In the fintech world and on various blockchain networks, Ricardian contracts have created a buzz and made some novel possibilities a reality. On the flip side of the same (bit)coin, though, many have their well-founded apprehensions about it as well.
In this article, we will attempt to weigh the pros against the cons in order to understand these contracts better.
Benefits of Ricardian Contracts
- It permits for the first time on the blockchain network the legally enforceable transfer of actual assets as well as rights, which was previously impossible with Smart Contracts. When smart contracts were utilized for the same goal, the transfer could not be legally enforced.
- Ricardian Contracts can help you save time, money, and effort in the event of a disagreement. The fundamental disadvantage of human-readable legal contracts is that they are susceptible to interpretation. Machine-readable legal contracts are not. Lawyers can interpret the material according to their preferences, which could lead to a quarrel.
- Ricardian Contracts are a huge step forward in the blockchain network's transparency.
Issues of Ricardian Contracts
Because the Ricardian Contracts are still in their early stages, several questions or clarifications are still needed. Who will, for example, enforce the Ricardian contracts?
The topic of how arbitration can be brought into the EOS ecosystem remains unsolved. In the same way, how can users submit claims?
Ricardian Contracts, on the other hand, are based on pre-defined and pre-agreed legal contracts. Pre-agreed and legally binding means you may present them to the judges in court when the time comes.
At the very least, a Ricardian Contract allows the arbiters to determine the original purpose as well as duties.
The technology, on the other hand, is still in its early stages of development. As we seek greater clarification, the legal structure governing Ricardian transactions continues to lag.
Current Applications of This Contract
Yes, there are examples of Ricardian Contracts. OpenBazaar is a great example of a Ricardian Contract. It's an open internet marketplace where you may buy and sell anything, as the name implies.
When two parties exchange products, this platform now employs Ricardian Contracts as a major tool to track the parties' obligations.
So, how does it function? A Ricardian Contract is created anytime two parties conduct trade on the platform. It keeps track of the legal Contract that numerous parties agree to and sign in order to move further.
As a result, the platform is extremely safe for users. Why? Because one side may have legal documents and records to submit in a court of law in the event of fraud or breach of contract.
This is why Ricardian Contracts may be quite useful in the e-commerce business since they provide users with an additional degree of protection.
Future of Ricardian Contracts
Ricardian Contracts, much more than Smart Contracts, may be used in a wide range of situations. Smart Contracts are typically utilised on the blockchain for financial transactions. Ricardian Contracts, on the other hand, have no limitations in terms of applicability, and they may be used for purposes other than financial transactions.
Because a Ricardian Contract defines a party's obligation, or in legal language, liability, while trading with another party, it has a wide range of uses. As a result, most experts predict that Ricardian contracts will only become common on EOS in the near future.
Ricardian contracts, which may also serve as a Smart Contract, can become a significant aspect of blockchain agreements and even replace Smart Contracts.
That is, they can clarify parties' intents, legally bind them in a contract, and also carry out orders based on the parameters agreed upon. This only improves the security, transparency, and efficiency of blockchain transactions and trade.
Ricardian contracts are still in their infancy, as their utilisation is very recent. They've only lately joined the EOS ecosystem. However, as the blockchain and Ricardian Contracts evolve, we will be able to see a clearer image of the future in the coming months.
Final Words
To recap everything we've covered so far, we can say that Ricardian contracts combine the legal agreement and terms into a contract that may be executed on the blockchain network.
Despite the fact that it is a decades-old concept, blockchain technology allows it to be fully realised. We can notarize these contracts, secure them on a blockchain network, and retain a comprehensive record of the transaction using blockchain.
It can improve the clarity of legal contracts between several parties and save time, money, and effort by reducing the likelihood of conflicts. They may also activate functions and activities when combined with Smart Contracts.
Ricardian Contracts are a strong new form of code that can have a substantial influence on trade on the blockchain network while also increasing the security of the process, and hence can be hailed as the new and improved version of smart contracts!
Written By – Devika Mishra
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