Dr. Craig Wright recently gave a presentation at Oxford University in the UK on the power of Bitcoin for contracts and written agreements. The transition to a Bitcoin-based contract is the next logical progression for legal agreements, just as we have previously witnessed changes to authorize the use of electronic signatures, email communication and more in legal and binding contracts. However, Bitcoin is able to dramatically alter the legal scope of contracts and adherence because it provides permanent records that can never be altered, can never be forged and can never be lost.
If Bitcoin contracts had been around before Bernie Madoff or Enron, billions of dollars of investors’ funds could have been saved. The financial ruin brought about by both was made possible because of the ability to maintain—and cook—separate financial accountability records, with Madoff at one time having as many as eight. Depending on whom he was speaking with, a separate record was presented.
There have been cases in the past where the courts have determined that even simple back-and-forth communication through email is enough to justify the legitimacy of an agreement to the point that it could be considering a legal contract. According to the UK Interpretations Act of 1978, “in writing” is defined as “Typing, printing, lithography, photography and other modes of representing or reproducing words in a visible form and expressions referring to writing are construed accordingly.” This means that any communication that is verifiable in court can be used to validate a contract between two parties.
This is certainly possible with Bitcoin and, in particular, the use of OP_RETURN codes in a transaction. These codes allow the inclusion of text that can be mutually-agreed upon by both parties in a contract, and, with the inclusion of a digital signature, enable a binding and legal contract once uploaded to the blockchain.
Wallets already exist to easily facilitate this capability. Both HandCash and CentBee allow a link between a transaction’s identity and a signature and, as soon as a transaction is initiated, it becomes a part of the permanent Bitcoin history.
Given that Bitcoin can legitimately cover all the requirements for a contract as established by current laws, there’s no need for new legislation—the technology is flexible enough to meet the laws as they’re now written. This will ultimately make it simpler during the transition from current legal contract parameters to what is coming, a blockchain-based legal system that is more efficient and immutable.
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