Authors: Tim O’Callaghan
Smart contracts have been dubbed the technology which will bring an end to the legal profession as we know it. This insight discusses what we can expect from smart contracts and why this technology probably won’t lead to the demise of the legal profession.
“The first thing we do, let’s kill all the lawyers“.1
For the last few years, Smart Contracts have been portrayed as spelling the end of the legal profession, the death of lawyers, and the commencement of a whole new age in trusted contractual relations. In 2016, the Australian Financial Review reported that commercial lawyers were closely watching the arrival of Ethereum (a blockchain-based computing platform which features smart contract functionality) given “the potential for smart contracts in the future to disintermediate their highly lucrative blockchain ‘smart contracts’ to disrupt lawyers role in drafting and exchanging paper contracts.”
The term “Smart Contracts” was first coined by scientist and cryptographer, Nick Szabo, in 1994.
Nick Szabo probably didn’t envisage that, 20 years later, the concept of smart contracts would still be causing unnecessary worry for lawyers, or for those who would like to see the end of lawyers, causing them unreasonable optimism.
Smart Contracts are best defined as:
“Computer code that, upon the occurrence of a specified condition or conditions, is capable of running automatically according to prespecified functions. The code can be stored and processed on a distributed ledger and would write any resulting change into the distributed ledger.”2
Put simply, a smart contract, is an agreement which can self execute certain elements of the agreement itself, such as automating payments which are required to be paid under the agreement. So really, there isn’t anything that smart about smart contracts.
Whether or not they are considered “smart”, they have never been considered “contracts”.
