The market for blockchain-backed ‘smart contracts’ should grow quickly, according to a partner at a global law firm, who is already working with the emerging technology.
Lee Bacon, a partner at Clyde & Co, made the prediction as his firm launched a consultancy aimed at advising insurers and clients in other sectors on the contracts, blockchain security and other similar distributed ledger technologies.
Mr Bacon told Legal Futures: “The potential benefits of smart contracts are numerous and include the fact that contracts become dynamic and able to respond and adjust as situations change…
“This is a new and emerging technology, so I wouldn’t expect it to change the world immediately.
“However, we are certainly seeing lots of appetite from clients across all of our core sectors to explore the potential that smart contracts bring…
“We are already working with clients on smart contracts and we expect the market to grow quickly.”
The solicitor gave the example of an insurance smart contract, which incorporated a “pre-agreed trigger event”, which when reached led automatically to payouts and adjustments in premiums and cover.
He went on: “All of this can if structured properly be programmed to execute automatically and almost instantly. This obviously reduces [administration] time and costs but also changes the nature of the service offered…
“Of course, this scenario would only work where there is a recognised data point for the smart contract to respond to and when agreements and parameters are built into the smart contract at the outset.”
The consultancy is known as Clyde Code. Its lead technical consultant is Gary Nuttall, backed by his independent advisory group, Team Blockchain.
Clyde partners involved in the consultancy are Mr Bacon and Nigel Brook in London, Sally Sfeir Tait in Dubai and Christina Terplan in San Francisco.
Mr Bacon added: “Blockchain provides the rails that smart contracts run on and together they have the potential to radically change and simplify legal contracts and transactions. But legal and technical advice is needed to ensure that workable agreements are reached and enforced.
“We are already actively engaged in reviewing smart contract and related distributed ledger transactions across multiple sectors, so setting up a standalone consultancy to bring together our legal expertise in this area is a natural next step.
The firm has advised on smart contract, blockchain and related transactions, including a blockchain-based fund platform, advising Emirates NBD Bank on the development, implementation, validity and enforceability of a blockchain solution, and working with insurers to establish what it called “parametric micro-insurance products”.
The news comes as insurance giant AXA has launched ‘fizzy’, a blockchain-based smart contract that delivers automatic compensation to policyholders whose flights are delayed. If the policyholder’s plane is more than two hours late, fizzy reimburses them immediately.
The contract is connected to global air traffic databases, so as soon as a delay of more than two hours is observed, compensation is triggered automatically.
“In this way, AXA has delegated the compensation decision to an independent network, strengthening the trust that customers can have in AXA,” the company said.
Currently in the test phase, fizzy can only be used for direct flights between Paris Charles de Gaulle airport and the United States, in either direction.
AXA said the goal was to expand the solution internationally and develop partnerships with airline companies, travel agencies and airports.
Separately, an online property purchase platform, clicktopurchase.com, is due to launch a blockchain-backed service within weeks. The software-as-a-service transaction platform “features a full-fledged blockchain underpinning real contract exchanges”. It reported it has already executed transactions of property worth £179m online in the UK and Ireland.
The service brings the ‘click to buy’ system already used in the commercial sector to residential property. It enables an immediate, legally binding exchange of contracts to be conducted, based on secure digitally signed documentation.