Smart Contracts

  • December 01, 2018
  • David J. Bilinsky

The digital revolution continues…

♫ This is the end
Beautiful friend
This is the end...

– Music and Lyrics by J. Morrison, J. P. Densmore,
R. D Manzarek, R. A Krieger, recorded by The Doors

David Bilinsky

Well, if ROSS Intelligence, automated contract review, Artificial Intelligence (“AI”) legal research, artificial litigation strategy analysis, automated document review, machine learning and similar approaches were not enough, now there is a new technology threatening to bring about the end of lawyers: Smart Contracts.

While the technologies of AI contract review or automated legal research seek to replicate, albeit much faster, the tasks that lawyers already do, Smart Contracts are different. Built upon the Blockchain technology, Smart Contracts don’t resemble anything presently produced by a lawyer.

So what exactly is a Smart Contract? It is a bit of computer code that is stored, supervised and managed as part of the Blockchain. It is also described as a self-executing contract, in the sense that it is able to enforce the performance of its terms with no further overhead, cost or supervision. How exactly then does this work? In order to delve deeper into Smart Contracts a bit of an explanation of the Blockchain is in order. The Blockchain is an ever-increasing list of computer records linked together by cryptography. Each Block or node in the chain consists of a cryptographic hash of the prior record in the chain, a timestamp and data about the transaction. Because of the nature of the cryptography, no node in the chain can be altered without altering all prior blocks. This ensures that no data in the Blockchain can be changed. When the chain’s nodes represent contracts, the contracts cannot be altered. Furthermore, the node also carries within it the rules and penalties for non-compliance.

An example is in order. Suppose you rent a (smart!) car under a Smart Contract. In order to start the contract, you lodge a payment (in Bitcoin) and the Blockchain provides you with a “key” to drive the car. But the contract requires you to make monthly payments to keep using the car. Miss a payment and the Smart Contract electronically renders your car “key” unusable. No court action or seizing the car is required – the computer code or contract simply makes the product or service unusable if the terms of the contract are breached.

Smart Contracts hit the legal profession with a 1-2 punch. One punch is aimed at solicitors who would otherwise draw traditional contracts unless they become familiar with the creation of computerized contracts. The second punch lands on litigators who would otherwise take action to enforce the breach of a traditional contract. The Smart Contract potentially alters society’s view of and need for lawyers. This is the end beautiful friend – the end.


The views expressed herein are strictly those of David Bilinsky and do not reflect the opinions of the Law Society of British Columbia, CBABC, or their respective members. 

David J. Bilinsky is the Practice Management Advisor for the Law Society of British Columbia
(presently on leave).
Email: daveb@thoughtfullaw.com
Blog: thoughtfullaw.com