10 questions with Kalina Tonkovska about LegalTech and Smart Contracts

Smart contracts is one of the most popular blockchain products at the moment. INDUSTRIA’s Business Operation Manager- Kalina Tonkovska answered some of the most frequently asked questions about Smart Contracts.

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Smart contracts is one of the most popular blockchain products at the moment. INDUSTRIA’s Business Operation Manager - Kalina Tonkovska answered some of the most frequently asked questions about Smart Contracts.

1. What are smart contracts and how do they work?

They are legally binding contracts in which some or all of the contractual obligations are defined in and/or performed automatically by a computer program, i.e. code.

Up until now, legal contracts have been recorded using natural language on paper or digital documents, stored on a computer or cloud. Every person has such contracts, whether it’s for work, a telecom plan or real estate. They are either in a packed drawer or somewhere in your drive. This is a static representation of what is agreed. 

Smart contracts is a dynamic version of the same legal contract. What this means is some or all of the terms in it are encoded, allowing for the contract to perform automatically. It can pull and push data, as well as execute activities such as payments, IoT automation and practically anything that requires updating different databases and working with data. 

This sounds very high-tech and some people would think ‘Why would my contracts need to do that?’. Especially for enterprises, the answer is simple - contract management has a huge value leakage and according to the IACCM, that amounts to roughly 9% of annual revenue, i.e. millions of dollars. 

Why a value leakage? -  There are many tools on the market for managing digital contracts but most of them focus on the drafting, collaborative negotiation and execution (signing) of a contract. Afterwards, they get archived and they are not used until a case of litigation. The work that needs to be done, contract performance, is scattered across many third party software apps. This renders all of the data and the software systems that perform the agreed upon terms, disconnected. Instead, the smart legal contract provides an opportunity to unlock the potential of the entire digital ecosystem by connecting the data and making the contract perform automatically. 

2. What is the difference between a Smart Contract and a Smart Legal Contract?

If you get confused by those terms, don’t worry - everyone does.

Smart contracts are a term deriving from blockchain and they actually reference computer programs which run automatically on the ledger, without human interference and natural language. They are a piece of code that performs transactions on cryptocurrency exchanges, NFTs and so on. 

When the legal sector started looking for ways to optimise and digitalise contracts, the term “smart contracts” caught on faster because people understood it better. 

The difference is that smart legal contracts are legal-first, since we take the actual contract and then automate it. This removes the risk of illegitimate transactions and litigation issues

3. What is the role of blockchain in Smart Contracts?

While blockchain is not necessarily needed for a smart contract, it can definitely achieve a lot of the results faster (the degree of automation is easily executable with blockchain) and guarantees something different than centralised systems - immutability by design of the protocol and higher security. 

Blockchain has been receiving some bad reputation recently, however many people think of public blockchain only. We use permissioned blockchain, also referred to as private, enterprise blockchain. This means that your data is not visible to other parties, it is just based on a decentralised technology.

Kalina Tonkovska

4. Which industries can make use of Smart Contracts?

Practically any industry, there really are endless cases to describe.

In the supply chain, it can automate a big part of the communication and notifications, obtaining and verifying documents along the way in a live platform, visible to everyone involved. Through IoT it can monitor temperature changes in transportation, which affect perishable goods and notify in advance. In real estate, smart contracts can update property transfer and ownership instantly, should the terms such as payments and verifications meet the criteria. In infrastructure, these contracts can regulate and provide transparency for all subcontractors, streamline payments and provide an immutable audit trail. 

5. Can you give me some examples of real-world applications that use Smart Contracts?

While the technology is still new, there are some notable real-world applications.

One that showcases a lot of the value that we speak of is the case of COVID-19 vaccine distribution. I believe everyone remembers the issues there were with supply chain, inventory management, data registers, health certificates and validation. All of these issues can be addressed with a smart legal contract on blockchain. 

Additionally, different vaccines require to be kept and delivered at different temperatures. The NHS (National Health System) in England used blockchain, IoT sensors and these contracts to monitor and distribute vaccines across the country. This immensely helped the entire health ecosystem by automating work, reducing risk and providing full transparency from manufacturing to administering the vaccine.

6. Can you explain how two parties can agree on a Smart Contract without an intermediary?

Not all contracts require an intermediary to be executed. Most of the intermediary work needed can be performed on the platform for smart contracts - activities such as KYC(Know Your Customer), AML(Anti-Money Laundering), identity and external company verifications. 

Intermediary automation in the form of external database checks is a good example, since they are in almost every contract. 

7. What are the best practices for designing a good Smart Contract?

Starting with accurate legal templates for standard contracts that have been created and verified by a legal team is a must. Then defining all of the terms and conditions which can be automated in a simple and secure way, ensuring highest security and privacy for the parties involved and most importantly - using technological innovations where it makes sense. 

Nobody needs a cutting edge tech tool that doesn’t add value. 

8. What are the main programming languages and technologies used to implement Smart Contracts? 

This greatly depends on the technology that will be used - whether it’s blockchain or not is a big factor. I don’t think the business user cares for the specific tech stack used, so long as it has a good integration layer and provides optimal interoperability with their current setup. Today it can be a JVM(Java Virtual Machine)-based technology, but in two years it can be something different. The language is merely a tool, rather than a solution itself.

9. Are there any legal challenges?

Depending on the type of smart contracts implementation, different legislations may regard these contracts differently. At the moment, the main risks derive from pure-code contracts, i.e. smart contracts. Simply put, the degree of automation defines the challenge from a legal perspective. 

10. What is the future of Smart Contracts and what will the benefit be to societies and economies?

This question reminds me of articles that came out a couple of years ago about the digitalisation of payments. The case with smart legal contracts is the same. 

Our world is becoming predominantly digital, which means that all of our data is digital. We cannot keep contracts, which are the driving force behind almost any payment, in a locked drawer or some file in the drive, labelled “final-final-v5”. We need to connect the data from our agreements to the digital ecosystem and through automation, derive as much value as possible.

Most importantly, in any industry, smart contracts provides risk management for the enterprise by connecting all the loose ends that may be prone to human error or delayed actions, which in turn saves a lot of money and provides rich data insights for business projections and accurate decision making, such as revenue, cost reduction, opportunities, etc. 

This is where connected data comes in handy. In a dynamically changing world, the successful business is the one that can pivot quickly and correctly. 

Final Words

INDUSTRIA hopes this interview helped you get a more detailed view of the Smart Contracts and LegalTech field.

If you still have any questions you need answers to or you are thinking of implementing smart contracts into your business, visit our page Smart Contracts and/or Get in Touch with an expert from INDUSTRIA.


INDUSTRIA is a global technology consulting, development, and ventures company with expertise in the field of enterprise blockchain, confidential computing, process automation, and digital experience. As one of the official partners of R3, we are implementing cutting-edge blockchain technologies and reshaping the fintech world. At INDUSTRIA, we are focused on providing permissioned blockchain solutions, such as Central Bank Digital Currencies, Electronic Bill of Lading, and Smart Contracts. Our solutions apply to a wide range of industries and use cases to empower and modernise society.

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