MVP for a web3 solution.
However, we also cater to business owners and analysts with a feature that employs AI to generate visual workflows. This can then be handed over to technical teams for further refinement.
For those with a technical background, we offer advanced features like source code extraction and GitHub export, ensuring a comprehensive experience for teams of all sizes.
Cross-workflow calling is baked into the builder. This means that any workflow can call any other workflow.
No, we use AI to generate the workflow of an asset or service. We then compose the smart-contract out of standardised components without using any AI generation. This process (for which we have filed a patent for) offers predictability and dependability while allowing you to use AI generation to kick-off the development process. It also makes the smart-contract easier and more cost-effective to audit.