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Integrity

This section addresses the question of who can request which changes.

Valid Ledgers

At the core is the concept of a valid ledger; changes are permissible if adding the corresponding commit to the ledger results in a valid ledger. Valid ledgers are those that fulfill three conditions:

Consistency

Exercises and fetches on inactive contracts are not allowed, i.e. contracts that have not yet been created or have already been consumed by an exercise. A contract with a contract key can be created only if the key is not associated to another unconsumed contract, and all key assertions hold.

Conformance

Only a restricted set of actions is allowed on a given contract.

Authorization

The parties who may request a particular change are restricted.

Only the last of these conditions depends on the party (or parties) requesting the change; the other two are general.

Consistency

Consistency consists of two parts:

1. Contract consistency: Contracts must be created before they are used, and they cannot be used once they are consumed.
2. Key consistency: Keys are unique and key assertions are satisfied.

To define this precisely, notions of “before” and “after” are needed. These are given by putting all actions in a sequence. Technically, the sequence is obtained by a pre-order traversal of the ledger’s actions, noting that these actions form an (ordered) forest. Intuitively, it is obtained by always picking parent actions before their proper subactions, and otherwise always picking the actions on the left before the actions on the right. The image below depicts the resulting order on the paint offer example:

In the image, an action act happens before action act’ if there is a (non-empty) path from act to act’. Then, act’ happens after act.

Contract consistency

Contract consistency ensures that contracts are used after they have been created and before they are consumed.

Definition »contract consistency«

A ledger is consistent for a contract c if all of the following holds for all actions act on c:

1. either act is itself Create c or a Create c happens before act
2. act does not happen before any Create c action
3. act does not happen after any exercise consuming c.

The consistency condition rules out the double spend example. As the red path below indicates, the second exercise in the example happens after a consuming exercise on the same contract, violating the contract consistency criteria.

In addition to the consistency notions, the before-after relation on actions can also be used to define the notion of contract state at any point in a given transaction. The contract state is changed by creating the contract and by exercising it consumingly. At any point in a transaction, we can then define the latest state change in the obvious way. Then, given a point in a transaction, the contract state of c is:

1. active, if the latest state change of c was a create;
2. archived, if the latest state change of c was a consuming exercise;
3. inexistent, if c never changed state.

A ledger is consistent for c exactly if Exercise and Fetch actions on c happen only when c is active, and Create actions only when c is inexistent. The figures below visualize the state of different contracts at all points in the example ledger.

Activeness of the PaintOffer contract

Activeness of the Iou Bank A contract

The notion of order can be defined on all the different ledger structures: actions, transactions, lists of transactions, and ledgers. Thus, the notions of consistency, inputs and outputs, and contract state can also all be defined on all these structures. The active contract set of a ledger is the set of all contracts that are active on the ledger. For the example above, it consists of contracts Iou Bank P and PaintAgree P A.

Key consistency

Contract keys introduce a key uniqueness constraint for the ledger. To capture this notion, the contract model must specify for every contract in the system whether the contract has a key and, if so, the key. Every contract can have at most one key.

Like contracts, every key has a state. An action act is an action on a key k if

• act is a Create, Exercise, or a Fetch action on a contract c with key k, or
• act is the key assertion NoSuchKey k.

Definition »key state«

The key state of a key on a ledger is determined by the last action act on the key:

• If act is a Create, non-consuming Exercise, or Fetch action on a contract c, then the key state is assigned to c.
• If act is a consuming Exercise action or a NoSuchKey assertion, then the key state is free.
• If there is no such action act, then the key state is unknown.

A key is unassigned if its key state is either free or unknown.

Key consistency ensures that there is at most one active contract for each key and that all key assertions are satisfies.

Definition »key consistency«

A ledger is consistent for a key k if for every action act on k, the key state s before act satisfies

• If act is a Create action or NoSuchKey assertion, then s is free or unknown.
• If act is an Exercise or Fetch action on some contract c, then s is assigned to c or unknown.

Key consistency rules out the problematic examples around key consistency. For example, suppose that the painter P has made a paint offer to A with reference number P123, but A has not yet accepted it. When P tries to create another paint offer to David with the same reference number P123, then this creation action would violate key uniqueness. The following ledger violates key uniqueness for the key (P, P123).

