Saurabh Bhalla, LL.B., Faculty of Law, Delhi University
ABSTRACT
Blockchain offers cryptographically secured transactions that are replicated across a network of computer nodes. The blockchain’s reliance on public- private key cryptography, peer-to-peer networks and consensus mechanisms helps create a novel system of exchanges and transactions, which overcomes the issues of trust inherent in systems managed by intermediaries. A blockchain network enables not only transfer of digital currency without intermediaries, but also change of ownership status of an asset, smart contracts, transfer of land titles, and the like. Smart contracts, which are seen as agreements that can be executed automatically and may transform legal agreements into code, have generated particular interest in recent times. Proponents believe that smart contracts will replace traditional legal agreements (today’s contracts written in standard legal prose) and by enabling code-based execution will obviate the need of lawyers, escrow agents etc. However, this scenario seems to be highly unlikely, at least in the foreseeable future. While smart contracts may be given legal sanction, they are likely to be only a part of traditional legal agreements, and not replace them as not all rights and obligations that are otherwise covered in a traditional legal agreement can find their way into the code of a smart contract. In this context, the paper gives an introduction to blockchain and thereafter moves on to one of its most innovative aspects: smart contracts. The next part seeks to answer whether smart contracts can replace traditional legal agreements. Subsequently, an attempt has been made to provide possible answers to questions about the legal enforceability of agreements, which include smart contracts, particularly in the context of India.
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