Over the last couple of years, there have been a flood of inquiries about smart contracts. A wider adoption of the bitcoin and similar cryptocurrencies has opened up a new world of exploration and innovation. Software developers, banks, investors, regulators, and attorneys, all are eyeing to take advantage of the Blockchain technology.
The incredible amount of hype around this technology has started a serious discussion on the impact of Blockchain network on various industries – particularly financial and legal services. Some experts argue that “smart contracts” are going to totally change the way financial and legal intermediation is done – in fact, threatening thousands of jobs in commercial intermediation and dispute negotiations.
What is a Smart Contract?
Before we move further into this – let’s first understand what is a smart contract, and why is it attracting so many organizations and individuals?
Investopedia defines smart contracts as “Self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.”
Smart contracts are kind of agreements where parties involved carry out without any financial, legal, or regulatory intermediary. The end result is a traceable, but transparent and irreversible transaction.
Lawyers as Smart Contractors
Smart contracts have the potential to encode and independently perform complex agreements. The contracts are extracted or built from the code library, signed and stored on the blockchain. Primarily, there are two key attractions in this mode of engagement. The first attraction is a boosted level of trust (due to certainty of execution) and second is the enhanced efficiency as there are no intermediaries and approval required. As a result, the cost of transaction also goes down.
There are certainly advantages of smart contracts but they have certain limitations as well. There are many elements in the contractual relations that cannot be outsourced to computer logic. Therefore, setting unrealistic expectations from blockchain technology to function independently and achieve total independence is not advised.
While there are reports confirming that some of the top law firms are raising questions on the level of disruption caused by smart contracts, one thing is certain: Modern lawyers will have to upgrade their skills and take a grip of the smart technology, blockchain, and crypto-contracts. Dubbed as “Smart Contractors”, the new role of the lawyers will require quite different of skills with deeper understanding of technology.
Many lawyers argue that smart contracts are one of the best execution mechanisms for the pre-defined set of obligations and guidelines – and not the contract itself. Comparing it with “Escrow Systems”, they believe that even if the blockchain becomes mainstream, the requirement of a trusted third party (legal or financial) will always be there.
Moreover, with the number of regulators (and intuitions) raising voice for regulations, lawyers may find them a whole new market to offer services. Hence, smart contracts will have a positive impact on the legal services, instead of (just) negative as being portrayed.
It’ll be very interesting to see how lawyers’ role are integrated in the process of ICOs, agreements and digital contracts. This depends on new regulations, industry growth, best practices, and participation of the bigger players.
If you’re looking to release an ICO or want to engage in smart contracts, feel free to get in touch with InWage. We have deep expertise in blockchain technology and management of smart contracts.