Smart Contracts
– The future?
Tariva Thomas, Associate Solicitor at Wright Hassall, discusses the introduction
that payment for the production
of a consignment of goods will be
automatically triggered once that specic
requirement of the contract has been
met i.e. delivery at a certain depot, as
opposed to waiting for an invoice to be
generated at the end of the month and
then waiting a further 30- 90 days for
payment.
IS IT THE WAY FORWARD?
Yes, but there is a ‘but’. It is
certainly the way forward for
relatively simple contracts that
can be coded and executed
automatically once pre-conditions
have been met – eg, in
residential conveyancing where
completion monies can be
released as soon as contracts
are signed. Smart contracts
will save businesses globally
a signicant amount of time
and money, and will radically
change the way that they interact with
one another in the supply chain and
with their consumers. There will be
limited human interaction, which
will free up individuals and key
decision makers from dealing
with routine administration
and red tape, enabling
them to get on with the
day job as the smart
contract automatically
takes up the slack.
Furthermore,
smart contracts
eradicate the need
for trust within
We have all heard about
‘smart contracts’ for quite
some time. The tech
industry has been getting
very excited about the capabilities of this
software, however, is this anything new?
Is it the way forward? Or is it still a long
way off from having any real impact in
sectors beyond tech?
What is it? The phrase ‘smart
contracts’ was coined by a US scientist
(Nick Szabo) in 1994 – yes, 25 years
ago! A smart contract is not a contract
in the traditional sense. It is a selfexecuting
contract which requires little
or no human intervention to activate
or enforce performance. A widely used
example is a vending machine. However,
smart contracts today have an added
dimension – blockchain.
Blockchain is the word on everyone’s
lips at present: those who work with
it, those who want to work with it and
those who are praying that they won’t
have to! At a very basic level, blockchain
is a form of digital ledger technology
(DLT) and is stored across a network of
computers. Data is stored in blocks
and is then linked together
(hence blockchain).
Incorporating blockchain
into a smart contract
involves coding the
contract into data
blocks. The magic
then happens
due to the chain
of data that is
created. If a
transaction or an
of ‘Smart Contracts’ and analyses their impact
event has an impact on the contract, it
is automatically recorded and managed
by blockchain, so any outcomes can
occur automatically without human
interference.
For example, using a smart contract
in a manufacturing context will mean
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