Economic Force of Smart Contracts

Abstract

Contracts have emerged as one of the suitable areas where technology can be used to eliminate the human mediation perceived to be hindered by weaknesses. Smart contracts date back to the 1990’s, but its current underlying blockchain technology makes it a force that cannot be ignored economically. Proceeding beyond the transactional processing qualities of blockchain technology, different fields envision the technology to solve divergent human-related problems which minimize the effectiveness of operations. Considering existing literature on contracts, smart contracts, and blockchain technology, we discuss the economic forces behind smart contracts operation giving dedicated deliberation to identified potential challenges in existing literature. We observe that the term smart contract can be ambiguous given the legal requirements of what constitutes a contract and although there are possible challenges, smart contracts have greater overall economic value compared to traditional contracts. We anticipate further studies into the intermarriage between technology and law to understand the full technicalities of smart contracts.