A Legal-Relationship Establishment in Smart Contracts: Ontological Semantics for Programming-Language Development

Machine-readable smart contracts (SC) on blockchains promise drastic enhancements in collaboration efficiency and effectiveness in that cost- and time reductions can be achieved while the quality of services increases. We address existing shortcomings of SCs that are in tendency incomplete for legal recognition especially to smart-contract-enabled funding rounds, not collaborative business-process reflective and are also not aware of their own processing state to justify the claim of smartness. When conflicts occur, tracing the past performance of conventional contract (CC) execution is very slow and expensive while in addition, CCs are challenging to enforce. On the one hand, the legal status of SCs based funding rounds is currently not clarified and the question arises if SCs comprise the necessary legal- concepts and properties. Current SC solutions do not suffice in those regards. To fill this gap, we develop the smart-legal-contract (SCL) ontology to define the legal- and collaborative business concepts and properties in the SCs. Formal methods, such as Colored Petri Nets (CPNs), are suitable to design, develop and analyze processing state of SCs in order to trace the performance of contractual-rights and obligations. In this work, SCL ontology is formalized using Colored Petri Nets resulting in a verifiable CPN model. Furthermore, we conduct a state-space analysis on the resulting CPN model and derive specific model properties. A running case from the automotive supply chain domain demonstrates the utility and validity of our approach.