On January 23, 2019, Chainlink hosted a standing room only fireside chat about the future of smart contracts in San Francisco, CA between Tom Gonser, Founder of DocuSign and Sergey Nazarov, CEO of Chainlink.
Tom is famous for founding DocuSign in 2003 to replace physical signatures with easy to use e-signatures that were both legally enforceable and cryptographically secure. DocuSign was a huge success and transformed the inefficient process of obtaining physical signatures on documents into an approachable web interface and mobile app. Now, millions of people and hundreds of thousands of businesses of all sizes, all over the world use DocuSign as the leading e-signature solution to sign, relay, and manage their contracts using the Internet.
E-signatures may seem like a simple, straightforward idea, but it took time to make businesses comfortable with the notion. Fast forward to today, and DocuSign is the leading-signature company in the world with a market capitalization of over $8.5B. It is publicly traded on the NASDAQ and its product is a standard across many industries. In fact, in some industries, e-signatures sped up business processes so much that failing to use them can cause a company to lose ground to competitors. According to Tom, “In real estate, you're not competitive if you can't do an electronic signature. You’re just not. You will lose.”
DocuSign’s journey from a small startup in an undefined market to an industry standard in global business represents a model path for Chainlink. As Sergey alluded to at the Fireside Chat, “The reason I have always found Tom very insightful is that he’s been able to get an industry like e-signature off the ground and see it through to a successful, widely adopted, widely used technology product. That wasn’t obvious back when he began building the first useful solutions.”
Chainlink is in a similar position to the early days of DocuSign, as it also strives to accelerate workflow and reduce costs by automating certain business processes of a contract. Having already navigated similar waters, Tom possesses invaluable knowledge on how to help guide Chainlink onto the same path of mass adoption. He believes deeply in what Chainlink is trying to achieve, saying “There's not this robust set of APIs that can connect these contracts to the rest of the world. That’s why I was so excited when I started talking to Sergey about what they’re doing with Chainlink.” This is precisely the reason the Chainlink team is now proud to announce Tom Gonser as an official advisor to the project.
The Value of Smart Contracts
Regarding contracts, Sergey says: “we live in a probabilistic world,” where I have a contract with you and “maybe I don’t fulfill my end.” However, a smart contract shifts us to a “deterministic world,” where “if someone performs, they get what they’re due.”
The difference? In a deterministic world, contracts are triggered directly by data and execute automatically without the possibility of either party tampering with the process. In a probabilistic world, contracts are executed through human intervention, which takes time and leaves room for manipulation and disputes. In a competitive business environment, this is the difference between guaranteed payment and probable payment.
Tom further defined the value of smart contracts by talking about efficiency and reliability — advantages of not needing a “contract maintenance group going through reams and reams of agreements to make sure they're actually paying things on time” or “making sure if we’re ten days late then we have a penalty to pay.” According to Tom, “human beings can go out of that loop,” so having contracts that function automatically ensures that the process runs “much more efficient.” It also means “that you can’t not perform.” The contract is essentially autonomous, or as he puts it, an “execution engine.”
Tom isn’t the only one who sees the advantages: “I sat down with a bunch of people from all around the world to talk about the business value of smart contracts. They all came away saying ‘I have to have that because that will fundamentally change my business. It will make it much more efficient.’”
So if companies see the value, what’s stopping smart contracts from going mainstream today?
Chainlink: The Missing Piece
One of the fundamental reasons Tom became interested in Chainlink is because he realized smart contracts were missing a key piece. “One of the biggest challenges of smart contracts is they're not very smart right now because they're not connected to their stuff they need to manage.” Tom went on to insist on the need for a “robust set of APIs that can connect these contracts to the rest of the world,” precisely the problem Chainlink is aiming to solve.
As Sergey has expressed many times and reiterated during the fireside chat, without smart contracts being able to connect to the inputs and outputs they need, the blockchain space is going to be stuck in tokenization for another four years.
Tom took it a step further by saying he believes Chainlink oracles actually go beyond just smart contracts on open systems. They can also provide reliable data for already existing closed systems and applications.
“I think the DocuSign platform could use oracles if it’s got good data to make decisions. It’s a closed system, at least today, but it could use those oracles to make decisions and make contracts in that system smarter. I think other applications out there could actually rely on those oracles for reliable data. I think it's beyond just smart contracts in terms of the value of these oracles. I think it’s going to be much bigger than that.”
This idea of a platform that can be leveraged for connectivity by both open and closed systems boils down to Sergey’s vision of Chainlink being a “single open standard” that any system can connect to, and use to replace some of their backend systems. Although he’s not a technology purist, Tom alluded to the topic of there being a need for “a rich network of oracles and other components out there that can actually span all these different markets” He went on to ponder, “Is it proprietary or is it not?” and concluded saying, “I think in this case it may not be, (...) If these components are actually built on an open standard where there is intercommunication possible, then I think companies like DocuSign should be able to adopt that and help it grow even faster.”
Some may be focused on the idea adoption will come from some new open blockchain interface, but that may not be the case. According to Sergey, initial adoption might actually come from businesses like DocuSign that already manage agreements, already have millions of end users with millions of contracts being processed monthly, and already have high-quality interfaces with the necessary legal compliance. To solidify this point, Sergey mentioned what he thought the goal of the smart contract ecosystem in general should be: “The goal of our space should be to make a digital agreement that’s so competitive because it’s so much better, that for them (companies like Tom’s) to take that form of digital agreement and make that their backend, is a no brainer.”
According to both Tom and Sergey, what’s likely to happen is that one or two large companies will go all in on smart contracts and create a few successful use cases. When asked by Tom what those initial industries might be, Sergey responded saying “derivatives and insurance,” since both already use digital agreements and both have trust problems. Both Tom and Sergey seem to envision a future where smart contracts become so cost efficient that companies have no choice but to implement them into their backend systems. Which is something Tom has seen time and time again during the adoption of e-signature across various industries; “If your contract all of a sudden gets ten times easier to manage and much more reliable, you’re much more competitive. We saw this with electronic signatures. (...) The same thing goes with these smarter and smarter contracts. So what's going to happen here, is as these things go out in the world, they’re going to give a competitive advantage to some companies. We’ve already seen that play out before. It makes it a mandate, other companies in that space have to adopt it.”
The future of smart contracts has still yet to be defined, but given his expertise in early startups, innovative tech, and digital agreements, it’s clear Tom has the skills and experience to help guide Chainlink in its quest to pioneer the next generation of digital agreements.
As Tom stated, it’s “super important for the future of this whole industry that these really sophisticated and reliable oracles get built to tie the fabric of smart contracts to the things that they need to make decisions. A super important evolution in this space. That’s why I’m here tonight.”