What are Ricardian Contracts? Is it the Future of Blockchain?

Pretty sure you’ve heard of the context I’m gonna talk about. Yeah! It’s Ricardian Contracts! If I’d discussed it a year ago or a little earlier, nobody would’ve listened to me. This amazing concept bloomed 10 years ago when Blockchain gained its name.

Yeah, due to the lack of technical exposure and upgrades, the world hasn’t recognized its potential. For a long time, smart contracts have been seen as the foundation of Blockchain. But now, the world needs a more updated and advanced protocol to deal with technical problems.

Today, every user is educated and is taking calculated risks. And they seek a more transparent process in every transaction. Today, the crypto users are not just the traders, real estate owners, creators, but collectors are also joining in. Governments like Singapore implemented the protocols for their monetary authorities.

For a crystal clear understanding and transparency of the process, Ricardian Contracts are brought. It has the potential to take over the entire blockchain industry for the upcoming decades. Travel with me throughout the blog to enrich your knowledge of this futuristic concept.

Disclaimer: This blog is dedicated to the Blockchain Lovers and traders who wish to learn authentic tech trends.

What are Ricardian Contracts?

Ricardian Contracts are the human-readable format of Smart Contracts that define the legal document in a digital format. This automates transactions and can be acknowledged in court, too. 

To understand where this comes from, we need to rewind a bit.

The concept was seeded in the mid-90s by the cryptographer Grigg. The core idea was to secure the financial elements in a digital format. To put into application, Grigg created the Ricardo payment System to transfer the assets. In that core idea itself, Grigg was sure about one thing. It should be secure, legally bound, and read by every human. The audience did not take this concept too far. And the technology was also not capable of including such advanced concepts. 

Then, when in the 2000s, the blockchain was introduced to the world, Ricardian Contracts caught its attention. Because the blockchain is a network of immutability and transparency. It’s of great relevance to the blockchain. These are solid for Ricardian Contracts. 

When integrated into the EOS network, Ricardian Contracts got their life. They took the concept into hybrid mode using three things.

• Human-readable
• Machine-readable
• Executable Code

This is termed as “Ricardian Triple”. Participants execute and sign all the transactions and legal agreements on the blockchain network.

Ricardian Contract Vs Smart Contract

How Ricardian Contracts Work?

Here are the 5 simple steps to understand how Ricadian Contracts works.

#1 Creation of Human-Readable Contract

User creates the legal document with easily understandable terms and conditions to resolve disputes in court.

#2 Conversion to Machine-Readable Contract

Now, they convert the legal human-readable document into a machine-readable contract.

#3 Digital Signature and Hashing

The issuer signs the final document, and then the related parties sign it with their unique cryptographic hash.

#4 Linking to Transactions

They incorporate the unique hash into every transaction related to that contract.

#5 Execution and Verification

The machine-readable parts automate the smart contracts once the specified conditions are met.

Benefits of Ricardian Contracts

Ricardian contracts are bringing real-world solutions that many think smart contracts aren’t enough for this advanced world. Let’s see a brief view of how these contracts benefit us.

Legally Enforceable

As we’ve seen, Ricardian contracts are legally binding and help solve issues to serious issues. They can enforce it in court to ensure clarity of the situation.

Transparency and Security

The cryptographic hash ensures that the contract is tamper-resistant. The human-readable contracts make the users confident that the information is the same as they’ve signed.

Tamper-Proof Identity

User cryptographically hashes every Ricardian contract. This action creates a unique identifier that the user can store on the blockchain network. This ensures that the contract remains unaltered after signing the documents.

Integrated Compliance

Designed to create contracts to comply with the regulations of particular geographical regions. It assures the users that their documents are legally compliant.

Enabling Exchange of RWAs

These contracts are integral for the real estate owners. Because there are lots of scams occurring in this field. Because it’s not dealing with just the digital assets. They’re selling and buying the real-world assets. In this part, Ricardian Contracts are the lifesaver for the real estate owners.

Why Ricardian Contract the Future of Blockchain?

• By bridging the legal and digital terms with a human-readable contract, it has extended the use case of blockchain to solving real-world problems.
• Nobody can change the conditions after the documents are cryptographically signed. This creates a strong trust between the involved parties.
• Ricardian Contracts provide the code that the regulators and the court understand the terms much clearly.
• Companies use it in E-commerce, Finance, and law departments that require more security and regulatory compliance.

Conclusion

So, what have you learned so far? Ricardian Contracts are gonna take over the upcoming decades with their versatile features, undoubtedly. Cryptographic hashes legally bind, ensure compliance, and secure these.

Above all, these are tamper-proof with connection to real-world assets. For the past decade, we’ve relied on smart contracts that execute only the preset conditions. But this concept has taken the blockchain to massive heights and addressed all the limitations we have with smart contracts.

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