Smart contracts could plug a leak worth tens of millions of pounds from the revenues of UK companies caused by paper-based and manual contracting, an event held yesterday to launch a major research report heard.
The Contracts, just smarter seminar featured Sir Geoffrey Vos, Master of the Rolls giving the keynote address.
Introducing the event, Jenifer Swallow, director of Lawtech UK, which published the Smarter Contracts report, pointed out that 9% of all revenue from international commerce was estimated as “leakage from the current paradigm from paper-based and manual methods of contracting”.
She asked: “Which business would not want a 9% uplift on revenue?… And that is just one element of it. That’s before we’ve even started to look at the efficiency benefits.”
She said a “paradigm shift” was happening, but that there was a “lag between what is out there in terms of what business is doing in respect of the contracting process and what they want” from the legal community.
Sir Geoffrey said the report aimed to show how smart contracts and blockchain technology was actually being used and to “dispel the great myth that blockchain is a fringe technology used only by those wanting to risk their livelihoods or possibly make their fortunes on volatile cryptoassets like bitcoin”.
He added it would become “ubiquitous in all major industrial and financial sectors, simply because it allows for the immutable recording of data, thereby reducing friction in commercial and consumer transactions, and obliterating the scope for dispute as to what has occurred”.
People thought blockchain was a “passing fad”, he said. They were wrong, just as some had thought they could shun the internet in 1995 but were “woefully mistaken”.
Law Commissioner Professor Sarah Green explained that the body was examining electronic trade documents and the issue of the possession of intangibles.
It was trying to devise proposals that would stand the test of time by looking at re-defining electronic documents “from first principles” to see how they could be possessed without being regarded as tangible – and therefore be recognised under English law.
On the question of new technologies and the risk of fraud, Professor Green said she believed that, while they would not necessarily reduce risk of fraud and might simply change the nature of the risk, they would nevertheless reduce the cost of doing business.
“So although the risk of fraud will still be there, it will look different [and] be outweighed by the greater efficiencies in the use of smart contracting technology.”
The LawtechUK report included a number of case studies of real-world smarter contracts, ranging from simple electronic signatures to contract automation and management, financial services, insurance, renewable energy – in which blockchain-based smart legal contracts underpin the ‘microgrids’ which enable the trading of small amounts of renewable electricity – home buying and selling, and the sale of goods and services.