The introduction of Blockchain technology has brought new ideas and solutions around the need to decentralize processes and offer more autonomy. Regarding the use of these tools, the smart contract emerged in law, which provides the ability to self-execute without third-party mediation, offering also immutability and distributed storage.
A contract is an agreement between two or more parties where the actions and competences of each of them are clearly defined. By accepting the established rules, everyone is responsible for their actions and is aware of the consequences that must be assumed in case of breaking the rules.
Traditionally valid contracts legally require, in addition to legal advice, the services of a notary, which represents more cost in time and resources. On the other hand, smart contracts can be executed and enforced by themselves, without the need for intermediaries to validate them. In this way they avoid the ambiguities of interpretation because they are not subject to the written language with which they are drafted, by legal professionals, traditional contracts. In them, the information is encoded in computer codes written with a programming language.
The autonomy for the validity of smart contracts is precisely linked to its nature, since it is a code that is visible to all those interested and that can not be modified by employing blockchain technology.
The attribute of being distributed in computers prevents it from being guarded or owned by a single company, which would result in the elimination of bureaucratic obstacles, reduction of economic costs and time in the process. In order for smart contracts to be executed in everyday life, there must be programmable transactions and a financial system that recognizes them as legal. Smart contracts began to be used through Bitcoin digital currency, to generate agreements between people interested in obtaining it.
In short, intelligent contracts are defined as a set of immutable codes programmed and distributed in thousands of nodes so that they cannot alter their content. In that sense, it`s a program that will always act in the same way, allowing you to store information without it being modified. When a condition is programmed into the system, the intelligent contract automatically executes the corresponding clause. They can be very safe, as long as they are not created with programming errors, because their security can be violated there and failures can be generated.
Despite the great benefits and resources that technology makes available to optimize processes, legal advice and knowledge of legal professionals is a step that should not be skipped, because to achieve the correct coding of these contracts is necessary to have the expertise of a lawyer.
Some experts in the area have defined some of the uses that can be given to smart contracts, these are:
- Liquidation of operations.
- Payments of coupons or bonds.
- Micro insurance
- Security deposit in the registry of the property.
- Automation of payments and donations.