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smart contracts, El American

Can Smart Contracts Be the Solution to the Overburdened Bureaucracy of Government?

Digitization can liquidate bureaucracy by optimizing processes

[Leer en español]

One of the political problems that one generally encounters, given the existence of the current statist paradigms (also considered as modern states), is the excess of what we call “bureaucracy”.

Many actions that can occur to us throughout our day require a previous rocky road full of political, regulatory, fiscal, and legal formalities. Nowadays, it is generally difficult to do those daily tasks, such as sitting on the sofa to read or turning on the TV before lunch.

Obviously, these situations have consequences that go beyond the inconvenience of excessive waiting (in fact, the state administration as we know it simply saves paper and gasoline consumption, but nothing more) on the part of the interested party.

To give an example, the tedious data regulations entail a high cost for small businesses, while the huge mountain of preliminary and intermediate steps means that many are discouraged or prevented from setting up a new company.

However, the purpose of this article is none other than to explain why this constant problem could be put to an end, but only as soon as new technologies are developed that can also respond to the paradigm of dispersion, distribution, and decentralization that is not alien to the network of networks, among other things.

Blockchains can “revolutionize” the contractual issue

As is well known, one of the technological paradigms in vogue, with promising advances in potential, are those blockchains that represent a paradigm of decentralization and dispersion (absence of central nodes).

This has a lot of life beyond those cryptocurrencies whose issuance does not depend on the centralized systems of central banking (guided by the fraudulent and ruinous fractional reserve), but, in a generic and non-technical sense, on the bets and valuations that spontaneously, dynamically and continuously the market allows.

For example, there are blockchain applications for managing highway and freeway tolls, coordinating medical emergency notifications in a hospital, promoting an electronic voting system free from fraudulent interference, or promoting tourist apartment rentals through the so-called “collaborative economy”.

However, here we will talk about that more concrete application, as a concept, which can mean an obvious “break” with the constant and suffocating bureaucratic spirals that not only despair but prove to be destructive for the economy (to a greater extent, affecting the self-employed and small businesses).

We are referring to the so-called smart contracts. Officially, they are not standardized. Conventional methods continue to exist and prevail, but not a few are studying and trying to apply this contractual digitalization.

¿Pone la computación cuántica en peligro de extinción a las criptomonedas?
“At the same time, it is not uncertain that more and more companies are trying to adopt blockchain in pursuit of innovation in their processes.” (Flickr)

Automation of clauses and arbitration, without intermediaries

Smart contracts, designed by Hungarian-American cryptologist Nick Szabo, are software solutions that, based on these blockchains, enable the digitization of contracts between two parties that transcends the mere implementation of electronic signatures.

Explained without too much depth, it could be based on a couple of transactions related to both the willingness to sign and the contract itself, applying the so-called timelocks or temporary blockers, which would prevent certain actions for a certain period of time. There would certainly be, by the way, public-key cryptography.

As can be guessed, there are no intermediaries in the process. However, this does not mean that there are no clauses because, while programming what makes the corresponding transaction possible, automatic mechanisms are implemented to ensure that the conditions are met.

That said, are they currently used? Rather, we can say that they are one of the main applications of Ethereum, another of the most relevant cryptocurrencies at the moment, which could surpass Bitcoin according to JP Morgan. This investment camp considers it as an essential unit of exchange in this new “economic environment”.

Other projects are also on the table. Here I will talk about the white papers produced by both Chainlink and the British legal group LawTechUK. The former would put the value of arbitrary executables to be able to implement on any network and the latter proposes to move smart contracts away from the courts as we know them.

At the same time, it is not uncertain that more and more companies are trying to adopt blockchains in pursuit of innovation in their processes. To this end, there are already solutions such as the XinFin Network, which combines the advantages of public and private blockchains with smart contracts.

Logically, technological innovation is all about efficiency and speed.

Without the need to fall into what can be considered as “frenetic intemperance” (more related to sociological moral corruption that can end up paving the way for those who seek to strangle society by overriding the natural, spontaneous, and obvious freedom of the market), certain “techno-hopes” are logical.

Whether it is to improve business productivity, to try to improve our quality of life, or to end up more satisfied in our daily chores, it is true that we expect not only mere automation or friendly simplification, but also that this should not be a complex and tedious process.

We want to receive weather alerts in the palm of our hand when we go hiking, we appreciate being alerted by SMS of the uses of our card, we want to reduce the fear of street disorientation, we want health diagnosis to be more accurate, sharp and fast.

To achieve this, we think of requirements that, in a nutshell, can be listed as “more megabytes”, “more processor cores”, “new processing clusters”, “non-redundant code”, “more capacity”, “more user-friendly interfaces”, “push notifications”.

And that’s where the developments are going. For better or for worse, it is about making our relationship with them much more friendly and immediate (in fact, it is worth noting that not even many software developers will have to think so much about the code, as there are low-code or no-code solutions and tools).

Therefore, it does not make sense that blockchains can lead to bureaucratic tangles such as those we are suffering today due to the progressive problematic tendency of the current states. Whether or not it is a matter of mere contractualism (not necessarily labor), digitization can liquidate bureaucracy, by optimizing these processes.

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