KDDI’s interest in blockchain in contract management results from Japan’s legalization of cryptocurrency tech. Source: Shutterstock

Japanese telco getting smart about contracts

THE JAPANESE government’s legalization of cryptocurrencies‘ use in its economy has led to a slew of Japanese firms joining the  Enterprise Ethereum Alliance (EEA), which launched February 2017, and whose members include household-name multinationals such as Banco Santander, BP, JPMorgan Chase and Microsoft, among others.

One of the new members, KDDI, itself ranked in the low 200s on the Fortune Global 500 list, is working with Japanese startup concern Couger on a smart contract system, currently at the proof-of-concept stage.

The movement by large enterprise towards blockchain-based tech is becoming more common, as the wider-reaching applications of the public ledger aka blockchain become apparent.

Smart contracts, as under exploration by KDDI, are a real-world business application for blockchain technology that’s more commonly associated with cryptocurrencies.

Blockchains work on the basis of no overall control, with the blockchain containing encrypted records of every transaction inside a system being distributed publically. This ensures both its longevity and its transparency.

In a smart contract, the elements of a contract are uploaded into the blockchain and become a matter of public record, although all involved parties remain anonymous.

At times and on events determined by uploaded code, the contract acts on an IF > THEN > ELSE basis that is familiar to programmers.

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As a simple example, if party A is selling a service/item to party B, the virtual ‘keys’ to said service/item can be released automatically to party B once the requisite funds are transferred (via crypto- or fiat currency) to party A.

The immutable nature of the blockchain means that once ‘posted’ into the blockchain, the contract cannot be altered or interfered with by third parties, or indeed, its intended involved parties.

Vitalik Buterin, the 22-year-old programmer of Ethereum, explained at a recent DC Blockchain Summit , once an asset or currency is transferred, “the program runs this code and at some point it automatically validates a condition and it automatically determines whether the asset should go to one person or back to the other person, or whether it should be immediately refunded to the person who sent it or some combination thereof.”

The coding required to build such contracts may seem bewildering to business owners and entrepreneurs:

contract MyToken {
// This creates an array with all balances
mapping (address => uint256) public balanceOf;

// Initializes contract with initial supply tokens to the creator of the contract
function MyToken(
uint256 initialSupply
) {
balanceOf[msg.sender] = initialSupply;              // Give the creator all initial tokens

// Send coins
function transfer(address _to, uint256 _value) {
require(balanceOf[msg.sender] >= _value);           // Check if the sender has enough
require(balanceOf[_to] + _value >= balanceOf[_to]); // Check for overflows
balanceOf[msg.sender] -= _value;                    // Subtract from the sender
balanceOf[_to] += _value;                           // Add the same to the recipient


However, there is a raft of new companies springing up that aims to provide easy-to-create yet highly powerful smart contracts in a software-as-a-service (SaaS) framework.

Examples of this new generation of business include:

  • Etherparty, whose initial coin offering (ICO) entered its public phase Sept 1. The Canadian company is part of the Vanbex Group, specialists in consulting and development services for businesses involved in blockchain commerce.
  • Confideal, which offers smart contract creation for use in freelancing service agreements, so-called ‘crypto-pawnshops’, import/export deals, and escrow.
  • Auctus is specializing in using Ethereum-based smart contracts in the area of pensions and is holding an ICO between Nov 14 and Nov 28, 2017.

While the capabilities of smart contracts are seemingly multifarious, there are problems that are specific to their use. For instance, if a smart contract is used to transfer real-estate ownership (according to a set timetable and transaction process), third party interference (local authorities seizing property) the blockchain’s immutable code cannot react. As every programmer knows, including every possible eventuality just isn’t feasible.

KDDI’s decision, therefore, to work with Couger and blockchain developer Trident-Arts to develop ways to combine AI, the internet of things (IoT) and blockchain becomes understandable. The company claims to wish to work with other members of the EEA to create a next-generation service platform based on a combination of AI, IoT, and blockchain technologies.