The article Smart-Contracts: Does Germany miss the next innovation? First appeared at the online magazine Basic Thinking. You can start the day well every morning via our newsletter update.
It sounds almost too beautiful to be true: contracts that execute themselves. So -called smart contracts are currently changing in many countries how business is completed and organized. Skepticism predominates in Germany. So do we miss the next important development?
No stack of paper, no emergency date, no weeks of waiting for a signature. Instead: a few lines of code, saved on a blockchain that automatically grab as soon as previously defined conditions are met. Smart contracts are used in more and more countries in concrete use, but in Germany you do not necessarily have the feeling that smart contracts are at the center of legal development.
What are smart contracts?
The term “smart contract” regularly ensures misunderstandings. Many think of a kind of “intelligent contract”, almost as if software could negotiate or apply law. That is not the case.
In truth, Smart Contracts are programs that are stored on a blockchain and represent conditions in Wenn-then logic.
An example: “If payment is received, then token y transfer to buyer Z.” A smart contract does not replace the contract itself, but automates certain contract mechanisms. The revolutionary of smart contracts is that they are unchangeable, transparent and understandable at any time if they are once stored in the blockchain.
So it no longer needs a middleman, no bank or not a notary who could initiate or stop the execution of the contract. Trust is replaced by technology – “code is law”, as it is always so beautiful in terms of smart contracts.
Specific fields of application
The strength of smart contracts now lies in automation and uniqueness, which is already evident in many areas. In global supply chains, for example, smart contracts can document delivery or risk and ownership transfer by triggering payment to the supplier when scanning a container in the port.
Loans, collateral and interest payments are completely controlled by code in the financial sector – without a classic bank. And in the real estate sector too, ownership transfers of land or rental payments are already automated.
In addition, there are also completely new business areas, for example in the context of insurance coverage. As classically, a damage event is not secured, but the occurrence of an event: If, for example, if the precipitation falls under a certain level in a region, the sum insured is paid out immediately, without an expert and waiting time.
It is striking that most of the examples come from other countries other than Germany. This is particularly important in Germany established processes and formalities that are often crossed with the new concepts of a digital economy.
In the real estate sector, for example, property broadcasts must be notarized (the same applies to the transfer of shares to chapter companies). Smart contracts would at least make notaries superfluous in these areas.
Smart contracts in international comparison
A look abroad confirms the impression that Germany lags behind in the development of smart contracts. In the United States, for example, more and more smart contract applications are taking place in the financial sector, where start-ups in California and New York are particularly promoting dynamics.
Legal questions such as enforceability or liability are treated pragmatically there, according to the motto “What works is tried out.” Various small countries are also courageous than Germany. In Belarus, for example, Smart Contracts were officially legalized with its own decree in 2018.
And in Europe, too, you gently grapple to smart contracts. Italy and Estonia are considered pioneers because they have integrated blockchain applications into public registers. The overall EU, on the other hand, still depends on a smart contract strategy.
Germany, in turn, started the first projects with the Blockchain strategy of 2019, for example in the energy sector or in digital identities, but compared to abroad, implementation remains hesitant, especially in areas of the judiciary, administration or financial system.
Change of economic and legal relationships
Of course, digital enthusiasts have been calling for a long time after a comprehensive introduction of smart contracts, not only in Germany. However, it should not be overlooked that this intervenes deeply into central pillars of economy and law and that they are postponed.
On the economic side, smart contracts ensure more efficiency by automating processes and reducing transaction costs. However, this challenges professional groups such as banks, notaries or other intermediaries that cannot be easily taken (and thus also the sources of income).
On the legal side, the question of contractual security is new in the room. The execution of the regulations contained in smart contracts is technically guaranteed, errors in code or manipulation raise problems that have to be transferred to the digital sphere with classic legal instruments such as contamination or compensation.
The question of liability is then associated with this: Who is responsible if a smart contract is incorrectly executed – the programmer, the client or nobody because the code simply acted “as intended”.
And finally, transparency also changes the rules of the game: Because everyone involved can view the same, unchangeable database, fraud is made more difficult, but at the same time creating a completely new openness in business relationships. These changes show that it is not just about technical innovation, but a possible reorganization of the basics on which economic and legal relationships have so far been built up.
Smart contacts: What has to change in Germany
Of course, these challenges are not without and require intensive use with you. However, they can always be solved, which has already been shown in many other countries. In Germany, however, smart contracts currently hardly play a role. However, this is not due to the legally impossible implementation, but because skepticism, uncertainty and institutional inertia dominate.
Many lawyers see smart contracts more as a technical toy instead of a serious innovation, which shows how strongly a paper and text-oriented mindset is still there in this country. Institutions such as notary, banks, authorities have less influence or business due to smart contracts.
No wonder that there is no hurry to change processes. Digitization in administration is a slow process anyway. Smart contracts act like – uninteresting – future music. In addition, clear regulatory guidelines are missing: companies hesitate because they fear legal uncertainty, and authorities are afraid to question well -rehearsed procedures. This reluctance could be overcome by concrete steps.
Test models for smart contracts
Sandbox models could create safe test fields in which companies can try out smart contracts under legally controlled conditions-similar to the UK or Singapore. A sandbox means a kind of “regulatory experiment space” in which companies can test new technologies – such as smart contracts – under supervision, but without full applicability (or immediately under absence) of existing regulations.
Pilot projects in administration, for example in commercial or land register registers, would show that smart contracts can also work in heavily regulated areas.
And finally, the legislator could signal through a targeted clarification in the bourgeois gesture book or a special law that automated contract mechanisms in Germany are not only conceivable, but rather expressly wanted.
Germany does not hesitate out of lack of possibilities, but again primarily out of lack of courage. In the area of smart contracts, the chance to establish economic and legal relationships more digital and thus future-oriented.
Conclusion: Germany must not lose connection to smart contracts
In my eyes, Germany stands on a crossroads when it comes to smart contracts: While other countries have long shown how this technology can be used in practice, the feeling in this country remains that you prefer to wait instead of actively designing.
This reluctance may seem typical German – safety -oriented, regular, regular, skeptical of new ones – but it is risky. Because smart contracts are not just a technical gimmick, but an infrastructure change that can reorganize entire economic areas and are already actively reorganized in some countries.
What is needed now are clear steps forward, carried by a brave mindset. We need an open political attitude that creates the framework for experiments. We need lawyers who no longer refuse to new, but actively shape the topic and we need concrete (pilot) projects that show that smart contracts also work in everyday law and economic life.
In my eyes, the direction is clear: Smart contracts will not come, they are already there – but not yet in Germany. The question is whether Germany continues to skeptically observe this development from the sidelines or whether it is possible to develop its own models that combine legal certainty with digital innovative strength.
The active design of this topic would have an advantage: As the largest economic nation in the EU, Germany could then have a decisive part in determining what the rules of the game will look like.
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The article Smart-Contracts: Does Germany miss the next innovation? First appeared on Basic Thinking. Follow us too Google News and Flipboard Or subscribe to our update newsletter.
As a Tech Industry expert, I believe that smart contracts have the potential to revolutionize the way business transactions are conducted. These self-executing contracts are based on blockchain technology, which ensures transparency, security, and efficiency in the agreement process.
While Germany is known for its strong tech industry and innovation, it is possible that they may be missing out on the full potential of smart contracts. The adoption of this technology in Germany has been slower compared to other countries, such as the United States and China.
One of the reasons for this slow adoption could be the regulatory uncertainty surrounding smart contracts in Germany. There is a lack of clear guidelines and regulations for businesses to follow when using this technology, which may be causing hesitation among companies to fully embrace smart contracts.
However, I believe that Germany has the opportunity to catch up and not miss out on this innovation. By creating a regulatory framework that supports the use of smart contracts, providing education and training on this technology, and encouraging collaboration between businesses and tech companies, Germany can position itself as a leader in the adoption of smart contracts.
Overall, I believe that smart contracts have the potential to greatly benefit businesses in Germany, and it is crucial for the country to embrace this innovation in order to stay competitive in the global tech industry.
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