Sagewise pitches a service to verify claims and arbitrate disputes over blockchain transactions

Sometimes smart contracts can be pretty dumb.

All of the benefits of a cryptographically secured, publicly verified, anonymized transaction system can be erased by errant code, malicious actors or poorly defined parameters of an executable agreement.

Hoping to beat back the tide of bad contracts, bad code and bad actors, Sagewise, a new Los Angeles-based startup, has raised $1.25 million to bring to market a service that basically hits pause on the execution of a contract so it can be arbitrated in the event that something goes wrong.

Co-founded by a longtime lawyer, Amy Wan, whose experience runs the gamut from the U.S. Department of Commerce to serving as counsel for a peer-to-peer real estate investment platform in Los Angeles, and Dan Rice, a longtime entrepreneur working with blockchain, Sagewise works with both Ethereum and the Hedera Hashgraph (a newer distributed ledger technology, which purports to solve some of the issues around transaction processing speed and security which have bedeviled platforms like Ethereum and Bitcoin).

The company’s technology works as a middleware, including an SDK and a contract notification and monitoring service. “The SDK is analogous to an arbitration clause in code form — when the smart contract executes a function, that execution is delayed for a pre-set amount of time (i.e. 24 hours) and users receive a text/email notification regarding the execution,” Wan wrote to me in an email. “If the execution is not the intent of the parties, they can freeze execution of the smart contract, giving them the luxury of time to fix whatever is wrong.”

Sagewise approaches the contract resolution process as a marketplace where priority is given to larger deals. “Once frozen, parties can fix coding bugs, patch up security vulnerabilities, or amend/terminate the smart contract, or self-resolve a dispute. If a dispute cannot be self-resolved, parties then graduate to a dispute resolution marketplace of third party vendors,” Wan writes. “After all, a $5 bar bet would be resolved differently from a $5M enterprise dispute. Thus, we are dispute process agnostic.”

Wavemaker Genesis led the round, which also included strategic investments from affiliates of Ari Paul (Blocktower Capital), Miko Matsumura (Gumi Cryptos), Youbi Capital, Maja Vujinovic (Cipher Principles), Jordan Clifford (Scalar Capital), Terrence Yang (Yang Ventures) and James Sowers.

“Smart contracts are coded by developers and audited by security auditing firms, but the quality of smart contract coding and auditing varies drastically among service providers,” said Wan, the chief executive of Sagewise, in a statement. “Inevitably, this discrepancy becomes the basis for smart contract disputes, which is where Sagewise steps in to provide the infrastructure that allows the blockchain and smart contract industry to achieve transactional confidence.”

In an email, Wan elaborated on the thesis to me, writing that, “smart contracts may have coding errors, security vulnerabilities, or parties may need to amend or terminate their smart contracts due to changing situations.”

Contracts could also be disputed if their execution was triggered accidentally or due to the actions of attackers trying to hack a platform.

“Sagewise seeks to bring transactional confidence into the blockchain industry by building a smart contract safety net where smart contracts do not fulfill the original transactional intent,” Wan wrote.