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TRANSCRIPT
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Blockchain for Smart Contracts
Blockchain for Smart Contracts
Jeremy Clopton, CPA, CFE, ACDA, CIDAForensics & Valuation [email protected]
Tom Haldiman, CPA, CFEForensics & Valuation [email protected]
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To Receive CPE Credit• Participate in the entire webinar
• Answer polls when they are provided
• If you are viewing this webinar in a group• Complete the group attendance form• Submit to [email protected] within 24 hours of the live webinar• Answer the polls when they are provided
• If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar
Presentation Roadmap
What is the blockchain?
What are smart contracts?
What this means for you
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What Is the Blockchain?
Questions Addressed by the Blockchain
• Was this TRANSACTION appropriately AUTHORIZED?
• When did THIS TRANSACTION occur relative to OTHER TRANSACTIONS?
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Was this TRANSACTION appropriately AUTHORIZED?
Physical World Example 1
Info on face of check Signature
Transaction Authorization
Verification: Bank compares signature to signature card, bank verifies customer has sufficient funds
Was this TRANSACTION appropriately AUTHORIZED?
Physical World Example 2
Transfer real estate Signature
Transaction Authorization
Verification: Title company verifies signer identity, performs title search to confirm ownership
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Was this TRANSACTION appropriately AUTHORIZED?
A >>> B Digital signature
Transaction Authorization
Blockchain Equivalent
Verification: Digital signature verified, funds availability verified through cryptography
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Father
Son 1 Son 2
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Key
AccountDigital Signature for Transaction A
Questions Addressed by the Blockchain
• Was this TRANSACTION appropriately AUTHORIZED?
• When did THIS TRANSACTION occur relative to OTHER TRANSACTIONS?
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Transaction 1Transaction 2Transaction 3
Transaction 4
First $1,000,000 transactionInvalid second $1,000,000 transaction
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Transaction 1Transaction 2Transaction 3
64ae5b11c96ed
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Transaction 1Transaction 2Transaction 31 (random #)
1b5a6da546eba
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Transaction 1Transaction 2Transaction 32 (random #)
7ca8965c4da45
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Transaction 1Transaction 2Transaction 33 (random #)
adb26e4ff674a
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 51 (random #)
64ac5b783afd2
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 52 (random #)
912bc3a1ef6b2
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 54879 (random #)
0000c944d9d75
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Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 54879 (random #)
0000c944d9d75
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0000c944d9d75 Transaction 6 Transaction 7Transaction 8Transaction 98914 (random #)
Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 54879 (random #)
00001a876df82
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0000c944d9d75 Transaction 6 Transaction 7Transaction 8Transaction 98914 (random #)
00001a876df82Transaction 10Transaction 11Transaction 12
Transaction 1Transaction 2Transaction 31975 (random #)
0000a549f1b56Transaction 4 Transaction 54879 (random #)
Questions Addressed by the Blockchain
• Was this TRANSACTION appropriately AUTHORIZED?
SOLUTION: Digital Signatures
• When did THIS TRANSACTION occur relative to OTHER TRANSACTIONS?
SOLUTION: Blocks of transactions cryptographically linked
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What Are Smart Contracts?
Smart Contracts
• Not really contracts, per se
• Based on rules & Boolean logic
• Combine coding & paper contracts
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Example – Apartment Rental
Smart Contracts• Smart Contracts are more complex transactions on the blockchain
• For example
– Transfer $1,000 to an Escrow Account
– If $1,000 is raised from others, release all funds to Charity A
– If $1,000 is not raised from others by May 1, 2017, return my funds to my account
Still must have your digital signature, but can “listen” for conditions to execute the contract
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Benefits of Smart Contracts
Automation of contract elements
Permanency
Efficiency
Reduced error rates
Potential for reduced litigation
Automation of Contract Elements
Performance
MonitoringEnforcement
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Permanency
Unchangeable record of what occurred
Blockchain is based on previous transactions
Smart contracts perform based on preset coding
Efficiency
Source: https://blockgeeks.com/guides/smart-contracts/
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Potential for Reduced Litigation
“Smart contracts … guarantee a very, very specific set of outcomes. There’s never any confusion and there’s never any need for litigation.”
Jeff Garzik
Owner, Bloq
Potential Risks/Issues
Programmatic issues
Elements outside the contract
Jurisdiction over the blockchain
Hacking
Contracts that violate laws
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What This Means for You
Anticipated Acceptance
Multiple platforms for smart contracts – not just Bitcoin
Music industry is an early use case
Development of Smart Contracts Alliance through U.S. Chamber of Digital Commerce
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Impact on Attorneys
Contracts will evolve, but not disappear
Clear understanding of “rules” in a contract will be key
Increasing reliance on technology & understanding of code
Enforcement will largely be in the blockchain
Likely will lead to fewer contract disputes
Your Next Steps• Evaluate impact on traditional contracts
• Identify expected areas of impact• Digital identify verification• Record destruction• Fintech• Title recording
• Education around blockchain
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Online Resources• https://blockgeeks.com/guides/smart-contracts/
• http://www.initc3.org/
• https://digitalchamber.org/smart-contracts/
QUESTIONS?
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The information contained in these slides is presented by professionals for your information only and is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered.
BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.
• CPE credit may be awarded upon verification of participant attendance
• For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at [email protected]
CPE CREDIT
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THANK YOUFor more information
Jeremy Clopton | [email protected] | 417.522.0409
Tom Haldiman | [email protected] | 816.489.4300