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Smart contracts

Introducing smart contracts

Smart contracts

A smart contract is a self-enforcing agreement embedded in computer code. Only very recently have smart contracts generated great expectations, especially in conjunction with DLT, although other technologies could also make use of them.

Smart contracts

Smart contracts enabled by DLT refer to pieces of computer code stored in a DLT, which are executed automatically on multiple distributed nodes upon fulfilment of pre-defined conditions, to enforce the terms of an agreement between parties. Therefore, agreements are automatically enforceable. Smart contracts may store the status of a transaction, to avoid having to go through the list of records in the DLT, and their execution can be triggered by another contract, by an individual or by a group of individuals if multiple parties are involved in the approval process for the execution of the contract.

Smart contracts may be:

  • Pieces of computer code designed to be executed when pre-defined conditions are met, without an underlying legal contract.
  • Extensions to a legal contract written in computer code.
  • Legal contracts or parts of legal contracts set down in writing, transposed into software code and executed by computers that participate in the DLT network. Not all parts of a contract are susceptible to be automated, and sometimes that automation might not even be desirable.

Documents of international standardization institutions

European Supervisory Authorities

International Financial Market Regulation Organizations