Hire Leading Smart Contract Law Practice
If you require any legal smart contracts assistance, such as your compliance obligations when transacting in smart contracts, find the most experienced smart contract lawyer. Smart contracts make many things possible. Businesses stand to enjoy numerous benefits given the efficiencies and safety benefits of smart contract automation.
However, the technology behind smart contracts (blockchain) is shrouded in mystery and regulation inconsistencies. This is precisely why federal agencies are exceedingly suspicious of entities and individuals that use blockchain technology.
Don't wait to be subjected to federal investigations. Before you begin using smart contracts, make sure you seek counsel from an attorney knowledgeable about smart contracts and related areas like cryptocurrencies and blockchain.
At Blockchain Lawyer, we have experts in blockchain ready to help you with any compliance issues linked to using blockchain. Contact us.
Introduction to Smart Contracts
Smart contracts are agreements written in code before being transferred to the blockchain. The contracts contain predefined rules that are already agreed upon by parties to the contract before being written using computer code.
The contracts have notable features. For instance, smart contracts are self-executing, which means once the terms are agreed upon, written in code, and transferred to the blockchain, they execute automatically when the predefined event occurs/fails to occur. This self-executing nature feature eliminates third parties like banks and other intermediaries involved in typical transactions.
Smart contracts offer other notable benefits, such as allowing multiple applications simultaneously. They can facilitate property exchange, NFTs, cryptocurrency, and just about anything of value. The contracts are stored on a blockchain, which means they can't be altered.
How Smart Contracts Work: The Process
Step 1: The process starts with all parties negotiating and agreeing on the contract terms.
Step 2: Once agreed, the terms are written in code.
Step 3: The computer code is then moved to the blockchain, where it stays inactive until the predefined trigger event occurs/fails to occur.
Step 4: Execution happens automatically according to the initial agreement. There's no need for a third party to approve or add anything.
Step 5: Once the contract is executed, the record is kept on the blockchain.
What Is the Main Difference between Smart Contracts and Traditional Contracts?
Smart contracts differ from traditional contracts in several ways. First and foremost, the contracts can't be altered once transferred into code and kept ready for execution in the blockchain. What's more, the contract is executed automatically with no need for third parties like banks. Smart contracts save time and money that is otherwise consumed by third parties in traditional contracts.
How Are Smart Contracts Used?
You can use a smart contract for many purposes across many industries. However, some industries are more suited than others for smart contracts. Notable examples of such industries include the financial sector, healthcare, supply chain management, and government-related industries.
In the finance sector, smart contracts are useful for entities like banks and audit firms. Companies operating in this sector operate in high-risk environments. They deal with sensitive data such as financial records and customer data. Smart contracts can be used to store such information and execute payment securely.
In the healthcare industry, smart contracts can also be used to store confidential information like patient health records. Smart contracts for the healthcare industry make it possible to store patient records securely. Blockchain tech can be designed to give specific individuals access to certain patient information safeguarding confidentiality in the process.
In supply chain management, where multiple parties (manufacturers, retailers, distributors, and buyers) rely heavily on paper records and systems to handle multiple functions and processes, smart contracts can be used to reduce fraud common with paperwork and systems that can be altered. A typical application would be automating payments, automatic execution of tasks, and transparency in recordkeeping.
In government-related industries, smart contracts can be used to handle government procurement, contracting, and other sensitive tasks. Information in government-related entities can also be stored safely using smart contracts.
Smart Contract Benefits
Some of the core benefits entities or individuals stand to enjoy from using smart contracts include:
- Accurate recordkeeping
- Automatic execution of contracts
- No third parties in contracting, which saves cost and reduces manipulation risks
- No risk of document tampering
- No risk of transaction tampering
- Safe storage for original files
- Automatic backup and storage
- Increased trust
- Improved data security due to cryptography
- Zero risk of human judgment errors
- Improved operational transparency and efficiency
Smart Contract Risks
Like anything else, smart contracts come with risks. The most notable include:
- Smart contracts are immutable/impossible to change, which can be a problem if all parties want changes made.
- Since smart contracts can't be changed once coded and moved to the blockchain, errors made during coding are permanent.
- There are always risks like cyber-attacks since they utilize technology.
- Creating smart contracts is a complex process requiring experts.
- Smart contracts attract federal regulators since they fall under new tech susceptible to compliance issues and fraudsters.
Professional Help with Smart Contracts
Smart contracts are incredibly beneficial, as discussed above. However, they also come with risks. As their popularity soars, federal agencies are expected to increase their attention to entities and individuals using them to do business.
Hire smart contracts attorneys by your side to avoid federal investigation and charges linked to compliance issues or related technologies like blockchain.
Blockchain Lawyer has blockchain lawyers dedicated to resolving smart contract compliance and other related issues. We can offer strategic recommendations to reduce federal investigation risks.
Don't wait for the IRS, SEC, and other agencies to investigate your company for using smart contracts or other blockchain applications. Contact us now to get advice so you're prepared in advance.