- Smart contracts are a crossover between technology and law.
- In recent reports, a huge increase in smart contract adoption is seen.
- The surge in the adoption of these contracts poses a challenge to law practitioners.
Smart contracts are those codes that are written into a blockchain. These lines of code are executed when a certain condition is met. This is what is termed a smart contract. Basically, it will terminate and execute itself automatically based on the conditions that are mentioned at the time of initiation. These contracts are used when the parties that enter into a contract seek the same outcome and want the process to be entirely automated.
The crypto market is often mentioned with the term ‘smart contracts’ often. But the reality is that these contracts were first mentioned by Nick Szabo. One of the biggest cryptocurrencies, Ethereum Classic (ETC) works on the principles of smart contracts. The inclusion of these contracts in blockchain led to the birth of computerized scripts, decentralized business logic, or smart code.
Smart contracts, the USA and the world
The applications of smart contracts in the USA are relatively narrow and they are secluded to their admission as evidence in debates or for the recognition of their electronic form and signatures. This application of smart contracts has been called incomplete by many critics. Although, the Commodity Futures Trading Commission (CFTC) along with the Securities and Exchange Commission (SEC) has given these contracts some legal authority.
The CFTC mentioned that the smart contracts will be legally binding on the parties involved in the formation of the contract. But the results will be declared based on the situations at hand and after thorough investigation. Thus, it was declared that smart contracts will be following a legal framework and they are binding both the parties to comply with the terms.
Other countries across the world have somewhat accepted these contracts which include Russia and Italy. Considering the European Union, there are some concerns from the Union’s side which are yet to be bound by any regulatory action.
We can expect that in the near future, these contracts will be a primary tool in providing speedy justice to those who have been the victims of a breach in contracts. Smart contracts are beginning to challenge the way the entire law architecture of various nations works. Indeed, it has proved to have great potential.