2022 was a challenging year for the blockchain industry, and market participants learned a number of difficult lessons that destroyed confidence in the industry as a whole.

Several centralized institutions played fast and loose **with customer funds & terms of service, forcing millions of retail investors to learn the rights and remedies of unsecured creditors in a bankruptcy proceeding.

For instance, firms like Celsius, BlockFi and Genesis made risky directional bets leading to losses of depositor funds and an inability to honor withdrawals.

On the other hand, firms like FTX practically absconded with depositor funds, which they instead used to fund lavish real estate purchases, venture investments, and political donations, among other things.

That the financial products and user accounts at issue were all on centralized exchanges — rather than an immutable blockchain — helped to obfuscate this egregious misconduct.

Consequently, many have called for greater adoption of smart contract technology, noting that DeFi protocols have continued to perform as expected despite the market turmoil.

The path forward for the industry is to expand the range of commercial transactions that can leverage non-custodial wallets and deterministic smart contracts, but there are a number of challenges:

• Smart contracts are context-bound — it is expensive, inefficient and impractical to deploy a unique smart contract with bespoke terms for every transaction or agreement;
• Smart contracts are immutable, making it difficult, if not impossible, to subsequently modify the terms of an agreement based on the mutual assent of the parties; and
• Smart contract programming languages are isolated from the off-chain data needed to structure complex transactions amongst contract parties.

However, the technological and legal landscapes concerning the transfer and control of digital assets are evolving for the better.

The development of wallet smart contract technology is making it possible, for the first time, to transact digital assets with a centralized institution without depositing funds into centralized custody.

Moreover, the Uniform Law Commission (ULC) has recently proposed an amendment to the Uniform Commercial Code, to clarify issues of ownership / control of digital assets in commercial transactions*,* noting as follows:

The adoption of DLT has underscored two important trends in electronic commerce. First, people have begun to assign economic value to some electronic records that bear no relationship to extrinsic rights and interests. For example, without any law or legally enforceable agreement, people around the world have agreed to treat virtual currencies such as bitcoin (or, more precisely “transaction outputs” generated by the Bitcoin protocol) as a medium of exchange and store of value. Second, people are using the creation or transfer of electronic records to transfer rights to receive payment, rights to receive performance of other obligations (e.g., services or delivery of goods), and other rights and interests in personal and real property.

These trends will inevitably result in disputes among claimants to electronic records and their related rights and other benefits. Uncertainty as to the criteria for resolving these claims creates commercial risk. The magnitude of these risks will grow as these trends continue.

OpenK is committed to resolving such uncertainties by creating standardized frameworks for mutualized assignment of digital asset control rights via programmable wallet smart contracts.

Once these legal, commercial and technological realities align, the blockchain sector can reach its full potential.

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