Research Summary: A Formal Specification Smart-Contract Language for Legally Binding Decentralized Autonomous Organizations


  • The paper describes the creation of complex business contracts on a blockchain through a smart-legal-contract-markup language (SLCML).
  • The authors first develop a Smart Contract Language (SCL) ontology which identifies the legal and business properties that should exist in a legally relevant business agreement between DAOs.
  • The ontology was used to develop the SLCML, which is better at recognizing complex legal and business concepts than regular SCLs. The SLCML defines these concepts as XML configurations that can be translated to an SCL like Solidity for blockchain implementation.
  • The development of the SCL ontology and SLCML could help automate complex business operations on a blockchain and instantiate any blockchain-based contracts understandable to IT and non-IT practitioners.

Core Research Question

Could a smart-legal-contract-markup language specifying legal and business properties help DAOs function collaboratively and automate business processes?


V. Dwivedi, A. Norta, A. Wulf, B. Leiding, S. Saxena, and C. Udokwu, “A Formal Specification Smart-Contract Language for Legally Binding Decentralized Autonomous Organizations,” in IEEE Access, vol. 9, pp. 76069-76082, 2021, A Formal Specification Smart-Contract Language for Legally Binding Decentralized Autonomous Organizations | IEEE Journals & Magazine | IEEE Xplore


  • Business Network Models (BNMs): Representations of processes and activities significant to enterprises. It comprises legally binding template contracts and service types. It is generally aimed at the automation of business processes.
  • Business Process Management Systems (BPMs): Systems that provide abstractions for rapidly implementing intra-organization business processes that exist as BNMsl.
  • DAOs: Organizations whose business activities are automated based on rules encoded in smart-contract programs.
  • Caterpillar: A Business Process Management System (BPMS) prototype that runs on top of Ethereum. Caterpillar accepts as input a process model specified in BPMN and generates a set of smart contracts representing the underlying behavior.
  • Ontology: The properties of a field of study and their relationship with other properties in the same field. It is created by defining concepts and categories that represent the subject.
  • Legal Semantics:
    • Actors: Parties with legal capacity in a contract that perform specific roles such as offeror, offeree, and mediator. In some jurisdictions, DAOs have the legal capacity to make binding contracts.
    • Consideration: The benefits negotiated between parties to induce the other party into the contract. Payment is a typical consideration.
    • Obligations: Legally-binding promises. These statements are mandatory in contracts that include an obligation owner and the obligor who performs the obligation.
    • Performance: Actions required by a contract toward fulfilling an obligation; non-performance triggers remedies.
  • Smart legal contract markup language (SLCML): A machine-readable XML-based smart-contract language for specifying cross-organizational business smart contracts Its pattern and transformation rules allow automatic conversion to Solidity.


  • Business processes on blockchains are advantageous because they make information exchange easier and this could lead to several innovations in business automation, operations, and management models.
  • DAOs, for example, could negotiate and collaborate on a cloud-based platform and reach agreements that create clauses to be enforced on each DAOs technology layer as depicted below.
  • Such DAOs collaboration lifecycles typically involve:
    1. Smart contracting setup
      • BNM selection
      • populate-phase
      • negotiate-phase
    2. Enactment
    3. Potential rollbacks
    4. Orderly termination
  • These life cycles involve identification of potential contractual parties, reputations, and offerings, negotiation, counter-offers, determination of obligations and considerations, termination of the relationship, remedies on performance or non-performance, fundamentality of an obligation, and more. Smart contract languages do not have the semantics and properties for handling these requirements.
  • The authors tackle this by developing a two-tiered SCL ontology that expresses the purpose of contractual relations and the relationship between collaborating parties and objects for human and machine understanding of the domain knowledge.
  • The upper layer depicts legally-relevant properties applicable to most smart contracts and the representation of those concepts in the SLCML. This includes the parties’ roles (buyer and seller), the contractual considerations and obligations as well as performance management

  • The Specific Domain Layer brings customization and specificity to the smart contract ontology. For example, obligations are subdivided based on the importance of fulfillment execution, the nature of performance expected, and financial implications.


  • The authors developed the ontology using Protege and the Hermit-reasoner was used to verify the ontology. The properties identified in the SCL ontology were then mapped into a preexisting eSourcing Markup Language (eSML) to create the smart-legal-contract markup language (SLCML).
  • The authors developed the eSourcing Markup Language (eSML) in a previous paper to represent the business semantics of DAO collaborations. The eSML identified contracting parties, exchanged values, and distinguished other basic aspects of electronic contracts. In this paper, the authors added legal elements to the eSML to develop a mature, smart contract language ontology.
  • An automotive supply-chain case study was used by the authors to illustrate the vital collaboration constructs inherent in the SLCML and the ability of the SLCML to represent real-world business agreements.
  • Finally, the authors compare the SLCML to existing SCLs based on four parameters.


