12Smart Contracts
The regulatory changes that we have discussed in previous chapters have undoubtedly added considerable strain and complexity to the management of legal data. New technologies are emerging in order to reduce the issues created by large legacy contract portfolios where the legal data has not been considered adequately at the point the contracts are put in place. One technology in particular that is currently generating a lot of interest is smart contracts, invigorated by the advent of the blockchain. However, it must be acknowledged that both technologies are still nascent and there is a lack of standardisation (and therefore confusion and misunderstanding that plagues the two). This chapter explores smart contracts and the potential for them to address legal data in the banking context.
What is a Smart Contract?
At a very simple level, smart contracts are coded instructions which execute on the occurrence of an event. However, there is no clear and settled meaning of what is meant by a smart contract. Consequently, there is a lot of confusion. For the purposes of this book, we prefer to provide a timeline of the varying definitions to show how the thinking about smart contract technology has developed and how it might evolve in the future.
The first step in the timeline goes back to its conception in 1994. The idea of smart contracts was conceived by computer scientist and legal theorist Nick Szabo, defining it as ‘a set of promises, specified in digital ...