Smart Contracts – Self-Executing Contracts of the Future?

Abstract

The first thing many people think of when they hear the term ‘smart contract’ is a contract that is somehow transposed into computer code and runs without any human intervention. This misses the mark by a wide margin. Instead, smart contracts are better thought of as ‘conditional transactions’ because they refer to the logic written in code that has ‘if this, then that’ conditions. For example, it can easily be programmed in a smart contract that ‘if on 1 October 2021, Bank A does not receive EUR 1,000 from John, then transfer EUR 1,000 from John’s account to Bank A’s account.’ Smart contracts have the potential to significantly improve efficiency, as contracts can be performed instantly and without the services of third parties. As illustrated in the US Chamber of Digital Commerce’s report, they have a number of potential applications from the automatic payment of dividends to property transfers and automation of insurance claims.

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