Transforming contracts and disputes with blockchain
31 March 2021
Blockchain is going to become an infrastructure technology - like the internet. No one really cares how the internet works, but it has become integral to our daily lives. The same will be true of blockchain. We haven’t reached that tipping point yet because there are no dominant players: we have Google for the internet, but there’s no Google for blockchain. At some point soon, this will change.
In the meantime, blockchain is causing major disruption to some really complex systems in the area of contracts, agreements and disputes. So much so, that PwC economists expect blockchain to generate as much as US $73 billion over the next decade in this arena.
In a new report, Time for Trust: The trillion dollar reason to rethink blockchain, PwC has assessed how blockchain technology is currently being used across every industry. The report argues that the technology is on track to deliver a US $1.76 trillion boost to the global economy by 2030, and that the majority of businesses will be using blockchain technology from 2025.
The beauty of using blockchain technology for contracts is that it can bring together ledgers, agreements and payments improving the flow of commercial agreements, and it can capture, and potentially manage, any disputes. The types of terms and conditions usually seen in a legal contract can be added to blockchain payments. These are known as Smart Contracts and they can synchronise the release of payments with the delivery of goods, services, or even financial instruments
“Smart Contracts are a one stop shop for business because they encompass everything you need: binding legal obligations, evidence immutably committed to the blockchain ledger, and a process for execution of payments. The blockchain records all of your activity, there’s no middleman. The use of smart contracts on the blockchain has the fantastic ability to act quickly and record transactions.” Dean Armstrong QC, CEO of The Proof of Trust and author of ‘Blockchain and Cryptocurrency: International Legal and Regulatory Challenges’
The biggest advantages of Smart Contracts is in the signing and filing: the contracts don’t need to be signed in person, and the technology automatically creates an immutable audit trail. This saves time, lowers costs and removes friction to improve the flow of any commercial agreement, within and across borders. As an early adopter of this technology, PwC is now the world’s leading provider of Smart Contract assurance.
There are a number of these types of solutions in use. For example, the tech group IBM and the shipping company Maersk have developed a blockchain-based platform to exchange digital documents, replacing paper documents to ensure instant instant secure access and trusted workflows.
By their very nature smart contracts are legally binding, but they don’t have jurisdiction clauses. This has opened up opportunities for dispute resolution systems. In the UK, companies, such as The Proof of Trust, run adjudication software systems. It can be written into the terms and conditions of a Smart Contract that any dispute will be resolved by a panel of independent adjudicators - brought together by companies such as Proof of Trust - rather than a specific jurisdiction.
For governments or large multinational companies this could save time and money on cross-border disputes. If a dispute occurs, blockchain can help by logging it, automatically blocking payments and triggering alerts that automate the dispute processes. And with its tracking abilities, blockchain technology can help quickly unwind disputes and exposures in a trusted way.
Read Time for Trust to find out more about how blockchain is being used right now, and which industries and countries are set to reap the biggest rewards from the technology. Explore our research and read the insights from our global industry experts.
To find out more about how Smart Contract solutions can create value for your organisation, get in touch.