CRYPTOMARKET

Sagewise Pioneers Dispute Resolution for Smart Contracts

  • by James Sower
  • July 21, 2018
  • 0

Sagewise is the safety net for the growing world of smart contract needs, providing a first-of-its-kind toolkit for errors and disputes in smart contracts. Smart contracts are often created by a developer and audited by a security firm. However, the quality of smart contract coding and auditing varies drastically among service providers. Since the teams that use such services are usually, by definition, non-technical or at least non-native to the blockchain, they lack the skill set to audit the smart contract codes themselves. They must rely completely on the honesty and competence of the vendors they contract to build their tokens. Many smart contracts contain errors that will cause them to behave differently in practice than their creators intended.

And yet, hardly anyone is talking about what happens when a smart contract does contain an error, or if an unforeseen circumstance arises in which none of the predetermined outcomes of the smart contract are appropriate. It is inevitable that smart contracts, despite their power, will require dispute resolution from time to time. But the current architecture mostly leaves parties with no recourse. This is a major problem for crypto markets that have the potential to result in very significant problems for space if we fail to provide a solution.

The Sagewise team is the first to address this issue in a unique way. A smart contract contains a coding error or security vulnerability which goes unnoticed by either its creator or an auditor, Sagewise provides users with a third layer of protection. This layer offers smart contract monitoring, notification, and freezing—like a bank’s fraud alerts—to ensure that the execution of a smart contract reflects a user’s intent. Using a combination of delayed execution, timeblocks, and notifications, Sagewise alerts users to pending execution of the smart contract and can prevent such execution of the smart contract before the event occurs. Sagewise also gives parties the ability to amend, terminate, and dispute a smart contract. The code is static, but problems and circumstances change, and when they do the contracts designed to regulate them must be able to adapt.

Sagewise offers users of blockchain products to help navigate errors or unforeseen circumstances without the fear of losing their investments because of an inflexible code. In turn, it allows smart contract developers and security auditors to sleep better at night, knowing that Sagewise provides a safety net for the undiscovered and unexpected.

Founded in 2017, Sagewise builds technology to efficiently resolve disputes involving blockchain technology and cryptocurrency.  Its system is a smart contract SDK, which allows contracts to be stopped when a dispute arises, coupled with a dispute resolution marketplace.  Dispute resolution can vary greatly depending on the application and our solution is flexible to fit a variety of circumstances.

How does it work?
Smart contract creator includes Sagewise SDK in their smart contract. This can be thought of as an arbitration clause in a traditional contract. When something goes wrong, contracting parties can trigger a “dispute resolution mode, “which freezes the smart contract until the dispute is resolved.

Disputes are resolved by the marketplace vendor defined in the smart contract. Vendors can provide unique approaches to dispute resolution using their own fee structures.

Application for ICOs
Sagewise ensures that whitepapers keep their promises. Most Initial Coin Offerings (ICOs) use smart contracts for their token sales. The smart contract used is often a modification of an open-source version for ERC20 tokens. ICO white papers also often make several representations as to how tokens will be governed. Most potential ICO participants are unaware of the prevalence of coding errors or other shortcomings that can cause the smart contract to fail to execute in the way that is promised in the white paper. But, just because a contract is ‘smart’ does not mean that the team that creates it is immune to making mistakes or has thought out every possible scenario. If one of these situations arises, the ICO participant is essentially unprotected and without recourse.

For example, imagine that ICO investors are subject to a 12-month lock-up period, a stipulation communicated in the white paper. If the template smart contract lacks code reflecting this, investors may dump their tokens with no restriction. Such a situation is easy to imagine: the company’s legal advisors and senior management made the decision to enact the lockup period to stay in regulatory compliance, but the requirement was inadequately communicated to the blockchain developers building the token, and they failed to update the code. Aside from causing serious governance issues, this may lead to a decline in the price of the tokens, and unhappy investors left holding the bag are more likely to demand recourse or sue the company.

Sagewise allows smart contracts to be frozen and amended, to reflect their true intent. This, in turn, provides accountability and helps the ICO landscape evolve. In the case of this example, imagine a company advisor attempts to sell tokens prior to their vesting date. In this case, the Sagewise SDK will notify the company that the advisor is acting in violation of their written agreement, even though that was not coded into the smart contract. The company freezes execution with the push of a button on a mobile app. The company can then update the smart contract to function properly and speak with the advisor. This protects buyers of the token from suffering price drops resulting from premature selling. Importantly, it also protects the company from the liability it would face in issuing a defective, non-compliant token.

Sagewise’s award winning team:

  • Amy wan Esq is the author of the Bloomberg Law guide on ICOs, a former law firm partner and start-up General Counsel. She was named one of the American Bar Association’s Top 10 Women to Watch in Legaltech, is a co-founder of Legal Hackers LA., and a Presidential Management Fellow. She holds an LL.M. from the London School of Economics & a JD from the University of Southern California.
  • CTO Dan Rice is a Veteran of fintech companies. He is the founder of the Bitcoin Developers Los Angeles & Orange County CTO Forum. His apps have been downloaded over 5M times.
  • Terrence Yang is an experienced Crypto, angel investor and founder of Yang Ventures.

Disclosure
The author is an investor in the company.

Disclaimer
Please review this case purely on its merit and proceed only if you are convinced or interested. I am just connecting you. Also, I do not encourage folks from the USA, China etc. to invest in an ICO unless they speak to their lawyers. I only support genuine good people doing.

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