Blockchain, the technology behind smart contracts, and AI are quickly converging. Futurists claim this will produce an entirely new paradigm that forever changes how companies write contracts and conduct business. What changes, though, can we expect?

The current state of smart contracts

Smart contracts remove trade or service agreements from the realm of static documents that require constant human management. They transform them into automation tools that drive complex transactions between multiple parties. Residing on the blockchain, they actively monitor conditions stated in the contract and trigger actions that the contract requires when those conditions are met.

One of the first smart contract demonstrations involved the purchase and transport of bales of cotton. A GPS device embedded in the shipment alerted the smart contract when the shipment reached its destination. This instantly triggered payment to the seller. No invoices or payments required human intervention.

Still, this simple smart contract could do far more than it did. By including the shipper in the contract, their payment would be triggered, too, eliminating human intervention on a separate contract. The act of buying or selling the cotton is thus treated holistically instead of as multiple actions.

Smart contracts can go even further. Since excess humidity can adversely affect the cotton’s quality, shippers could include humidity-sensors in it. If humidity exceeds predefined levels, the contract automatically reduces the buyer’s payment.

To account for this variable, humidity-control equipment could be rented from yet another party on the same smart contract and their payment, too, would depend on their equipment meeting a specified level of service. In the same way, other variables could be included in a single smart contract: insurers, lenders – the possibilities are endless. With each party added to the contract, the more effectively the transaction can be analyzed both in full and in its constituent parts.

The value of AI in smart contracts for law

That analysis is where AI comes in. It powers the analysis necessary both to create and execute such complex smart contracts and make them more effective. The more data AI has, the better it can predict outcomes.

Thus, in contract negotiation, AI can analyze past negotiations to see how parties negotiated in the past and suggest the types of language and clauses most likely to secure agreement. AI can also analyze past contracts to identify variables not previously considered, and incorporate them into future contracts.

Because the smart contract functions as a self-executing document that guides workflow, AI can also use previous smart contracts to analyze the effectiveness of past workflows and identify potential improvements for future implementation.

Finally, with AI, the ability to track component parts of a transaction are not lost in a holistic muddle. On the contrary, it is enhanced. Siloing of information is greatly reduced while the ability to analyze transactions—holistically or in their component parts—for increased efficiencies is greatly enhanced.


Smart contracts have already changed the face of traditional contacts. They have eliminated the human verification that ensures that all terms have been fulfilled into an automation tool that implements the terms of the agreement with little human intervention.

Adding AI to the existing capabilities of blockchain-enabled smart contracts exponentially increases their efficiency. AI and blockchain working in tandem provides deeper analysis of the effectiveness of both the contact terms and the workflows it monitors while further reducing the need for human verification, intervention or analysis.

Together, AI and blockchain simplify the negotiation and execution processes, while simultaneously facilitating more complex agreements that can ultimately lead to greater efficiencies. This integral partnership launches the field of contracts into an entirely new world for which both businesses and legal professionals must be prepared.

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