Lawyers are here to stay for the foreseeable future
As I talked about recently, Walmart is already using a private blockchain and smart contracts to streamline its supply chain management. This is really leading-edge innovation being carried out at a large scale, where savings and improvements can be measured in real dollars. That’s a nice start. But what if Walmart or any other company out there could save one one of modern business’ biggest (and most annoying) expenses? What if they could get rid of legal fees?
Some of my fellow technophiles believe that smart contracts will soon replace lawyers and we will live in paradise. Well, don't fire your legal counsel yet.
Let’s remind ourselves: what exactly is a smart contract? It is a 'computer program or a transaction protocol that is intended to automatically execute, control or document legally-relevant events and actions according to the terms of a contract or an agreement...'
Technically, smart contracts predated blockchain and even the Internet. The first smart contract was used for a Coca Cola vending machine. By inserting a coin, you automatically received a bottle of Coke. Not too complicated…
More recently, the term smart contract has been associated with the Ethereum blockchain. The advantage of tying the program with blockchain is that you could base it on satisfying given conditions - and automatically move money (or its equivalent) from account to account.
There are many articles and videos on YouTube and elsewhere explaining the huge benefits of this new technology showing how this will change everything. The main advantage they usually bring up? Removing lawyers from the equation.
Spoiler alert - this won't happen anytime soon.
Why? Human affairs are usually complicated and trying to reduce them into simple zeroes and ones doesn't always work.
Let’s start by revisiting that definition I gave above. Even the term smart contract is disputed by the introduction of the term smart legal contract, as explained in Wikipedia: A smart contract, which is also an enforceable legal contract and was created through interaction of lawyers and developers ...'.
Just because you call something a smart contract, doesn't mean that it is a contract which you can take to a court. (What’s the point of a non-enforceable contract? Great question!)
The touted advantage of a smart contract on a blockchain is also an Achilles heel. The contracts are immutable and for everyone to see. See this description of how to update the Smart Contract on blockchain. (Or don’t. It will put even a well-trained lawyer to sleep).
What’s the problem? The ability to see any contract creates the desired transparency and also it allows hackers to exploit any weakness.
Not only do you have to make sure that the smart contract does exactly what it is supposed to. You also have to make sure that it is properly programmed. We’ve already seen that a bug in software which crashes your laptop, in the case of a smart contract, could cost you millions of dollars (Read DeFi Platform Mango Loses $117 Million in Smart Contract Exploit: Are DAOs Responsible for Bad Smart Contracts?). In typical lawyer fashion the discussion is about whose fault that is. For the technically inclined, here is a science paper, how to build Extorsionware.
The list of issues is long. Many of the claims of superiority of smart contracts come from naïveté about law and how it functions. If you don’t know much of anything about the law, but think just about any problem can be solved with clever programming, I understand why you might think it’s easy to just remove lawyers from the equation.
So why do I think that lawyers will be around for a long time? The technology is still in its infancy and there are a myriad of technical issues to be solved. Secondly, every programmer would laugh if they were told a lawyer could write software code. You can imagine the situation in reverse would not go well, either.
When the concept of the Paperless Office was introduced, what happened? The consumption of paper went up. The introduction of smart contracts will require even more lawyers to migrate current processes to this new paradigm.
The future will happen when smart developers with smart lawyers come together, learn each other’s language, appreciate the complexity of the problem at hand and build us solutions to make our lives simpler. That's what I call a Smart Recurrent Pattern.