Blockchain technology has impacted the world in a very unique way. It all started with cryptocurriencies which is a unique technology that is still advancing. In fact, governments and financial institutions are researching the vast potential of this unique technology that expands far beyond cryptocurriencies. As I said before, cyberspace has created new innovations that have benefited the global society in both licit and illicit activities. However, it has also created new concepts that can benefit the legal environment in numerous ways.
Investopedia defines smart contracts as, Smart contracts are 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 permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible. (Investopedia, 2018)
Therefore, smart contracts removes the legal entity by allowing the end user to utilize the ledger with cryptocurrency. The end user can use this technology to define an agreement similar to a traditional contract without having to go to a lawyer. The decentralized ledger provides autonomy, trust, safety, savings, and speed. It’s the future. Barclays’ understood this and dedicated research and development to this technology (Barclays’ Corporate Banking) and implemented it into their firm for various transactions( barclayscorporate.com).
The legal Conundrum
With Blockchain smart contracts being perceived as the future should lawyers panic? No. This technology is like everything else that we humans create. It has its flaws. Since the system is decentralized who regulates the contracts? What if the code is wrong? How does the court system interpret these contracts and rules? Who writes the code, lawyers? What if the contracts are hacked? Aside from potential legal theories, what the users of smart contracts have to remember is that the code is the contract. With traditional contracts the law can only enforce what’s in the four corners of a contract. Theoretically, only what’s in the code could be enforced. Fundamentally, how would the court interpret smart contracts? Like all legal issues, the precise language and intent needs interpretation. For example, if the code is wrong or false, the court would have to determine the correct interpretation of the contract and the original intent of the code. Smart contracts have potential problems that have yet to be answered.
Nonetheless, law firms could truly benefit from researching this technology and jumping ahead of the curb. For example, a law firm could invest adequate time and resources to understand how to utilize, adapt, and integrate this blockchain technology. Law firms could use this technology to mitigate risk, make acquisitions, intellectual property,and record real estate transactions. Law firms could also merge traditional contracts into the blockchain with a backup physical copy to meet end user needs.