Last week in New York City, I went to a conference about blockchain and smart contracts. What is interesting is that this event was held at a law firm that was dedicated to adopting the technologies of blockchain and smart contracts to solve novel legal questions that present new challenges and possibilities. These smart contracts, or self-executing contracts, are contracts that are converted to computer code, and stored and replicated on a supervised network of computers that run blockchain. Smart contracts help us exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middle man. Smart contracts also, automatically define the rules and penalties around an agreement in the same way that a traditional contract would.
What’s extremely exciting are the several uses for this type of technology. One of its biggest uses is for government. For example, even though we have members of our government who vouch that the possibility of our voting system being rigged is low, smart contracts would basically completely eradicate any possibility of that happening. Ledger-protected votes would need an excessive amount of computing power to decode, and the likelihood of anyone having that type of computing power is slim to none. Another benefit of smart contracts is that they can stimulate low voter turnout. One of the major factors stifling voter turnout is the long and annoying process of lining up, showing your identity, and completing forms. But with smart contracts, voting can be transferred online, thus increasing voter turnout.
Supply chains can also benefit from smart contracts. As Jeff Garzik said, smart contracts operate on the premise of if-then sequences so “UPS can execute contracts that say, ‘If I receive cash on delivery at this location in a developing, emerging market, then this other [product], many, many links up the supply chain, will trigger a supplier creating a new item since the existing item was just delivered in that developing market.”’ Often suppliers are hindered by paper-based systems that are clumsy and must go through several channels for approval. The blockchain prevents any exposure to loss and fraud by providing a secure, accessible digital version to all of the necessary parties and thus automates tasks and payments.
Smart contracts give us a lot of added benefits. They include autonomy, trust, backup, safety, speed, savings, and accuracy. The fact that we as individuals are the one’s making the agreement, there’s no need to rely on a broker, lawyer, or any other type of intermediary. This eliminates the danger of being manipulated by a third party as this is often an issue whether someone knows if it is happening or not. Not to mention that all documents are encrypted on a shared ledger so there is no way for someone to say that they lost a valuable document of yours as documents are duplicated many times over.
Now even though smart contracts are incredibly useful, they are not without fault. For example, what if bugs get in the code? And how should governments regulate such contracts? Or how should governments tax these smart contract transactions? Experts are trying to unravel how exactly to avoid these issues as they are some of the primary reasons that potential adopters are hesitant about signing on. As these potential issues get unraveled, more and more leaders in some of our biggest industries will adopt smart contracts, and this will alter aspects of our society at a significant magnitude. These are exciting times, and with due time we will see more conversations about how smart contracts will affect the everyday consumer’s life.