Key assertions can be used in workflows to evidence the inexistence of a certain kind of contract. For example, suppose that the painter P is a member of the union of painters U. This union maintains a blacklist of potential customers that its members must not do business with. A customer C is considered to be on the blacklist if there is an active contract Blacklist @U &A. To make sure that the painter P does not make a paint offer if A is blacklisted, the painter combines its commit with a NoSuchKey assertion on the key (U, A). The following ledger shows the transaction, where UnionMember U P represents P’s membership in the union U. It grants P the choice to perform such an assertion, which is needed for authorization.

Key consistency extends to actions, transactions and lists of transactions just like the other consistency notions.

Ledger consistency

Definition »ledger consistency«

A ledger is consistent if it is consistent for all contracts and for all keys.

Internal consistency

The above consistency requirement is too strong for actions and transactions in isolation. For example, the acceptance transaction from the paint offer example is not consistent as a ledger, because PaintOffer A P Bank and the Iou Bank A contracts are used without being created before:

However, the transaction can still be appended to a ledger that creates these contracts and yield a consistent ledger. Such transactions are said to be internally consistent, and contracts such as the PaintOffer A P Bank P123 and Iou Bank A are called input contracts of the transaction. Dually, output contracts of a transactions are the contracts that a transactions creates and does not archive.

Definition »internal consistency for a contract«

A transaction is internally consistent for a contract c if the following holds for all of its subactions act on the contract c

1. act does not happen before any Create c action
2. act does not happen after any exercise consuming c.

A transaction is internally consistent if it is internally consistent for all contracts and consistent for all keys.

Definition »input contract«

For an internally consistent transaction, a contract c is an input contract of the transaction if the transaction contains an Exercise or a Fetch action on c but not a Create c action.

Definition »output contract«

For an internally consistent transaction, a contract c is an output contract of the transaction if the transaction contains a Create c action, but no a consuming Exercise action on c.

Note that the input and output contracts are undefined for transactions that are not internally consistent. The image below shows some examples of internally consistent and inconsistent transactions.

The first two transactions violate the conditions of internal consistency. The first transaction creates the Iou after exercising it consumingly, violating both conditions. The second transaction contains a (non-consuming) exercise on the Iou after a consuming one, violating the second condition. The last transaction is internally consistent.

Similar to input contracts, we define the input keys as the set that must be unassigned at the beginning of a transaction.

Definition »input key«

A key k is an input key to an internally consistent transaction if the first action act on k is either a Create action or a NoSuchKey assertion.

In the blacklisting example, P’s transaction has two input keys: (U, A) due to the NoSuchKey action and (P, P123) as it creates a PaintOffer contract.

Conformance

The conformance condition constrains the actions that may occur on the ledger. This is done by considering a contract model M (or a model for short), which specifies the set of all possible actions. A ledger is conformant to M (or conforms to M) if all top-level actions on the ledger are members of M. Like consistency, the notion of conformance does not depend on the requesters of a commit, so it can also be applied to transactions and lists of transactions.

For example, the set of allowed actions on IOU contracts could be described as follows.

The boxes in the image are templates in the sense that the contract parameters in a box (such as obligor or owner) can be instantiated by arbitrary values of the appropriate type. To facilitate understanding, each box includes a label describing the intuitive purpose of the corresponding set of actions. As the image suggest, the transfer box imposes the constraint that the bank must remain the same both in the exercised IOU contract, and in the newly created IOU contract. However, the owner can change arbitrarily. In contrast, in the settle actions, both the bank and the owner must remain the same. Furthermore, to be conformant, the actor of a transfer action must be the same as the owner of the contract.

Of course, the constraints on the relationship between the parameters can be arbitrary complex, and cannot conveniently be reproduced in this graphical representation. This is the role of DAML – it provides a much more convenient way of representing contract models. The link between DAML and contract models is explained in more detail in a later section.

To see the conformance criterion in action, assume that the contract model allows only the following actions on PaintOffer and MustPaint contracts.

The problem with example where Alice changes the offer’s outcome to avoid transferring the money now becomes apparent.

