Links In The Blockchain: Creating Smarter Contracts

In a 2016 World Economic Forum report, it was suggested smart contracts based on blockchain technology could potentially codify financial agreements in a shared platform and guarantee execution based on mutually agreed conditions. This would significantly reduce manual efforts required to support the execution of financial agreements and – in theory – accelerate business processes.

But there are also important technical and legal issues.

Broadly speaking, smart contracts are self-executing electronic instructions drafted in computer code. This allows a computer to read the contract, which in many instances, will self-execute the stipulations of an agreement when predetermined conditions are triggered. The parties to the contract typically sign the agreement using a cryptographic security code and deploy it to a distributed ledger, or blockchain. When conditions in the code are met, the program automatically triggers the required action.