Commercial viability of Automated Smart Contracts

About the author:

The author is an Advocate based out of Delhi and graduated from NLSIU, Bangalore in 2021.

Smart Contracting is perhaps, one of the most commercially sought after application of blockchain infrastructure. Automated Smart Contracts are self-executing agreements, which remove human agency and ergo, error from the process of execution of contracts. In simpler terms, a smart contract is a computer code resting on blockchain infrastructure, containing a set of rules. The parties to the contract pre-program when & how the contract is to be executed and the computer code, upon relevant stimuli, automatically executes this command. For example, in a smart contract for sale of real estate, the code would automatically deduct money from the buyers’ account once the seller’s logged the title documents.

Smart Contracts promise efficiency, mandate compliance, and ensure transparency. These promises are based on the beauty of the underlying blockchain infrastructure. Thus, before delving into the commercial viability of smart contracting, it is imperative to decode blockchain.

Decoding Blockchain

Any blockchain is composed of multiple, individual nodes with each node simultaneously acting as a command-executor and a decentralized ledger. Every ledger is a discrete unit. Any movement of capital/ data on the blockchain is simultaneously reflected in all the discrete ledgers. This decentralization is what makes blockchain unique and its data authentic. This is not to say that the data on the blockchain cannot be altered – rather, any alteration is reflected in all ledgers with a time-stamp and meta-data, ensuring transparency and any alteration requires validation by multiple nodes on the blockchain, acting as a