Recently, Toshev & Boteva Law Firm published the pilot material of a series of informative articles intended to shed some light on one of the most intriguing applications of blockchain technology - the so-called "smart contracts."
After we described what smart contracts are and how they function today, we can already take a closer look at how they actually transform the legal services as we know them and design a next-generation customer experience.
Will smart contracts substitute traditional contracts?
The concept of "self-executing" smart contracts implies the lack of an intermediary or a third party in the legal process of contracting. This is a rather fundamental transformation that we are unlikely to observe in the foreseeable future, due to the number of "gaps" separating the legal system as we know it from the hypothetical legal system of the future. The most obvious of these gaps is the mere fact that traditional contracts consist of text, and smart contracts consist of coding.
The futuristic perspective for lawyers-programmers who produce smart contracts on the blockchain ledger is scary to some and inspiring to others. And although Toshev & Boteva Law Firm belongs to the second type, today we will discuss more about smart contracts as an addition to the traditional legal services, rather than as a revolutionary new legal approach.
What is the role of lawyers in the realm of smart contracts?
The process we observe at the moment is a smooth implementation of smart contracts as an addition to traditional contracts. This hybrid model enables parties to consolidate the legal certainty of a conventional contract with the effectiveness of a smart one. Generally speaking, smart contracts are an excellent way of automating some aspects of the written contract.
As a practical example of what we specified above, we can mention the platforms for funding startup companies such as Initial coin offering, or ICO. When using them, the companies offer digital tokens for sale to investors and the general public. Collecting virtual funds and distributing company tokens happens quick and easy with a smart contract, accompanied by a written agreement that states the rights and the risks of the buyers.
The role of the lawyer in this multilateral process is far from limited to writing down the conventional arrangements. The parties need legal advice on the legal compatibility of the smart contract with all of the currently existing regulations. In addition to the law on banks and securities, these may also be regulations concerning different industries such as data storage, real estate, retail & e-commerce, data storage, or other.
Unlike conventional contracts, smart contracts create an interactive environment for various legal affairs. This interactivity encourages people to grasp, cooperate, and support the process as it occurs. This is conceivable with the assistance of experienced lawyers to navigate this complex but effective process.
Innovative technologies, in the face of artificial intelligence and smart contracts, are often declared as potential competitors to the legal industry. The truth is that they produce what the Austrian economist Joseph Schumpeter once describes as "creative destruction." Namely, the abandonment of some outdated procedures and practices to implement new, more sophisticated, and more intelligent ones.
Toshev & Boteva Law Firm is a pro-active participant in the digital transformation of the legal services. As the initiator of several processes related to the application of blockchain technology, we are always eager to provide further guidance on the applicability of smart contracts in your specific case.
Georgi Toshev is a lawyer and Managing Partner at Toshev & Boteva Law Office, leading a dedicated team of lawyers who invest time, resources, and efforts in exploring blockchain technology and defining its legal status as a key technology of the future. Because the world does not change all by itself. We are the ones changing it. Have an idea? Brainstorm with us. https://www.toshevboteva.
Have an idea! Brainstorm with us.