Are Smart Contracts The Next Step In The Evolution Of Law?
A Brief But Forensic Look At The Technology’s Capabilities
Ever since the invention of the wheel, the idea of progress has been synonymous with movement. Ask any inventor to explain their creation and they’ll likely reach for words and phrases that evoke adventure and exploration. Striving ahead. Pioneering. New horizons. With the wheel this is understandable, since its invention represented a seismic shift in the way society moved. But what about other inventions, ones that signify progress without moving, at least in a literal sense?
Take legal documents. First it was the handshake, a gentleman’s agreement that was only as good as the honesty and sincerity of the men involved. Then came the written contract, a static document signed by each party that outlined the particulars of that relationship. This contract was harder to break as it was usually held secure by a third party. The latest step in this evolution is the smart contract, and it is here that superlatives suggesting movement start to make sense.
What is a Smart Contract?
Simply put, a smart contract is a computer program that acts as a self-enforcing contract. Its foundation is usually built upon a statement that follows this sequence: “if (this happens) then (that else happens)”. When the conditions of the statement are met, the contract triggers certain actions, such as a payment or a transfer of digital assets.
While at first glance they may seem nothing more than written contracts dressed in digital suits, on closer examination they are much more than this. A simple (and popular) way to understand how is to imagine a smart contract as a vending machine. This analogy helps illustrate all the key characteristics of a smart contract.
Key characteristics of a Smart Contract
Distributed.
Imagine the same model of vending machine being placed in every train station in a city. In the blockchain world, the contract is replicated and distributed throughout the blockchain, which makes it decentralised.
Deterministic.
Now, imagine this vending machine is built to dispense cans of soft drink. It will perform this task and this task only. A smart contract shares the same singularity in its purpose.
Immutable.
In the real world, once the vending machine is built it cannot be altered. Smart contracts are the same. This characteristic is particularly important with regard to their security.
Autonomous.
Once this vending machine is placed at the train station, aside from needing the odd repair, it will operate without human assistance. This is also the case with smart contracts. Likewise, the contract will remain dormant until its conditions are met, just as the vending machine will remain dormant until someone inserts money into it.
Customisable.
While the vending machine cannot be altered once it’s in use, before its deployment it can be built to perform different functions. Smart contracts are no different as they can be coded to perform limitless duties.
Trustless.
In the train station it’s likely that many people will use the vending machine. To use the vending machine, though, you will not need to know (or trust) anyone else that is using the machine. In the blockchain world, this characteristic makes smart contracts simple to engage with.
Transparent.
With the vending machine, when you insert your money and select the soft drink you want, you’ll be able to watch the machine perform most of its functions, owing to the glass screen attached to the front. Because smart contracts are based on a public blockchain they are equally visible, which makes them more trustworthy than traditional contracts.
These characteristics show that in terms of progress and future potential smart contracts do warrant some embellishment when discussed. And while this kind of approach can sometimes elicit as much suspicion as praise, it usually comes from a genuine and sincere place, where the union of imagination and technology is seen as a relationship beneficial to all.
