Blockchain technology is laying the foundation for the automation of more and more hitherto human-driven processes. One key element is “smart contracts” – computer protocols that are not only a technical manifestation of contracts, but actually perform them autonomously. While it will continue to be up to natural and legal persons to negotiate the subject matter of their transactions, smart contracts can completely take over the performance of said transactions, greatly simplifying in this way the synchronisation of the exchange of services. Smart contracts can greatly ease the load on, and in some cases even replace, traditional intermediaries such as banks and stock exchanges. The contracting parties benefit ultimately from the significant reduction in transaction costs.
Smart contracts are especially useful for bulk transactions – one single smart contract, for instance, can perform the task of administering a large number of customer relations. In decentralised networks smart contracts also allow direct business relationships between parties unknown to each other.
Our legal services around smart contracts begin with support when it comes to ‘converting’ contractual arrangements into smart contracts. On behalf of our clients we explore the data protection requirements, the liability risks and the possibilities available to prepare for the contingency of flawed smart contracts, and provide guidance on the matters of risk evaluation and compliance for the use of decentralised platforms. We also assess smart contracts that are intended to be used to process a large volume of transactions from the perspective of the legislation governing general terms and conditions of business. We vet the reliability of individual parties involved and ascertain who is legally answerable for the smart contract in the case of decentralised applications.