How smart are smart contracts?
As we delve deeper into the Web3 -or next evolution of the Internet- , we see the possibilities that blockchain technology opens up for us as they transform industries in their many verticals, as well as the general way of us doing business, interacting with each other and managing our finances.
The innovation ‘smart contracts’ coined by Nick Szabo, refers to self executing pieces of code: self-executing agreements written in code that automatically execute predefined conditions when specific criteria are met, enabling secure and transparent transactions without the need for intermediaries.
These agreements automatically fulfill conditions, reducing errors and ensuring transparency and security through automation, autonomy, transparency, and trust within blockchain-based systems.
It is clear that the Internet of Value has the potential of leveraging blockchain technology to make the legal system less wasteful, more accessible and efficient.
However, some argue that morality cannot be coded.
Smart contracts don’t offer a substitute for legal contracts as they can fail to capture the complexity and nuance of real world situations. Accounting for moral values, human discretion and unforeseen circumstances remains to be solved — as these may affect the contract performance. As an example: a smart contract can penalise a driver for running a red light, but does not consider the context of a medical emergency justifying that violation.
Therefore smart contracts have to be complemented by legal contracts providing remedies and disputing resolution mechanisms that are unique to specific situations -conflicts and exceptions-.
One of the innovative things about a smart contract is programming business logic into our business protocols and applications — and then have those applications abide by the law.
The debate is on, but it is clear that smart contracts are smart in that they have the potential of transforming and levelling the playfield. They help reducing costs, promote equality in granting easier legal access, reducing wasteful intermediaries and improving efficiency of the very system.
The focus now should be placed on researching how smart contracts, as innovations in business can be implemented and adapted in companies’ systems across various industries, enhancing transparency, security and trust.
Blockchain technology emerges as a solution to trust based problems within society, affecting the way we do business, communicate with each other and manage our finances. And it is here to stay.
