Smart Contracts are self-executing contracts. Contracts execute themselves and transactions happen automatically when both parties meet the conditions specified as part of a transaction. The executed contract then adds on to the blockchain as a transaction. Smart Contracts are indispensable to blockchain and vice-versa, as the execution happens because and through the blockchain technology. It is the digital identity that enables smart contracts as a technology.
How Smart Contracts Work
If Bob had a car, which he wanted to sell, the smart contract system would try to match and verify, if anyone met the conditions laid out by Bob. If the system found that Alice met the conditions of Bob and that of Bob with Alice, the system would execute the contract automatically. It would deduct the amount of money Alice had in her account. The corresponding amount would be added to Bob’s account.
Transfer of Ownership via Smart Contracts on Blockchain
The system would also execute and transfer the ownership and registration of the car to Alice. In the future, smart systems may also transfer a sort of digital key of the car to Alice from Bob. Similarly, if Ram were to sell Rahim a house, the same process would unfold. Be it a home or car, sale of goods and services can happen on their own through smart contracts. The contracts can range from divorce to property transfers, will and settlement.
Smart Contracts in the Legal Sector
One of the key areas Smart Contracts would be widely useful is in the legal sector. This technology will eliminate the need for cumbersome paperwork that usually associates with the legal profession. The sector always uses a lot of paper and hard copies of documents. Since most people will get digital identities and perform digital transactions, the legal sector will also go digital.
Digital Identity and Digital Transactions
Advocates, lawyers, solicitors, and attorneys will have to make use of digital documents, identity and all types of digital paperwork. Smart Assets and digital identity will lead to most of the legal work happen through Smart Contracts. While blockchain enables Smart Contracts, the associated functions as digital identity and smart assets will reinforce the former.
Blockchain will give rise to digital identity, digital assets, and digitized transactions. Legal aspects are intrinsic to these processes and they will go hand in hand, as they develop. Since these aspects involve identity and transaction, they will happen smooth digitally, without any disputes and issues. Smart Contracts will ease the negotiation of terms, as they are self-executing, smart and automatic. Hence, Smart Contracts are set to become an important feature of the blockchain technology.