In a previous post, we talked about the factors that affect someone’s willingness to sign a smart contract and that smart translations help someone who doesn’t understand computer code read a smart contract. To recap, there are Changeable and Unchangeable factors affecting someone’s willingness to sign.
- Unchangeable Factors include the size of the contract, your reputation, the volume of transactions and the length of time the transactions have been active.
- Changeable Factors are the accountability of the responsible party if the translation is found to be inaccurate and the magnitude of the remedy provided for said inaccuracy.
There are different smart translation solutions with varying levels of changeable factors. We’ll go over the different types of smart translations below.
Smart Translation Solutions
The solutions are listed here from least to most complete, starting with No Translation and ending with Smart Translation with Insurance. This will make sense below, but the solution you choose should be relative to how much the unchangeable factors hurt you. For example, if you have a good reputation, and the contract is for small sums of money, you don’t need translation insurance. However, if this is a complex and expensive contract and you don’t have much time operating, someone might not be willing to sign your contract without proper insurance.
- No translation. This is only appropriate if virtually all of the Unchangeable Factors help you.
- Translation without representation. The multisided platform that brings the parties together provides a translation but makes no representation about its accuracy.
- Translation with non-smart representation. The multisided platform provides a translation and, as part of a traditional contract, represents to the parties that the translation is accurate. In the event that a party discovers the translation is not accurate, that party would need to sue the multisided platform in the traditional judicial system. That would be costly and time-consuming.
- “Smart Translation” with smart representation. The multisided platform provides a “smart translation,” which is defined as a smart contract that contains a translation and that pays the parties if the translation is inaccurate. In this scenario, a smart translation is a separate smart contract from the contract which governs the parties’ transaction (meaning there are two contracts in this case). The smart translation contains contract variables related to whether the translation is accurate. To the extent the translation is determined to be inaccurate (possibly via enforcement of the smart translation by Smarter Contract), the multisided platform pays a specified penalty to the parties.
- Translation with professional, non-smart representation. This is the same as solution #3, except that the entity making the representation is a company specializing in auditing smart contract translations, with a reputation on the line.
- “Smart Translation” with professional, smart representation. This is the same as solution #4, except that the entity responsible for paying the parties if the smart translation is inaccurate is a company specializing in auditing and insuring smart contract translations.
- “Smart Translation” with market-based translation insurance. There could be a market where companies that audit translations make offers for insuring the accuracy of smart translations. More accurate smart translations would have lower cost translation insurance.
To summarize, smart translations should always be the last thing you do. To ensure that a smart contract is as accurate as possible, it should first be written in code. Only then should a smart translation be created. The level of the translation you provide should be relative to how much your Unchangeable factors help or hurt you.