July 07, 2004

The Ricardian Contract

Presented yesterday at the IEEE's first Workshop on Electronic Contracting, a new paper entitled "The Ricardian Contract" covers the background and essential structure of Systemics' innovation in digital contracts. It is with much sadness that I am writing this blog instead of presenting, but also with much gladness that Mark Miller, of E and capabilities fame, was able to step in at only a few hours notice.

That which I invented (with help from Gary Howland, my co-architect of the Ricardo system for secure assets transfer) was a fairly mundane document, digitised mundanely, and wrapped in some equally mundane crypto. If anything, it's a wonderful example of how to use very basic crypto and software tools in a very basic fashion to achieve something much bigger than its parts.

In fact, we thought it so basic that we ignored it, thinking that people will just copy it. But, no-one else did, so nearly a decade after the fact, I've finally admitted defeat and gone back to documenting why the concept was so important.

The Ricardian Contract worked to the extent that when people got it, they got it big. In a religious sense, which meant that its audience was those who'd already issued, and intiutively felt the need. Hasan coined the phrase that "the contract is the keystone of issuance," and now Mark points out that a major element of the innovation was in the bringing together of the requirements from the real business across to the tech.

They are both right. Much stuff didn't make it into the paper - it had hit 20 pages by the time I was told I was allowed 8. Slashing mercilessly reduced it, but I had to drop the requirements section, something I now regret.

Mark's comment on business requirements matches the central message of FC7 - that financial cryptography is a cross-discipline game. Hide yourself in your small box, at your peril. But, no person can appreciate all the apposite components within FC7, so we are forced to build powerful, cross-discipline tools that ease that burden. The Ricardian Contract is one such - a tool for bringing the technical world and the legal world together in issuance of robust financial value.

Posted by iang at July 7, 2004 06:03 AM | TrackBack

The Ricardian Contract has been replicated by others but not in the same sense as creating a contract. They have provided the secure transaction based on the belief that if people entered their store or website the implications of the contract are present or suggested. So with the suggestion of a contract between buyer and seller they have chosen to make sure the information, i.e. the payment aspects, are recorded and transmitted to the banking designee assigned to the suggested contract by the buyer and seller.

The money and the asset are seperate items within the suggested contract. These are vague ideas of trust and since the only way one can deal with this and not loose their minds is branding by a trusted agent. Rather than create a building block for trust in a trustless enviroment they took the cream of the processing of the transaction and threw away the contractual aspects clearly defined in Ricardo.

This weakness and lack of focus allowed them to concentrate on what they did best: sell the brand and produce an air of security rather than actual security. Suggested contracts with the air of security is a version of the Ricardian Contract but in a weak fashion that does not hold itself up to critical review but rather makes a ton of money quickly.

Posted by: Jim at July 7, 2004 07:51 AM