The Accord Project (http://www.accordproject.org) is pleased to announce the release of its Open Identity Exchange white paper, Accord Project ID: The Smart Legal Contract Identity and Trust Framework Standard. The paper lays the groundwork for a standard underlying the intersection of two increasingly important phenomenon: digital identity and smart legal contracts.

Smart legal contracts, as part of the general growth of business automation and legal technology, are a growing phenomenon that connects traditional legal agreements to external sources of data, enterprise technology, and online services. Smart legal contracts may use distributed ledger technology to enhance their operations, including with respect to identity transactions. Smart legal contracts enable the full automation of business transactions and corresponding gains from higher efficiency and increasingly data-driven contractual relationships, operations, and analytics.

The connection between digital identity and smart legal contracts is that identity is a foundational aspect of legal agreements. Parties to a contract typically know of each other’s identity and, often through a combination of market reputation, prior dealings, and due diligence, the relevant characteristics associated with their counterparty’s identity that serve as the basis for the contracting relationship. In addition to the identity of contracting parties, likewise important is the identity of any third parties involved a contractual relationship and the identity of the various documents that memorialize and operationalize a contractual arrangement.

As natively digital phenomenon, smart legal contracts must integrate into digital identity systems. Integrating with digital identity systems not only enables smart legal contracts to achieve basic functionality, but also enables them to benefit from using online means to verify the identity aspects of legal contracts, provide access to contract-related services based on identity credentials, and engage in other digital identity transactions. Given that contracting is a distributed phenomenon consisting of numerous parties, transactions, and activities, a decentralized identity architecture is best suited for smart legal contracts.

The Accord Project white paper develops the Accord Project ID (“APID”) digital identity standard for smart legal contracts. This identity standard forms a component piece of the open source Accord Project Protocol. The fundamental components of the APID digital identity standard for smart legal contracts are:

  • adoption of decentralized identifiers and verifiable claims as foundational data structures;
  • initiation of contract operations in part based on decentralized identifier service endpoints; and
  • integration with distributed ledger technology for identity transactions and the exchange of verifiable claims.

The verifiable claims data structure enables parties involved in carrying out a contract to assure others of their qualifications while minimizing the amount of confidential information they must share. For example, a supplier would be able to increase supply chain efficiency by providing assurance about their financial health to companies downstream in a supply chain without disclosing potentially sensitive information.

The white paper also provides a foundation for the APID identity trust framework as an application of identity systems to smart legal contracts. Trust frameworks for identity enable a wide range of parties to rely on assurances about identity by creating a systematic framework that supports identity transactions. Examples of trust frameworks include credit card network operating rules and the United Kingdom’s GOV.UK Verify program that is used to prove identity online and enable access government services. An identity trust framework for smart legal contracts is needed to enable the widespread, global adoption of the next generation of contracting.