Blockchain for Contracts, Technology for Digital Contracting

CLIENT CASE STUDY

Blockchain has the potential to fundamentally change the way organizations do business, providing new infrastructure on which the next generation of streamlined business applications will be built.

But it is also a technology with much hype that is not well understood. One simple way to define it is: Blockchain is a new type of database system that maintains and records data in a way that allows multiple stakeholders to confidently and securely share access to the same data and information. The promise and implications of this technology are so profound, it could revolutionize business practices as we know them.

Financial institutions could settle securities in minutes instead of days. Manufacturers could track the origin and movements of inventory across a supply chain. Businesses could also manage commercial contracts, making them digital, shared and tamper-evident—a use case Accenture has developed and is testing, with a path toward further enabling smart contracts.

THE IDEA: BLOCKCHAIN FOR CONTRACTS

Accenture and the companies with which it engages go through extensive efforts in finalizing contracts for services and managing them over the contract lifetime. The process is one that involves many people, steps and revisions, and lends itself to blockchain for its enablement of full transparency—all parties to a transaction will share the same view of data and information that has been agreed and time-stamped as it is added to the ledger.

The idea is to take existing paper contracts between Accenture and its clients and put them on a shared blockchain database that every party can use to securely view contracts, revise and accept changes, all captured on the blockchain ledger. Every step of the process would generate notifications and alerts to all parties involved and produce a shared ledger of all activity. The result would be definitive contracts, stored electronically in one location accessible by only the parties with access, and with clearly recorded versions and activity.

PROOF OF EXISTENCE

An Accenture task force led by the internal IT organization, and including leadership in emerging technologies, financial services and with legal backgrounds, set up a phased, use-case approach, beginning with establishing a “proof of existence” of any paper contract onto the blockchain. Proof of existence can be described as two parties having access to the same contract, in the same location, with trust and security measures around that contract to ensure both parties know it is the final and real version. It exists in a shared and agreed location by both parties. Once proof of existence is established, smart contracts and financial automations can be extracted to revolutionize contracting processes.

PLATFORM DEVELOPMENT

Following this successful use case proofing, a dedicated project team moved forward with developing a platform to support the digitizing of paper contracts, building out the solution, onboarding Accenture’s paper contracts to the blockchain solution, and industrializing it. This effort included developing a leading-edge, front-end consumer-friendly experience and back-end technology to support the onboarding of clients. Once Accenture and a client establish a connection through each hosting a network node, each party can manage their contracts on the front-end and trust that they are both working off the same version. This is possible all because blockchain technology is supporting the platform’s back end, which acts as a single source of truth.

HIGH SECURITY

The new platform, Blockchain for Contracts, provides a high level of security through encryption and restricted data sharing while allowing for complete transparency. Both parties always have access to a live contract and every revision of the contract is recorded, creating a tamper-evident audit trail. This is accomplished by capturing and storing unique, encrypted hash codes of the documents and transactions on the blockchain. Hash codes are the unique sequences of characters that identify one contract version from another.

TESTING AND EXPANSION

Contracts can be proposed, revised and executed all within the platform, eliminating the tedious contract management process of the past. Contract drafting, rule-based agreements, digital signatures, software entitlements and automatic remittance can all be executed via the blockchain platform. Select Accenture clients will participate in testing of the platform, with broader expansion on the horizon to any company looking to leverage blockchain’s benefits for managing contracts.

Ultimately, the platform will support a wide range of business-to-business contract management needs for any party, Accenture client or not. The custom solution sits on the Corda platform and is hosted through Microsoft Azure. Accenture’s offering vision is a subscription-model service.

SMART CONTRACTS

In the future, there is potential to create additional efficiencies through “smart contracts.” Smart contracts are contracts that are developed, agreed and managed by code, and are suited for simple and transactional components of an agreement. Accenture plans to explore the development of code that would manage a line item, transaction, deliverable or obligation in a contract that Accenture or any party might have regarding a contract. Two or more parties would agree on the code, and that code would run, manage and execute a contractual agreement—without paper or words ever needed. A potential market offering would be a library of transactional smart contracts that would enable financial automation to allow Accenture customers or any customer independent of Accenture to leverage those smart contracts and the blockchain network for managing their contractual agreements.

CONTRACT TRANSFORMATION:
THE POTENTIAL BENEFITS

The Blockchain for Contracts platform is the next generation of contract management technology. The digitization of paper-based contracts onto the blockchain holds the potential to revolutionize the way contracts are prepared, transacted, amended, stored and complied with. It may create value for organizations by having a single repository for contracts that indisputably houses latest, agreed-upon versions. A decentralized repository would digitize paper-based contracts, eliminate the need for physical storage space, and cut paper and environmental waste. The use of blockchain would improve visibility and shared ownership of contracts between parties. The information on the blockchain could also help resolve contractual disputes faster, without arbitration or litigation. Additional automation may streamline or eliminate manual processes and improve speed and efficiency.

A single, digitized contract repository may: