A smart contract is a coded, self-executing agreement between parties on a blockchain (a decentralized ledger of all cryptocurrency transactions).
Smart contracts raise unique concerns for several reasons, including the general anonymity associated with the process (as with transactions involving Bitcoin, Monero, Zcash, Ethereum, and Litecoin, to name a few), and the regulatory and enforcement issues surrounding the entire crypto ecosystem.
This also creates new challenges and opportunities for dispute resolution mechanisms, whether they are needed to address a contractual dispute, an unforeseen coding error, hacking or some other event. Errors and other issues affecting a smart contract could occur both on and off the blockchain.
While some “on-chain” disputes could be candidates for self-executing, automated resolution, there is uncertainty regarding how complex or high-value disputes should be handled. This uncertainty causes apprehension in potential litigants because the resolution methods in this arena may turn out to be fundamentally different from traditional methods such as the court system and ADR processes such as mediation and arbitration.
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