A’s commit is not conformant to the contract model, as the model does not contain the top-level action she is trying to commit.

Authorization

The last criterion rules out the last two problematic examples, an obligation imposed on a painter, and the painter stealing Alice’s money. The first of those is visualized below.

The reason why the example is intuitively impermissible is that the PaintAgree contract is supposed to express that the painter has an obligation to paint Alice’s house, but he never agreed to that obligation. On paper contracts, obligations are expressed in the body of the contract, and imposed on the contract’s signatories.

Signatories, Agreements, and Maintainers

To capture these elements of real-world contracts, the contract model additionally specifies, for each contract in the system:

1. A non-empty set of signatories, the parties bound by the contract.
2. An optional agreement text associated with the contract, specifying the off-ledger, real-world obligations of the signatories.
3. If the contract is associated with a key, a non-empty set of maintainers, the parties that make sure that at most one unconsumed contract exists for the key. The maintainers must be a subset of the signatories and depend only on the key. This dependence is captured the function maintainers that takes a key and returns the key’s maintainers.

In the example, the contract model specifies that

1. an Iou obligor owner contract has only the obligor as a signatory, and no agreement text.
2. a MustPay obligor owner contract has both the obligor and the owner as signatories, with an agreement text requiring the obligor to pay the owner a certain amount, off the ledger.
3. a PaintOffer houseOwner painter obligor refNo contract has only the painter as the signatory, with no agreement text. Its associated key consists of the painter and the reference number. The painter is the maintainer.
4. a PaintAgree houseOwner painter refNo contract has both the house owner and the painter as signatories, with an agreement text requiring the painter to paint the house. The key consists of the painter and the reference number. The painter is the only maintainer.

In the graphical representation below, signatories of a contract are indicated with a dollar sign (as a mnemonic for an obligation) and use a bold font. Maintainers are marked with @ (as a mnemonic who enforces uniqueness). Since they are always signatories, parties marked with @ are implicitly signatories. For example, annotating the paint offer acceptance action with signatories yields the image below.

Authorization Rules

Signatories allow one to precisely state that the painter has an obligation. The imposed obligation is intuitively invalid because the painter did not agree to this obligation. In other words, the painter did not authorize the creation of the obligation.

In a DA ledger, a party can authorize a subaction of a commit in one of the two ways:

• Every top-level action of the commit is authorized by all requesters of the commit.
• Every consequence of an exercise action act on a contract c is authorized by all signatories of c and all actors of act.

The second authorization rule encodes the offer-acceptance pattern, which is a prerequisite for contract formation in contract law. The contract c is effectively an offer by its signatories who act as offerers. The exercise is an acceptance of the offer by the actors who are the offerees. The consequences of the exercise can be interpreted as the contract body so the authorization rules of DA ledgers closely model the rules for contract formation in contract law.

A commit is well-authorized if every subaction act of the commit is authorized by at least all of the required authorizers of act, where:

1. the required authorizers of a Create action on a contract c are the signatories of c.
2. the required authorizers of an Exercise or a Fetch action are its actors.
3. the required authorizers of a NoSuchKey assertion are the maintainers of the key.

We lift this notion to ledgers, whereby a ledger is well-authorized exactly when all of its commits are.

Examples

An intuition for how the authorization definitions work is most easily developed by looking at some examples. The main example, the paint offer ledger, is intuitively legitimate. It should therefore also be well-authorized according to our definitions, which it is indeed.

In the visualizations below, Π ✓ act denotes that the parties Π authorize the action act. The resulting authorizations are shown below.

In the first commit, the bank authorizes the creation of the IOU by requesting that commit. As the bank is the sole signatory on the IOU contract, this commit is well-authorized. Similarly, in the second commit, the painter authorizes the creation of the paint offer contract, and painter is the only signatory on that contract, making this commit also well-authorized.

