Smart Contracts: Legal Agreements For The Blockchain
Bitcoin, blockchain, and smart contracts - these are terms that one hears with increasing frequency in the banking and financial press. The blockchain technology underlying the digital currency Bitcoin is widely touted to solve a number of seemingly intractable and longstanding problems, such as reducing transaction costs, speeding up processing time, expanding financial services, and empowering consumers. 1 Smart contracts are envisioned as potentially eliminating the need for extrinsic enforcement of legal agreements, thereby making business transactions cheaper, quicker, and more efficient. 2 The World Economic Forum has speculated that smart contracts utilizing blockchain technology could codify financial agreements in a shared platform and guarantee execution. 3 This would significantly reduce the manual effort required to support the execution of financial agreements and thereby accelerate business processes. 4 Other commentators have suggested that if blockchain will allow financial transactions without banks, smart contracts may lead to contracts that no longer need courts to enforce them.