In today’s society, we are beginning to find easier and more innovative ways of life. Started with smarter refrigerators to extract data from a document. And a contract is also a subject of this transformation, it’s a reasonable assumption to think the change will also affect the world of law and contract.
In this discussion, the order for something to be called smart is to have a higher level of automation. This means that data and intelligence must be gathered as part of the process. Stated differently, when data is collected and analyzed in the context of how a process is established, automation can deliver an output that is faster and with greater accuracy. In this context, what might be the future of smart contracts?
The Future of Smart Contracts
The smart contract itself has become popular in niche companies, mostly in the industries of cryptocurrencies or blockchain space. Smart contracts will very soon be far more mainstream as people increasingly understand and gain confidence in blockchain technology.
It’s curious that so many detractors impulsively say they’ll never place these kinds of legal agreements in a blockchain environment because blockchain isn’t 100% secure. They’re ignoring the fact that the IT infrastructure at the average bank, brokerage house, or savings and loan is hackable and fallible too.
Blockchain provides the necessary security so an agreement cannot be altered or lost. Given its virtual nature, these types of agreements could be executed anywhere. Each transaction must be authenticated in such a way that mutual agreement can be validated for every condition.
So what kind of transactions and contractual agreements can be managed through smart contracts? Pretty much any financial transaction – loans, insurance, investments, renting, wagering, and purchases – can and will be secured and policed on blockchain systems in the future.
Challenge
While the autonomous and secure environment sounds great. The smart contract still has three remaining concerns and downsides that need to be addressed.
Nonmonetary agreement
The first one is the enforcement of a nonmonetary agreement, if we look for a case of a non-financial agreement between two companies, for example regarding swapped services or an understanding that one party will receive preferential service levels. It’s more onerous to craft a smart contract that automatically guarantees satisfaction to the injured party when no financial penalties are on the line.
The future kind of service will require development and adaptation, so the agreements could be policied, managed, and enforced through a smart contract.
Skill boundaries
Second, to place a contract onto the blockchain, all of the necessary legalese have to be written into computer code. Lawyers are not typically coders and coders are not typically lawyers. This transformation requires an element of trust and expertise so the parties can be confident that the code within the smart contract truly reflects the legal intent.
Rigid and Inflexible
Third, a blockchain-based smart contract is “written in stone.” The blockchain is decentralized, and usually, that works for the good. But it also means that there’s no central authority or referee who can step in if one party feels aggrieved or even conned. The problem will be the main concern of the early adopters when facing the option of using a Smart contract.
Conclusion
The future of Smart contracts will be bright as more and more aspects of our lives are being automated. And the issues will be resolved over time. On the matter of how the contract will be perfected, as more and more smart contracts are drawn up, they’ll serve as templates for similar agreements. And for more complex legal matters, there is probably will be an emergence of a new specialty that bridges the gap between traditional and coded legal drafting.
While Regarding the issue of fraud, the legal profession will attempt to have a step in the legal recourse. And the IT community will design a decentralized way to adjudicate the cases
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