Smart contract technology will transform our lives. Couple it with the other truly stunning advances in technology and we are all in for a frighteningly wild ride in the coming decades.
Yes, you may have detected a note of fear. While I am a technology geek, I still have sincere concerns about how we will harness our new capabilities. Is anyone else apprehensive that existing off-the-shelf technology could easily be turned into a diabolical weapon system? Take one drone, add a gun, and throw in some facial recognition software (all common garden variety technology these days) and you have a frightening assassination tool.
Closer to my day job as a lawyer, it is easy to see the shock and awe potential that smart contracts and blockchain technology wields.
In the instance of blockchain technology, any business that maintains a ledger may one day soon be unceremoniously turned upside down.
The concept of a ledger business model is worth exploring. Banks are a perfect example. Banks operate a massive ledger where they record: deposits in; loans out; repayments in; and interest out.
Insurance companies, finance companies, car rental companies, and countless other sorts of other businesses are structured around a ledger model. A blockchain business model removes the intermediaries. All those ancillary brokers, advisers and other people who make a living out of being a trusted third party in a transaction may soon be looking for other gainful employment.
They won’t be the first intermediaries to be replaced by technology in recent years. Ask your average recruiter how Linkedin and Seek have cruelled their business model. Recruiters traded on a paucity of information where employers and job seekers had difficulty locating each other. The job market is now much more transparent and the old model is withering. Recruiters are still looking for new jobs… for themselves.
How many businesses that operate a ledger model could be automated? What would be the cost savings from reduced staff numbers, lower insurance premiums, and less office space being required?
This is where interaction between the Blockchain and smart contracts will work its alchemy.
For the uninitiated, smart contracts are not strictly contracts (in the sense us lawyers use the term). Some even note that they need not be very smart. Take payment from person A, move Item X to person A, and enter a record of the transaction in the ledger.
So, smart contracts are better summed up as computer code that conducts machine to machine deals and processes and records the transactions. Or when used in an administrative function, something is taken from the in tray and put in the out tray, while the other machine lodging the application or requesting the service, conducts a similar process.
This is where the rub comes though. For centuries, we minions have been the merry intermediaries moving paper between those trays and recording our actions in company ledgers. Those of us, who have done it, can attest that office work can tend to be tedious and monotonous. Regardless, it drew legions of our ancestors off the farms and into ’white collar’ work.
What would be the consequential social and personal costs if huge numbers of us are displaced by machines? Lots more unemployment will have its own intangible costs. Discarded workers will predictably suffer lost self-esteem and ill health. Divorce and suicide rates could then spiral upwards. Why, we may even see a significant decline in office property prices. Not such a bad thing some may say, but there are landlords, investors and retirement savings on the other side of that outcome.
Are we truly ready for a world of smart contracts? Should we welcome an era of massive technological disruption? The Committee for Economic Development of Australia released a report last year that claimed there is a moderate to high likelihood that over five million (or around 40 per cent of Australian jobs will be lost in the next 10-15 years.
The kiwis are slightly more optimistic. The New Zealand Institute of Economic Research think tank predicts 46% of jobs will be lost over the next 20 years – a sliver of better news.
How does a capitalist society work where a huge chunk of the population can’t find work? The old paradigm of ‘I will sell my time and effort in return for money’ may break in an era where nobody needs you. How will we handle that new reality?
The prompt response is usually that new types of jobs will be created. That will probably be true, but it will depend on how quickly the status quo is disrupted. There is no sign of a technology slow down on the horizon.
There is the old fable of the emperor who was thrilled with the game of chess. He called the inventor into his court and offered him any reward he wanted in return for bringing so much joy into the Emperor’s life. The inventor pondered and then, pointing to the chess board, asked for one grain of rice to be put on the first square, two grains on the second, four on the third and so on.
As the Medici’s long ago discovered, there is magic in compounding. By the time you get to the 64th square the number of grains of rice would exceed the total amount of rice ever grown. It is obvious that the Emperor’s pledge went unfulfilled.
We have kept pace with technology and change and its incessant encroachment on our lives. It has been rapid. Pre-WWII many households lived without electricity. Sewerage only came to the Australian suburbs in the early 70s. They were massive changes, but the pace was moderate.
Those improvements all seem so distant from the information technology age. Few would argue that the pace of disruption and change has not recently significantly increased. Are we now on the second half of the chess board? Can we keep making new jobs as quickly as we shed them?
As for myself, I am embracing the new technologies. I find smart contracts very promising. They will deliver great advantages. I just hope we all go into this new era with our eyes wide open and we are agile enough to develop new social systems, new laws and new means of actually improving, not just changing, our lives through technology