  • The authors put the ontology and SLCML together in an automotive case study and demonstrate the feasibility of the SLCML in representing business and legal concepts through the Solidity translation below.
  • Comparing the SLCML to existing SCLs for legally relevant DAO collaborations, the authors found that the SLCML was most effective for complex collaborative business contracts:
    • It includes legal concepts specific to collaborative contracts.
    • It introduces legal semantics to describe the life-cycle of contracts and obligations.
    • It reflects the obligation states and rights of parties using more complete domain concepts and axioms.
    • It addresses transaction rules that can be established, amended, or modified by the collaborating DAOs.
  • The comparative advantage of the SLCML is depicted in the table below.

Discussion and Key Takeaways

  • The paper highlights how creating more domain-complete SCLs like the SLCML could improve mainstream DAO adoption for business process automation.
  • The ontology developed could inform the design of other smart contract languages.

Implications and Follow-ups

  • The authors plan further development of the contract ontology to make it more applicable to various business and legal scenarios.
  • The authors also planned and executed follow-up research for developing SLCML to Solidity transformation rules. The research proposed patterns and transformation rules for converting SLCML to a choreography model to be then implemented in Solidity through Caterpillar.


  • The crux of the research is the necessity of legal and business semantics in developing smart contract languages. Researchers can use the SCL ontology from this research to develop other DAO collaboration-oriented languages.
  • The SLCML developed in the paper is an XML-based language that can be used to define the configuration of complex collaborative smart contracts.
  • Creating legally relevant DAO collaborations would significantly improve the automation of business processes through Blockchains and develop opportunities for reimagining business operations and management. Essentially, enterprises can achieve all steps of the contracting process (search, negotiation, performance, adjudication, and commitment) through smart contracts.

A wonderful summary you got here @tomideadeoye… Blockchain technology makes it possible to reorganize economic processes, decreases the time and expenses incurred by middlemen, and increases the trust among the various actors in an ecosystem.

It’s true that DAOs may communicate and negotiate on a cloud-based platform to come to agreements that would establish terms that would have to be upheld by each DAO’s technological layer. But the real query here is: Is the environment susceptible to manipulation? (stability)…

Question… is the XML- base language, the only that can be used to define configuration of fomplex collaborative smart contracts?..

Hi @Amazingdez

Very interesting query. All platforms are utimately suceptible to all kinds of manipulation if the incentives of all actors are not aligned or if the technology itself is suceptible to hacks - which is very often true but can addressed through security audits.

From my research, the other languages created to solve similar problems used Xtext (a Domain Specific Language generator) in creating the language. An example is Symboleo.

I don’t think XML based languages are the only option for specifying a mark up language like the SLCML. I think a JSON Schema ia an alternative; though comparatively less powerful than XSD. But for the particular modeling approach the authors employed, perhaps, only XML can be used to generated the smart contract codes.

1 Like

Yeah perhaps only XML can be used… well I hope to learn more on this as others contribute!.

Hello @tomideadeoye, I enjoyed reading your post. It makes sense, I am tempted to say that the immutable traceability of blockchain technology establishes trust among the collaboration participants and reduces cost and time in business transactions by eliminating the need for intermediaries.That is to say that Blockchain technology controls the execution of inter-organizational business processes through
smart contracts and enables decentralized autonomous organizations (DAO).

For a better understanding of this paper, I think it would be substancial to say that a smart contract is a digital agreement in which the participant’s rights and obligations are specified in a program-code, including the agreeing rules within which participants carry out these rights and obligations. But what could be be represented in a smart contract? the search,
negotiation, performance, adjudication, commitment could be represented in smart contracts.

In addition, what could be the important of DAO in this context I think it is DAO’’ was to provide a novel business model where the investor, or shareholder can run both commercial and non-profit enterprises without having a traditional management structure. I noticed clearly that this paper fills the gap by answering the research question, i.e., how to develop a formal-specification language for the purpose of legally-binding DAO collaboration. I think the paper the addresses the challenges of
formalizing contracts written in natural languages in machine-readable languages. is obvious that researchers argue that human contract intentions are mostly defined in natural-language, which is easy to understand but highly ambiguous and subject to interpretation. I think this is the reason why they proposed a methodology to develop a high-level specification that achieves common understanding through natural-language phrases and is compiled directly into machine instructions.

I think the paper further discuss the extension part of SLCML, which is not part of the eSML foundation. The author also identified that multi-tiered SCL ontology captures the full range of legally binding business-related contracts in a unified model.

The Futuristic

We aim that the contract ontology can be
further developed to achieve domain completeness. In addition, we plan to develop a tool-supported process to transform
SLCML contract specification into smart-contract code, e.g., Solidity, and to carry out more case studies with SLCML in blockchain research projects.

1 Like