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Smart contracts and efficient contracting

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The idea of shifting transactions into the digital space dates back to the beginnings of computer science.

The development of blockchain technology has uncovered new possibilities for regulating contractual relationships. Parties to a contract now have at their disposal a new digital environment where contracts may be concluded, performed and enforced in a more efficient and smarter manner, and where middlemen become redundant. What are smart contracts? What benefits will they bring? What challenges do they raise and what constraints would they impose on the parties?

Smart contracts: what are they?

The term 'smart contract' was allegedly coined in the 1990s by Nick Szabo, an American computer scientist and cryptographer (suspected by some to be the creator of Bitcoin), who described smart contract as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises.” This definition still seems to be accurate. Smart contracts operate electronically and contain algorithms for automated performance of the contract (and are therefore irrevocable). In this manner, smart contracts combine the conclusion of the contract with its enforcement. Recourse to the courts is no longer needed as the contract is “self-executing”. This increases the equality of the parties and mitigates the risk that the stronger party will attempt to take advantage of the weaker party...

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