With these goals in mind, it will be crucial not only to think about how current structures and perspectives can be adapted to this new technology. Conversely, the real transformation that smart contracts can bring will likely come from entirely new standards that we don`t yet have to imagine. To speed up transactions, a set of rules – called a smart contract – is stored on the blockchain and executed automatically. A smart contract can set the terms for transferring corporate bonds, include travel insurance payment terms, and much more. In a follow-up article, Szabo (1997) discussed some smart contract protocols that addressed the use of cryptography and other digital security methods to secure businesses and eliminate third-party intrusions. Then comes the subject of the agreement, which is an object that can only exist in the smart contract environment. Due to the need for the parties to have direct and unfettered access to property, the subject matter of the agreement had resulted in significant challenges and delays in developing smart contracts. It was only after the introduction of the first cryptocurrency in 2009 that this problem was solved to some extent. 8.
Harley, B. (2017, August 1). Are smart contracts contracts? Talking Tech deals with the concept and realities of the smart contract. Talking Tech.talkingtech.cliffordchance.com/en/emerging-technologies/smart-contracts/are-smart-contracts-contracts.html «When every transaction occurs, it is recorded as a `block` of data. Each block is connected to the before and after. Transactions are blocked together in an irreversible chain: a blockchain. However, one of the main functions of digital contracts is the transfer of cryptocurrencies. For example, if Bitcoin is used in the agreement, the seller`s Bitcoin will be transferred to the seller once payment is confirmed.
A frequently addressed question in the literature is whether smart contracts have the same legal validity as traditional contracts. While this question deserved a definitive and authoritative answer, it instead sparked endless debate among academics and practitioners. Some academics have put all nerves to the test to overestimate the power and authority of smart contracts. For example, Savelyev expressed the radical view that «smart contracts don`t need a legal system to exist: they can work without a comprehensive legal framework. De facto, according to Savelyev, they represent a technological alternative to the entire legal system. 7 In contrast, practitioners have expressed concerns about the legal status of smart contracts because, unlike traditional contracts, the contract is not reinforced by natural language, but by data and computer rules.8 While this concern is justified, this paper suggests that the prevailing view should be that smart contracts have the same legal validity as traditional contracts. Indeed, «the data-driven label simply suggests that the parties have decided that a subset of key terms or conditions would benefit from being represented as data that can be processed by computer.» 9 This argument is reasonable because «anything from a verbal agreement to an email conversation can become a contract in court if the basic elements of a contract can be found.» 10 Blockchain Smart Contacts have significant benefits in terms of increasing financial liquidity through faster payment methods. For automated systems that electronically record the receipt of goods and services, smart contracts allow payments to be released almost instantaneously, rather than waiting days or weeks for manual entries. Combined with legal paper contracts, smart contracts provide the same legal certainty to the parties of all parts of the transaction.
Additional transaction costs can be significantly reduced as smart contracts eliminate the need for referral fees, commissions, agent fees, and escrow fees. Unlike its traditional counterpart, a smart contract automatically facilitates, certifies, or executes the negotiation or execution of a transaction. Since its design has solved the problem of trust and is self-executing, the need for a third party to modify the contract has been removed. The process and considerations for conducting audits of ordinary computer code are essentially the same as when auditing smart contracts, meaning that both involve careful scoping and reviewing the code to identify vulnerabilities and vulnerabilities before deploying them publicly (Hussey and Phillips, 2021). It`s similar to testing a newly manufactured car before it`s certified safe and approved for public use. Smart contracts are now simpler, but as they become more widespread and accepted, they will be able to handle more complex transactions. They will also promote greater standardization of contracts. Similarly, people still find it difficult to accept that parties agreed upon in smart contracts are essentially transferring jurisdiction over certain aspects of a contractual obligation to a computerized protocol that is immutable. This is another important reason why smart contracts continue to lag behind in penetrating legal frameworks around the world. As we are in the early stages of adopting smart contracts, best practices for implementing such code continue to evolve.
However, the following checklist should help developers design effective smart contracts and support businesses that plan to use them. Smart contracts are the technology topic of the day and have the ability to disrupt the practice of traditional contracting. Szabo envisioned smart contracts as a way to «combine protocols with user interfaces to formalize and secure relationships between computer networks. The objectives and design principles of these systems derive from reliable and secure legal foundations, economic theories, and protocol theories. 2 More than twenty years later, Szabo`s vision is still the basis of a literature, although no agreement has yet been reached on a coherent and consistent meaning of smart contracts that accurately reflects their current and potential functionality. This is largely due to the advent of the blockchain network, which has made smart contracts what they are today.3 Yet most academics and practitioners would agree that «a smart contract is an automatable and enforceable agreement. Computer-automatable, although some parts require human intervention and control. 4 This definition sums up the nature of smart contracts, taking care not to offer anything beyond their existing capabilities.