Smart Contracts and the Judicial Environment
Smart contracts are set to revolutionize the way business and industry transactions are carried out. Automation, predictability, and speed are the advantages of software that have made an impact in many industries, and they are now set to change the justice environment as well. This article explores the effects that smart contracts will have on the judicial environment.
Increased Clarity and Predictability of Consensus
One of the major benefits of using smart contracts is increased clarity and predictability of agreements. By expressing contract terms in code, rather than in natural language, both parties to the transaction can have a clear understanding of the terms of the agreement and the possible outcomes of the contract. This is because smart contracts can be tested against any combination of inputs, including physical facts that can be considered as inputs.
Simulating Trading Risks
Another benefit of smart contracts is the ability for traders to simulate each contract in a specific environment and test all possible inputs. This gives both parties to the transaction a clear understanding of the risks involved. In simple cases, these simulations may not be necessary, but they are useful for lawyers to test the contract and ensure that each party is aware of the risks they are taking.
Changes to Legal Practice
While smart contracts may never completely replace natural language laws, they will certainly change the way legal practice is carried out. Many types of consensus are impossible to fully express in code, so they cannot be executed by a computer. For example, contracts that involve human actions rather than just the exchange of immaterial assets cannot be implemented with smart contracts. Even self-enforceable contracts will eventually need to make reference to legal terms and concepts that define each party's rights in case they go to court. The advent of smart contracts is a reassessment of current practice and will force lawyers and clients to discover which types of agreements and clauses are best suited for code and how they fit together in their respective worlds.
Real-world Implementation Problems
Smart contracts are still in their early stages, and there are several challenges that must be overcome before they can be used in the real world. Law firms must start thinking about how advances in blockchain technology and smart contracts will affect their business. Currently, smart contracts are still in the theoretical stage and have not yet been widely adopted. The two major challenges that must be overcome are:
- Real Asset Control Issues
How can smart contracts control real-world assets such as cash and stocks to enforce agreements? This is a major challenge that must be overcome before smart contracts can be widely adopted.
- Matters of Implementation of Agreement Terms
Another challenge is how to enforce the terms of the contract in a way that both parties trust the computer. The parties must not only agree to the code of the contract, but also give their consent to the computer that interprets and runs the code. There must be a shared standard at a minimum level, and it should be used in a way that is verifiable from each party. Solutions to these challenges are starting to emerge, and as research and development around blockchain technology advances, expectations are high that smart contracts will become a reality in the near future.
Advantages of Smart Contracts for the Legal Environment
Smart contracts offer many benefits for the legal environment, including increased clarity, predictability, and speed in the process of consensus building. By expressing contract terms in code, smart contracts can eliminate ambiguities and provide a clear understanding of the agreement to all parties involved. The ability to test contracts against various inputs also allows lawyers to better assess the risks involved in a transaction.
Challenges of Implementing Smart Contracts in the Real World
While smart contracts hold significant promise for the legal world, there are still challenges that must be overcome before they can be widely adopted. One of the biggest challenges is the issue of real asset control, or how smart contracts can actually enforce agreements involving real-world assets such as cash and stocks. Another challenge is ensuring that the terms of the agreement are properly implemented and enforceable by a computer program.
Future of Smart Contracts
Despite the challenges, the development of smart contracts and blockchain technology continues to progress, and there is growing optimism that these innovations will soon become a reality in the legal world. Law firms must be prepared for the impact that smart contracts will have on their businesses and begin exploring the best ways to incorporate this technology into their practice.
Smart contracts are not meant to fully replace natural language laws, but rather offer a reassessment of current practices and a new way of thinking about agreements and contracts. The goal is to find the best balance between code and natural language, so that contracts can be self-enforcing while still adhering to legal terms and concepts. In the end, the use of smart contracts will provide a clearer, faster, and more efficient way to conduct business and enforce agreements.