With the rapid development across the world, some technologies are also advancing at a fast pace. AI and Smart Contracts are two of the many technologies that may potentially impact several industries. AI or artificial intelligence is a term that’s on roll for a few years now. AI is a technology that can replace human intelligence.
Smart contracts are like a digital contract. They are stored on a blockchain and get automatically executed when the pre-decided terms and conditions are fulfilled. Blockchain is an advanced technology that provides a database to securely store company’s data and information. In this article, we’ll present an insight of how technologies collaborate to ease out the complex procedure of contract and the synergy of AI and Smart Contracts.
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What is AI?
AI stands for Artificial Intelligence. It is the ability of computers to do things that are usually related to human intelligence, like learning, reasoning, problem-solving etc.. It is an area of computer science research that creates and studies softwares and methods that help machines to understand their surroundings and use intelligence and learning to make decisions that help them reach their goals. This kind of machine might be called an AI. AI is used in many well-known things, such as
web search engines like Google Search, Amazon, and Netflix,
virtual assistants like Google Assistant, Siri, and Alexa,
self-driving cars like Waymo,
generative and creative tools like ChatGPT and AI art, and
superhuman play and analysis in strategy games like chess and Go.
Also, Get to Know How Artificial Intelligence is Transforming Legal Agreements
What is a Smart Contract?
We’ve heard of smart watches, smart phones, smart AC, etc.. All these appliances and machines have evolved and collaborated with advanced technology to be called smart. Similarly, smart contracts are also technology infused contracts. It is a computer program that allows the automatic execution of predetermined actions when certain conditions are carried out. These smart contracts function on blockchain technology, which secures the information. Smart contracts dismiss the need of intermediaries. They are self-executing and this feature makes them more efficient.
AI and Smart Contracts: A Smart Collaboration
Infusing AI in smart contracts is a synergetic approach. It showcases the Adding AI to smart contracts is a good idea that works well together. It shows how two cutting-edge technologies—blockchain and artificial intelligence—can work together. The industries get more publicity because of this synergy. When AI and smart contracts work together, they can make deals much more efficient, cutting out the need for middlemen and making processes safer. For example, AI can be used to analyse and interpret complex contracts, while smart contracts can be used to automate the execution of those contracts. It particularly benefits the finance and insurance industries, or any other industry that deals with high volume of transactions and therefore need more speed and accuracy. AI and blockchain are two technologies that are together being used in this modern world.
Application of AI and Smart Contracts
Smart contracts that use AI can be used in many different fields. Here are a few examples of applications :
Supply-Chain Management: It benefits from the application of AI smart contracts by introducing automation and real-time data analytics into logistics. These smart contracts allows the tracking of products from manufacturer to final user, with no manual intervention. This reduces the possibility of fraudulent acts.
Innovation in Healthcare: AI smart contracts can safely handle patient records, facilitate payments and ensure that clinical procedures are executed only when the conditions are fulfilled.
Financial Sector: AI smart contracts modifying how transactions and agreements are being executed. These contracts automate the monetary operations like, payments, loans, etc., hence, reducing the need of middlemen and intermediaries. It also reduces the possibility of any human error and saves time.
Checkout What are the Ways to Terminate a Contract?
AI in Contract Law
Artificial Intelligence is playing a key role in the field of contract law, transforming the several aspects of Contract Management, and drafting contracts. Machine learning and natural language processing are examples of artificial intelligence technologies that can be used to improve and speed up the traditional contract processes. One area where AI has shown it can work well is in managing contracts. An AI-powered contract management system can automate and improve contract workflows like making contracts, negotiating them, and keeping an eye on them. These systems use machine-learned algorithms to look through huge amounts of contracts and find important information. They make it easier to manage contracts and evaluate risks.
By automating processes, improving the efficiency, AI technologies offer a revolutionary potential in Contract Law. The use of AI in drafting of contracts, analyzing and summarising, can give the legal professionals a chance to improve their work efficiency and make more correct and absolute decisions. That being said, ethical concerns and the limits of AI should still be carefully thought through to make sure that it is used responsibly and effectively in contract law.
Pros and Cons of AI Smart Contracts
With new development comes new solution and related new challenges. AI smart contracts have several benefits and challenges that are mentioned below.
Benefits:
AI Smart contracts can reduce the cost of transactions by eliminating the need for intermediaries.
AI-Smart contract’s power to automate processes can reduce the time and effort required to complete transactions.
As AI-Smart contracts are automatically executed after the fulfilment of certain conditions, it reduces the risk of any human error or fraud.
These are executed using the blockchain technology, providing a safe and clear platform for executing the contract.
AI Smart contracts are more flexible than the traditional paper contracts. They can be customized and changed as and when needed.
Checkout What Are Technology Contracts & Its Types
Challenges
Creating AI-Smart contracts needs expertise in blockchain technology and AI along with the legal knowledge. This is a set of different specialization and increases the complexity.
Regulatory frameworks for AI and blockchain are still evolving, posing legal and compliance challenges.
AI is dependant on data and ensuring the privacy of confidential information is crucial. Exposing the sensitive data may implore great risk.
Also, Get to Know What is Contract Renewal?
To sum up
AI-written smart contracts are a cool way for blockchain and AI to work together. Because they can adapt, learn, and make smart decisions, they can find new jobs in many areas, such as healthcare, banking, and supply chain management. Even though there are some problems, adding AI to smart contracts is an interesting idea that should be looked into because it could make them more efficient, clear, and safe. As technology keeps getting better, AI-coded smart contracts could change the future of finance and other fields as well, bringing about a time of automation, trust, and new ideas.
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AI and Smart Contract: FAQs
Q1: What is AI Smart contract?
It is a contract or more like a program that functions automatically on blockchain technology.
Q2: Can AI replace blockchain?
AI can relatively help in making blockchain procedure more efficient. It cannot replace blockchain.
Q3: Can AI review Contracts?
Yes, Lawyers or legal professionals may use AI for reviewing legal documents and contracts.
Q4: Are smart contracts legal in India?
Yes, they are considered legal in India. Though there are no specified legislations or provisions that addresses them.
