Smart contracts have received significant attention from legal academics and attorneys for the impact they may have on contract law and the role of lawyers. Some have also identified and described a series of use cases for smart contracts. However, the literature currently lacks a comprehensive discussion of the legal implications of use cases that are unrelated to contract law. To fill that gap, in May of 2017 we first published a white paper entitled “Legal Aspects of Smart Contract Applications,” which offered an initial analysis of the legal aspects of five prominent smart contract use cases. This updated edition of the white paper offers new analysis refined by the regulatory and industry activity undertaken since May 2017 through six use cases: digital asset sales, capital markets, supply chain management, smart government records and smart cities, real estate land registries, and self-sovereign identity. We continue to maintain that legal risk is inherent in each of these subject areas, but that with careful risk mitigation planning, companies can overcome many of those hurdles to offer effective products and services.
This updated white paper proceeds in four parts. Part I defines the terms blockchain and distributed ledger technology as used for the purposes of this white paper and then briefly surveys the relevant technological characteristics of smart contracts, the platforms upon which they operate, and the challenges that face those creating and executing them. In Part II we review the current literature from both leading industry groups and academia regarding smart contracts and acknowledge emerging industry efforts to build platforms for legally enforceable computational contracts. Part III introduces six uses of smart contracts in business and government processes, and examines the legal regime(s) applicable to each. Finally, in Part IV we offer insight into practical steps a business may take to mitigate legal risk when launching a product or service that uses smart contracts. Download the white paper here.