Paradigm Shift from Paper Contracts to Smart Contracts

Abstract

The ambiguity and complexity of the traditional legal contracts have motivated the study and exploration of a better and advanced contract known as blockchain-based smart contracts. A smart contract is a self-executable contract where the terms of the agreement between the involved parties are directly written into the lines of code that resides in the distributed ledger technology known as the blockchain. Obtaining a better understanding of smart contracts to overcome the fundamental issues of traditional legal contracts is vital for the successful and faster dispute settlement process without the intervention of any third-party mediators like courts, banks, lawyers, etc. In this paper, we present a comprehensive overview of the key features of the paradigm shift from traditional paper contracts to smart contracts. In addition, we also discuss why smart contracts are necessary to be legally enforced and the crucial conditions that are required for them to be legally enforceable. Furthermore, we outline recent trends and emerging technologies such as Natural Language Processing, Machine Learning, and the Internet of Things that have been combined together with smart contracts.