The state of Arizona gave yesterday equal standing to smart contracts, on par with paper contracts. It’s the first legal decision on such matter, making it highly persuasive in all western courts, suggesting that other jurisdictions will follow the same approach.
As such, ethereum’s technology has acquired legal certainty, opening the way for smart contracts to be widely used in a business setting while also making the technology somewhat interesting for lawyers as the more simple applications may, in a decade or so, be fully automated.
That is because the current legal system is antiquated at best. So many trees are used for piles and piles of paper to be shuffled around, when nowadays everyone has a computer. Moreover, while certain aspects of law are very complicated requiring lengthy analysis of facts and precedents, some aspects are routine, mechanical, and very boring.
To increase efficiency, lawyers use legal templates, but they hardly need a human save for to allocate the template and complete what is very much a form. For contracts specifically, save for name changes, nothing else really needs to be done in some cases.
This opens huge opportunities in the wider field of computing, but law is a highly restricted and regulated process to the point of stifling. There are some incredibly good reasons for that, but extending these restrictions to computer software is completely silly. The specific restriction being the provision of legal advice in the United States which some cases indicate extents to a company using algorithms to automatically find templates and offer them to clients.
The decision of the state of Arizona might make that sort of discussion mute because it allows for the updating of static paper into dynamic code. The paper templates that lawyers use can now be upgraded to code templates.
Much of it will probably or hopefully be open sourced, no different than many projects one can currently download, such as Hacker News clones one can, with no modification if they please, easily incorporate into their website.
Some will probably be proprietary, like high end templates are currently, but the point is eventually a certain body of common code based contract template assets will develop which will allow anyone to simply download and thus perform a function.
What such function may be only imagination can constrain. A simple one may be a goods sale. I will send you a cargo full of iPhones for x eth which is to be automatically released once the tracking GPS says the cargo has been delivered.
Although this is a fairly simple contractual exchange, many things can go wrong. For example, what if the code malfunctions and the eth is not automatically released, or it’s hacked, or the iPhones cargo is actually a cargo full of literal rubbish, and so on.
Here we find a common mistake in current thinking. Smart contracts do not replace fluid thought. They do not replace the intellectual ability of humans to consider all sorts of nuances, engage in balancing, trade-offs etc. They do not extend to events where things go wrong.
What smart contracts do can be very limited, but what they do within those limits does considerably increase efficiency and can potentially automate many admin like positions in law offices across the world.
They do so better when no human action is required at all save for the initial entering into the smart contract. One example is Numerai. A complex eth based user driven hedge fund. It has algorithms and algorithms underneath which analyses stock pics, how they have performed, then rewards those who made the most accurate prediction with a token. It could be eth directly or, once the dollar is converted to codable money which it most probably will eventually, it could be dollars itself.
To a lawyer, at first, this isn’t very interesting. It sort of has nothing to do with contractual templates nor, might they say, does it have anything to do with what they do day to day. However, if we zoom in slightly and consider Numerai as a traditional company, a lot here has been automated.
Firstly, there are no employment contracts although for profit work is being done. There are no paper wage agreements, no protection for unfair dismissal, etc. Had this been a traditional company, a HR department would be required, accountants, lawyers to comply with all sorts of regulations, supervisors, managers, etc.
All of that is replaced with developers. This is just the beginning. When thinking about this technology it is easy to consider that it doesn’t actually automate everything while ignoring what it actually does automate. Moreover, when we combine codable money as well as smart contracts with algorithms and other computer functions, or in physical space we combine it with wireless technology, sensors, etc, what does become automated considerably expands.
Computers will not become humans, but like TV expanded our vision while phones extended our hearing, smart contracts, blockchain technology, algorithms, codable money, are now extending our intellectual abilities.
That is, we write down our liquid thinking not in static, immovable, paper, which only extends our memory, but in dynamic code which can act and do exactly what we order it to while also having memory. Thus freeing us from menial tasks.
It isn’t hard to imagine, for example, that the first decision on a simple legal case is that of a computer which can of course as of right be escalated to a judge. This would take significant time and manpower to develop in combination with experts considering all the precedents, statues, as well as the endless if this then that, but the savings in costs, time, and emotions, are likely to be far more considerable.
The law is, after all, code. It is far more fluid than maths, but in many ways it applies the same logic and many legal answers can be provided by an if, then, analysis. As such, since we are beginning to gain the capabilities, it is only a matter of time until the 21st century comes to one of the oldest profession.