By Kamran Gasimov – Today, signing electronic contracts is a big risk and a mechanism commonly user by scammers. Without an adequate security system, electronic contracts can easily be falsified. However, smart contracts that use blockchain technology are immune to any cyber attack.
Electronic contracts are protocols that are automatically executed after: a certain period of time, the approval of the parties involved, certain determined actions, the reception of any deliverable and any other triggering action. Data from intelligent contracts is encrypted, therefore it’s almost impossible to be modified. The verification of the conditions of the contract is automatic, eliminating the presence of a human notary. If it’s necessary the terms of the contract to be verified by an attorney or other qualified professional, this can be done through a video conference.
Smart contracts minimize human costs associated with legal advice and arbitration. In case of default, the associated parties don’t need to call a lawyer to resolve the dispute. The intelligent contract executes the corresponding protocols for each case. In many legal disputes, judges always tend to favor one of the parties. However, computers are always impartial.
Smart contracts can be implemented in the banking system for buying and selling goods and services. Any banking activity that requires the use of paper, such as loan and credit applications, can also be executed through an intelligent contract.
Banking institutions fear implementing these intelligent contracts in their usual operations, due to the lack of flexibility they offer. In real world, the conditions of a contract may change after prior agreement of the parties involved. However, to do this with an intelligent contract, the coding would have to be modified, which is impossible.
Another big problem with smart contracts is the impossibility of reversing the protocols that would be executed if one of the parties commits fraud. Once the contract has begun to be executed, the parties involved must take care of the infractions. The codification of the contract doesn’t forgive human errors.
The third problem that involves the implementation of smart contracts is the adaptation of financial authorities to these new technologies. At the beginning, for many legal institutions it will be difficult to understand the operation of blockchains, which will require an extra expense of time and money in training. However, the effort will be worth it.
We can’t forget that intelligent contracts will take away job opportunities from many lawyers dedicated to legal arbitration. It’s obvious that smart contracts offer many advantages; however, it’s possible that the current legal and banking system isn’t prepared for changes, which makes us think that the implementation of blockchain technologies in this field is further away than what we imagine.
However, for now, many people who need to manage their business and legal activities anonymously, can always use smart contracts to escape the usual expenses of legal advice and arbitration. From employment contracts to purchase and sale of property via the Internet, the possible situations in which intelligent contracts can be applicable are innumerable.
Kamran Gasimov is an adviser to the Chairman of the Board and Director of Creation of Bank Products and Development of Sales Channels at MuganBank OJSC. He also is a Co-Founder and Development Director of Accounting and Tax Resources and the Founder and Director of Richmond Group.