Everyone who has at least some basic idea of what blockchain and cryptocurrencies are is bound to have heard about smart contracts. Given the increasing number of entrepreneurs seeking to register a cryptocurrency company, concluding smart contracts for ICOs is now taking centerstage. Coined by the scientist & programmer Nick Szabo in 1994, the term ‘smart contracts’ can be defined as follows: a self-fulfilling digital contract that doesn’t require human intervention. Vending machines are often referred to as an example of the use of smart contracts - as soon as the money is deposited into the machine, the goods are made available.
Speaking in real terms, smart contracts work as follows: a regular contract is converted to a digital code and then saved on several computers that are a part of the blockchain.
If you are planning on starting a cryptocurrency business in the US or ICO company registration in America, you should keep in mind that blockchain is a kind of a digital registry distributed between thousands of computers. Such a registry is open and can be easily accessed, but its entries cannot be changed. Therefore, information cannot be falsified & is reliably protected.
Any transactions that affect the smart contract affect the entire blockchain. There are hundreds of examples of such transactions, with the the most notable being the ones involving Bitcoin and Ethereum.
Technologically speaking, smart contracts are a big step forward; however, they still cannot completely replace humans. And here's why:
- Blockchain still cannot conclude complex legal agreements, and it is unlikely that it’ll ever be able to do so any time soon. Strictly speaking, there will always be a need for legal assistance with concluding contracts.
- Smart contracts can reduce time spent on drafting & executing simple contracts. However, more complex contracts require human intervention. Therefore, there will always be a need for a lawyer capable of drawing up a contract.
- Since blockchain is a distributed ledger, there is no single owner here. Therefore, no one can tamper with the code or the contract itself. All transactions are recorded & controlled by thousands of computers connected to a single network. In addition, transactions are visible to everyone who has access to the blockchain, which makes them completely transparent. However, blockchain, like any other technology, is error prone, and it may take considerable time to fix the mistakes.
- At some point, using smart contracts can become commonplace, but it is unlikely that lawyers will convert them into a programming code. There is no need for them to understand all the technicalities involved, just like a regular computer user does not need to know how it works. Therefore, lawyers & law firms will have to hire programmers to do all the coding for them.
- Even if smart contracts become dominant if the future, regular contracts will not disappear, & legal guidance will always be required to draft them. However, their drafting will go hand in hand with the development of smart contracts. The latter, in their turn, will make it possible to save time, open up new opportunities for clients & foster positive changes in the market.
Smart contracts are expected to have a fundamental impact on the conclusion of legal agreements are concluded in the future. And while many people will be idly watching the changes taking place, others will be doing their best to take advantage of the available opportunities. The good news is that blockchain technology will help humans concentrate on more complex tasks & increase their overall efficiency.
Still have questions regarding the subject of this article? IQ Decision UK will be happy to provide you with a comprehensive consultation on blockchain technology & smart contracts. Our legal experts can also provide legal advice on launching investment projects, registration of cryptoasset companies, launching of ICOs and a lot more.