Saturday, April 8, 2017

Risks in the smart contracts layer

Smart contracts, happen outside of the sandbox. They are if/then decision trees, generally requiring one or more parties to complete a ledger service (make payment, register ownership, or deliver mass). These points are often by time and often by sequence.  Hot
First, all parties have secure elements so they can probabilistically make payments.  The honest and optimum payment promise is:
 'Typically on the 15th, every three weeks but I will run within 35% of amber on the red/green'

No arbitrage cash does a lot of heavy lifting behind the scenes, especially with optimum congestion. If the contract is valid at the decision point, then both the distribution of arrivals for the part and the service are known,  odd of 'fails to deliver' can be computed, a priori. Of course, the system is not stationary, that is, a payment on the 15th may hold for a while, but there is nothing magic about 15 in the sandbox. All parties in the contract strive to out perform delivery on the margin.  So there is a strong element of uncomputable risk, but currency risk is handled properly.

No comments: