Technology is progressing in the legal field, with a focus on computer contracts, also known as smart contracts, leading the way.
Smart contracts serve as a universal language that enables machines to understand and process contract terms automatically and accurately.
Law firms will experience reduced costs for legal transactions and have new opportunities to improve contract creation.
Blockchain has now become more established, allowing for a closer look at how technology will lead the legal sector through a significant transformation involving smart contracts. Discover more about this subject in the following article!
Transforming legislation into smart contracts poses a significant challenge.
A standard contract involves an agreement between multiple parties regarding a future obligation, such as Alice paying Roberto for renting her home. In contrast, a smart contract utilizes a computer code to assess and enforce the specified conditions.
If Alice agrees to pay Bob for renting the property but doesn’t fulfill the agreement, the execution can proceed without allowing either party to withdraw.
A key aspect of a smart contract is its dependable execution, eliminating the need to rely on third parties to fulfill specified conditions. Instead of depending on another party to uphold their end of the agreement, a smart contract autonomously enforces the agreed-upon terms efficiently and objectively.
In the coming years, there will be significant advancements in the elements and processes of smart contracts, but reaching this level of development will require considerable effort.
Making computers understand languages like Portuguese and English is a complex challenge that requires rethinking how contracts are drafted to transform them into computational contracts.
The process involves establishing the domain of an ontology, defining the initial terms and concepts used to describe legal discourse and the relationships between different types of knowledge in legal reasoning.
It seems straightforward, doesn’t it? I spotted an error.
Other advanced technologies in addition to blockchain, like artificial intelligence, will play a vital role in transforming contract language into smart contracts.
Practically implementing a smart contract.
The insurance industry has effectively utilized smart contracts, thanks to advancements in blockchain technology and growing global demand for insurance products, leading to the rise of parametric insurance.
The payment of insurance claims currently relies heavily on an assessor’s subjective evaluation of damages and losses. Parametric insurance offers a more objective and data-driven method for processing insurance payments.
Claims payments in a type model are determined by the happening of a specific event and a pre-established payment if the event occurs.
The idea of parametric insurance had been around since the late 1990s, but it only gained traction and attracted consumer attention when a reliable infrastructure for swiftly and securely handling contracts became available.
The situation is evolving with the introduction of blockchain and smart contracts technology.
Smart contracts and what lies ahead
Contracts in the near future will become more intricate, allowing users to incorporate external data and self-execute, while also witnessing a rise in decentralized elements utilized by fintechs and insurtechs.
It is crucial to establish a fair and inclusive legal environment using advanced and impartial technologies. Embracing critical thinking, questioning conventional standards, and leveraging technology can enhance access to justice and improve legal services for everyone.
Read the white paper “Constructing the future of Blockchain through the lens of Law” to learn more about blockchain and its significance in the legal realm.
