European Parliament Data Act Includes Smart Contract ‘Kill Switch’

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  • The European Parliament has voted to implement new smart contract laws, which includes a provision to include a ‘kill switch’
  • The kill switch would necessitate smart contracts to be mutable, which has worried experts
  • The vote passed 500-23, but experts have warned that it could create security flaws

The European Parliament has been messing with the blockchain and cryptocurrency world again, this time by approving a bill that will force smart contract developers to include a ‘kill switch’ that will mean they can be altered, potentially undermining their entire purpose. The collective yesterday passed the Data Act, which is intended to “boost innovation by removing barriers obstructing access to industrial data”, but crypto enthusiasts have called into question the merits of some of the articles within it, which they say introduce security flaws.

“Safe Termination and Interruption” of Smart Contracts

According to a statement by the European Parliament, the legislation was introduced to govern the equitable sharing of data produced by “connected products or related services,” such as the Internet of Things and “industrial machines.” The Parliament observed that 80% of industrial data is unused and the act aims to promote the utilization of these resources for algorithmic training and device repair cost reduction.

The legislation also includes safeguards to shield trade secrets and prevent unauthorized data transfers. It also mandates specific provisions for the smart contracts of entities providing shareable data, including provisions for “safe termination and interruption”:

The smart contract shall include internal functions which can reset or instruct the contract to stop or interrupt the operation. […] Especially, it should be assessed under which conditions non-consensual termination or interruption should be permissible.

This potential for blockchains to become amendable was seized on by blockchain experts, who immediately flagged the fact that it undermines the very nature of blockchains and smart contracts by creating a central point of failure. One such person was Thibault Schrepel, Associate Professor of Law at VU Amsterdam and Faculty Affiliate at Stanford University’s CodeX Center, who took to Twitter to point out the many flaws in the plan:

Professor Schrepel pointed out that immutability is key to a blockchain’s survival, warning that implementing a kill switch endangers them “to an extent that no one can predict”, while the draft didn’t point out who would be responsible for carrying out such an action – the creator of the smart contract or a third party?

Schrepel’s concerns weren’t enough to sway the European Parliament, which voted 500-23 in favor of the move, with 110 abstentions.