Existing legal contracts are written with physical signatures needed on the original documents, which requires significant time, energy and finances to perform, all for a binding legal agreement. As we all are aware that manual processing of legal documentation is vulnerable to human error, blockchain holds a word to change this manual process into a digital process that is in smart contracts.
Smart contracts could probably be created and executed directly between the associated parties without the requirement of a lawyer. Making legal documentation more convenient and transparent, a smart contract is automatically performed to meet the requirements and the cost and friction of generating and securing legal agreement is reduced. Unlike the traditional agreement, there will be no need to secure the bundle of paper files. Smart contracts would trigger the rules to perform the legal agreement after the particularised conditions are made.
A smart contract can be defined as a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.
The best example to describe smart contracts is to compare the technology to a vending machine. Ordinarily, you would go to a lawyer or a notary, pay them, and wait while you get the document. With smart contracts, you simply drop a bitcoin into the vending machine (i.e. ledger), and your escrow, driver’s license, or whatever drops into your account. More so, smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations.