In this podcast we look at the amazing opportunity reforming contracts with self-executing contracts can have on insurance, distributed ledgers and beyond. To take us through this journey we are joined by Rory Unsworth, who until recently was Swiss Re’s Director at Smart Contracts Counsel.

Rory has a background as a UK lawyer with a focus on insurance litigation civil law. In recent years he pivoted towards legal engineering as it is more fun than traditional legal practice because it is about solving new challenges, working in teams and delivering projects.

A legal engineer is someone who helps to change legal processes by leveraging and creating adoption. Both of those things, leveraging and creating adoption are tools, based on all types of technology, from text mining to blockchain, AI, semantic, whose purpose is to support lawyers and experts.

During his stay at Swiss Re, Rory had the chance to re-engineer the way Swiss Re works around its contracts and manages contract risk. He has now recently left Swiss Re and is moving into the consultancy space.

 

What is blockchain?

Blockchain is a type of distributed ledger. A ledger is a type of record keeping system. It allows you to note the state of your asset or of your transactions with those assets.

A distributed ledger, it's a new concept because it's shared across a network

 

What are self-executing contracts?

Smart contracts are bits of code that order the code to take action when a contractual condition is satisfied. They're not actually contracts. It's a misnomer. They are “if, then” conditions that execute individual actions, usually with a view to automating or driving contractual conditions. And those actions could be payments or value transfers.

Now a self-executing contract are like traditional contracts but executed by means of smart contracts. To compare it to the internet, it’s a bit like text with hyperlinks, you got the surface text, but there's another dimension underneath it which leads to an execution piece.

 

Example of iTunes

When you used to sign up to iTunes you were presented with a massive click to accept contract which apparently was longer than Hamlet by Shakespeare in terms of word count. This was the traditional contract that came with clauses and so forth which limited the number of devices onto which you could share the music you had bought a license for. You could share the music with five devices but in the old style of contract enforcement if you had shared the music with more than five devices you would receive a nasty lawyer letter asking you to cease and desist or they would ask you to pay a fine for breaching that contract.

This of course would have been impossible for Apple to impose and would have never succeeded as a business model. Apple removed that friction by using a smart contract to do two things:

* Contractual permission: to enable the customer to listen on several devices

* Contractual prohibition: to block the listening of music on more devices than were allowed.

In that sense contractual enforcement was automated and there was no need for lawyers. The code simply didn’t permit you to breach the contract.

 

Smart contracts potential to change the legacy landscape

Rory likes to use the metaphor of how self-driving cars are going to change the way our roads will look like and how driving will look like, as an experience, to describe the impact smart contracts will have on legacy approaches.

Contracting and driving are both complex acts which has the potential to be fully or partially automated with lots of benefits to users.

In a future vision,