The third commit is more complicated. First, Alice authorizes the exercise on the paint offer by requesting it. She is the only actor on this exercise, so this complies with the authorization requirement. Since the painter is the signatory of the paint offer, and Alice the actor of the exercise, they jointly authorize all consequences of the exercise. The first consequence is an exercise on the IOU, with Alice as the actor; so this is permissible. The second consequence is the creation of the paint agreement, which has Alice and the painter as signatories. Since they both authorize this action, this is also permissible. Finally, the creation of the new IOU (for P) is a consequence of the exercise on the old one (for A). As the old IOU was signed by the bank, and as Alice was the actor of the exercise, the bank and Alice jointly authorize the creation of the new IOU. Since the bank is the sole signatory of this IOU, this action is also permissible. Thus, the entire third commit is also well-authorized, and then so is the ledger.

Similarly, the intuitively problematic examples are prohibitied by our authorization criterion. In the first example, Alice forced the painter to paint her house. The authorizations for the example are shown below.

Alice authorizes the Create action on the PaintAgree contract by requesting it. However, the painter is also a signatory on the PaintAgree contract, but he did not authorize the Create action. Thus, this ledger is indeed not well-authorized.

In the second example, the painter steals money from Alice.

The bank authorizes the creation of the IOU by requesting this action. Similarly, the painter authorizes the exercise that transfers the IOU to him. However, the actor of this exercise is Alice, who has not authorized the exercise. Thus, this ledger is not well-authorized.

The rationale for making the maintainers as required authorizers for a NoSuchKey assertion is discussed in the next section about privacy.

Valid Ledgers, Obligations, Offers and Rights

DA ledgers are designed to mimic real-world interactions between parties, which are governed by contract law. The validity conditions on the ledgers, and the information contained in contract models have several subtle links to the concepts of the contract law that are worth pointing out.

First, in addition to the explicit off-ledger obligations specified in the agreement text, contracts also specify implicit on-ledger obligations, which result from consequences of the exercises on contracts. For example, the PaintOffer contains an on-ledger obligation for A to transfer her IOU in case she accepts the offer. Agreement texts are therefore only necessary to specify obligations that are not already modeled as permissible actions on the ledger. For example, P’s obligation to paint the house cannot be sensibly modeled on the ledger, and must thus be specified by the agreement text.

Second, every contract on a DA ledger can simultaneously model both:

• a real-world offer, whose consequences (both on- and off-ledger) are specified by the Exercise actions on the contract allowed by the contract model, and
• a real-world contract “proper”, specified through the contract’s (optional) agreement text.

Third, in DA ledgers, as in the real world, one person’s rights are another person’s obligations. For example, A’s right to accept the PaintOffer is P’s obligation to paint her house in case she accepts. In DA ledgers, a party’s rights according to a contract model are the exercise actions the party can perform according to the authorization and conformance rules.

Finally, validity conditions ensure three important properties of the DA ledger model, that mimic the contract law.

1. Obligations need consent. DA ledgers follow the offer-acceptance pattern of the contract law, and thus ensures that all ledger contracts are formed voluntarily. For example, the following ledger is not valid.

   

2. Consent is needed to take away on-ledger rights. As only Exercise actions consume contracts, the rights cannot be taken away from the actors; the contract model specifies exactly who the actors are, and the authorization rules require them to approve the contract consumption.

   In the examples, Alice had the right to transfer her IOUs; painter’s attempt to take that right away from her, by performing a transfer himself, was not valid.

   

   Parties can still delegate their rights to other parties. For example, assume that Alice, instead of accepting painter’s offer, decides to make him a counteroffer instead. The painter can then accept this counteroffer, with the consequences as before:

   

   Here, by creating the CounterOffer contract, Alice delegates her right to transfer the IOU contract to the painter. In case of delegation, prior to submission, the requester must get informed about the contracts that are part of the requested transaction, but where the requester is not a signatory. In the example above, the painter must learn about the existence of the IOU for Alice before he can request the acceptance of the CounterOffer. The concepts of observers and divulgence, introduced in the next section, enable such scenarios.

3. On-ledger obligations cannot be unilaterally escaped. Once an obligation is recorded on a DA ledger, it can only be removed in accordance with the contract model. For example, assuming the IOU contract model shown earlier, if the ledger records the creation of a MustPay contract, the bank cannot later simply record an action that consumes this contract:

   

   That is, this ledger is invalid, as the action above is not conformant to the contract model.