What are blockchain-based Ricardian contracts | The Financial Express

What are blockchain-based Ricardian contracts

Market reports have shown that blockchain-backed smart contracts make use of consensus techniques and cryptographic features for digital legal contracts

Reportedly, companies such as Civic, OpenBazaar, and Mattereum have inculcated blockchain-based Ricardian contracts
Reportedly, companies such as Civic, OpenBazaar, and Mattereum have inculcated blockchain-based Ricardian contracts

From a legal perspective, it seems that machine-learning algorithms are growing in demand. It is believed that experts are exploring the influence of Ricardian contracts, which are legally-based smart contracts drawn between two parties, and how their integration with blockchain can open up possibilities. 

According to Valuates Reports, a market research-based company, the global smart contracts market is expected to reach a valuation worth $1460.3 million by 2029, at a compound annual growth rate (CAGR) between 2023-29. Globally, governments aim to utilise smart contracts for reduction in contract management costs through decrease in human influence, and Ricardian Contracts are vouched to be an important part. “I believe Ricardian contracts standardises the terms of legal agreements and contracts in machine-readable computer code to run on the blockchain platform. It aims to improve the vision of legal contracts between parties, is time-saving and economically viable,” Vipin Vindal, CEO, Quarks Technosoft, a software company, told FE Blockchain.

Market reports have shown that blockchain-backed smart contracts make use of consensus techniques and cryptographic features for digital legal contracts. Insights from 101 Blockchains, a blockchain-based platform, highlighted that Ricardian contracts make use of cryptographic hash to ensure protection of legal documents. Furthermore, Ricardian contracts implement the feature of private keys to prevent involved parties from altering terms of the agreement. 

“Decentralised platforms and exchanges (DEXs) are expected to support more products by bridging legal compliance to legally auditable and enforceable Ricardian contracts with privacy and third party smart contract interoperability. Ricardian contracts have the potential to replace smart contracts,” Koneru Lakshman Havish, vice-president, KL Deemed to be University, an educational institution, mentioned.

There is believed to be an inverse relationship between smart contracts and Ricardian contracts, which results in the difference between their execution of actions. As stated by LeewayHertz, a Web3.0 development company, both smart contracts and Ricardian contracts permit automation of actions on blockchain, but smart contracts are only machine-readable but Ricardian contracts are human and machine-readable.   

Reportedly, companies such as Civic, OpenBazaar, Mattereum, among others, have inculcated blockchain-based Ricardian contracts. While Civic utilises decentralised Ricardian contracts to represent agreements between users and service providers, OpenBazaar uses Ricardian contracts to ensure legitimacy of trading parties, and Mattereum allows signing and recording of non-fungible tokens (NFTs) through Ricardian contracts. 

Moreover, future predictions indicate that Ricardian contracts can converge blockchain and smart contract functionality into legal agreements, upon further research. Experts suggest that Ricardian’s BowTie model has room for complete digitalisation of global legal landscape. “The future of Ricardian contracts is expected to be promising in the upcoming years, as more companies and organisations recognise the benefits of this approach. The legal recognition and acceptance of Ricardian Contracts is expected to increase, as more courts and legal systems become familiar with this type of contract and its benefits,” Sathvik Vishwanath, co-founder and CEO, Unocoin, a cryptocurrency exchange, stated.

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First published on: 08-02-2023 at 08:00 IST