Legal agreements for the digital age
18 July 2017
Consider a world in which contracts are performed by computers and drafted in computer code by legal software engineers. What kind of efficiencies in terms of speed of execution, legal certainty and transparency could be gained? Conversely, what are the risks of trusting machines to execute contracts, and perhaps even to enter into contracts with other machines? These are some of the questions raised by smart contracts, an emerging technology that promises self-executing contracts implemented in computer code and performed by networks of computers, with minimal intervention from human agents after they have been “launched” by the parties.
Backers of smart contracts technologies believe they have the potential to revolutionise traditional contracting. Davos founder Klaus Schwab identifies smart contracts as one of the technologies that will unleash a “fourth industrial revolution” that will transform the world’s economies. Despite this enthusiasm, the technology is still in development and it seems unlikely that digitised, self-executing contracts will replace all traditional legal contracts in the near future. However, there is real potential for smart contracts to flourish incertain sectors where the performance of process-intensive transactions has already been extensively automated.
This full article explores how we define smart contracts, blockchain and automated execution, as well as the implications and regulations for these.
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