The United states Commodities Futures Trading Commission has always been highly concerned about curbing illegalities and unfairness against the American people. Just like the SEC, the CFTC has kept a close eye on cryptocurrencies. Recently, the commission released a 32-page report about cryptocurrencies and the underlying blockchain. The report detailed the advantages and disadvantages of using blockchain-based smart contracts.
The CFTC’s Report On Blockchain Technology
The report released by the SEC is basically a learning curve for investors, policymakers and regulators. According to the definition of the CFTC, smart contracts is a term used to refer to a set of coded self-executing computer functions. These contracts execute themselves as long as certain predetermined criteria are met. It is not necessarily a legally binding contract. These smart contracts can also be used to transfer digital assets or programmable money.
The report had a list of three attributes of every smart contract. These are as follows:
- A smart contract can authenticate or counter identities, claims of right and ownership of assets.
It can refer to or access external information or data that it requires to trigger actions.
A smart contract can automate the process of executing transactions.
The report went on to define blockchain and distributed ledgers as the platforms on which smart contracts operate. With these distributed ledgers, smart contracts are stored and distributed. The report also made reference to some other viewpoints while defining smart contracts. In reference to Ethereum’s Vitalik Buterin, the report stated:
“Smart contracts are mechanism that involve digital assets and two or more parties. With smart contracts, either some or all the parties put in assets that are automatically redistributed among all parties. The distribution is typically based on a predetermined formula that is, in turn, based on certain data.”
Bitcoin (BTC) Price Today – BTC / USD
The report states that the CFTC’s mission is to promote competitive, open, transparent and financially stable markets. With this stated, it made a list of some of the benefits of smart contracts which includes:
Economy and speed
Blockchain technology, tandem with smart contracts, is going to revolutionize commerce, business transactions and logistics. When applied, these smart contracts eliminate the need for intermediaries. Most industries find blockchain technology appealing because it provides solutions that can be applied to root out corruption from scammers and skimmers who try to manipulate transactions, systems and agreements for their benefit.
Even if the CFTC listed some of the benefits of blockchain technology and smart contracts, it also listed some of the possible disadvantages. Some of the risks of using blockchain are operational and technical. There is still the susceptibility to cyber fraud and manipulation.
For a while now, J. Christopher Giancarlo, the CFTC chairman has been positive about smart contracts and blockchain technology as a whole. While he is being cautious about the emerging technology, he is also open minded and ready to embrace the potential benefits of smart contracts.
If the SEC were be more open minded about the industry, they would have made a strong regulatory framework for it. The chairman of the SEC, Jay Clayton, recently said that a lot of work needs to be done before he can be comfortable with the industry.