The Benefits and Risks of Smart Contracts

February 10, 2021 by Avery Wright of Aikon.com. Welcome to our most recent guest post from our friends Aikon.com “The Benefits and Risks of Smart Contracts. You can also Check them out on their website Aikon.com to learn more about them, smart contracts, blockchain, and cryptocurrency.

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Hello everyone and welcome to this awesome post from Avery Wright and our guests at Aikon.com. “Avery Wright is a content marketing manager by day, freelance writer by night, and an all-around crypto girl in between.” So I would like to welcome Avery and thank her for taking time to write this great article for everyone to enjoy.

In addition to that Aikon.com is a leader in educating people and businesses on Smart Contract and Blockchain technology. As well as helping companies and individuals find ways to use and adopt Smart Contracts and Blockchain technology.

So if you are looking to see if you got what it takes to make it in the cryptocurrency world. I would say give these guys and gals a visit. And see if they can help you with developing your future cryptocurrency project. Because they have the technology and the know how to help you get your cryptocurrency set up right from the very the beginning.

Alright now that we have that covered let’s get into our guest post.

Table of Contents

Hey though before we start…

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And now without further delay here is our guest post:

The Benefits and Risks of Smart Contracts

Smart contracts are automated contracts with self-executing business rules and financial agreements written into the code and stored on a decentralized blockchain network.

Note here that they are not legally binding like traditional legal instruments, but are simply business decisions expressed in a form understandable by software and executed by the “Rules of Law”. That means that it is agreed upon by both parties that once the conditions are met, the contract is executed no matter what.

The mere fact that they are controlled by the code adds to their groundbreaking essence as that also makes them trackable, irreversible, and non-tamperable.

Nevertheless, as with any innovation, there is the other side of the coin. With smart contracts, that is the issue of trust.

Even though blockchain technology provides by nature a trustworthy and trustless alternative to the already existing models of business and interpersonal conduct, a code-controlled contract still remains as secure as the code written into and as bulletproof as the skillset of the person who wrote it.

How Are Smart Contracts Used?

The financial and banking sector was the first to recognize the massive potential of smart contracts using blockchain, but other industries are jumping on the bandwagon as well.

Banks from all over the world have long since started to utilize smart contractual relationships, focusing mostly on large-volume cross-border transactions and trading credit default swaps.

Additionally, companies in healthcare, real estate, tax, and insurance, supply chain industries are rapidly switching to these contracts for executing everyday business tasks.

This, of course, in part relies on securing participant identity in the blockchain via tools like AIKON’s ORE Protocol in order to ensure contract signees’ access control, identity, and payment.

Smart Contracts’ Benefits

Many argue that the pros by far outweigh the cons, but for smart contract mass adoption to become a thing of reality, those who are meant to use them first must understand both the benefits and associated risks.

Accuracy

Since this type of contract is based on “if/then” relationships written into the code, when all conditions are met, contracts are executed. Therefore, they allow for infinitely more precision in their execution than what is allowed by traditional judicial frameworks, while at the same time they leave no room for subjective interpretation by human participants.

Speed

As a paperless business tool, smart contracts are very quickly processed. Moreover, their automated and digital nature allows for incredibly fast data input and modification. When time is equalized with money, this is a significant advantage to have over the competition, for instance.

Cost-effectiveness

Having in mind that utilizing these contracts eliminates all need to employ intermediaries that would vouch for the unviolated nature of information, using agreements of this type is less costly for companies than traditional ones. In this sense, trust is built into the mechanism of recording and executing the terms of the agreement – blockchain.

Trust

Encoded into the blockchain platform, and based on the same principles, smart contract technology inherently invokes the rule of trust. Encrypted fragmented records of legal relationships and financial transactions are shared between all blockchain participants, thus ensuring their intended undamaged condition free of malicious modification.

Security

Again, the fact that all information related to this type of contract – or anything stored in blockchain really – is broken down into encrypted sections distributed across the network is precisely what makes it safe from tampering. To change a piece of information within a smart contract, the entire chain would need to be altered and that is only done through a validation consensus.

Smart Contracts’ Risks

As said before, with such a young technology – after all, smart contracts were first introduced in the mid-nineties – there are still pending issues that hinder its mass adoption.

Reliance on the Code

Many people still vary from utilizing contracts built on blockchain to conduct their business precisely because they believe no code is perfect simply because it has to be created by a human. In that sense, it’s reasonable to think that there will always be flaws others can use to gain unauthorized access to the system and perform malicious actions.

Regulation

Since smart contracts and blockchain technology are still maturing, we are yet to see how the legal systems across the world will handle these business agreements in terms of taxation and other forms of regulation.

Nevertheless, these issues are expected to be addressed and resolved as the technology matures and is perfected over time.

In any case, these contracts are formulated in such a way that they truly represent the future of humankind, especially when having in mind the technology-based society we live in.

This article originally appeared on aikon.com

So…

Thanks for stopping by and I hope you enjoyed our Guest’s Post, ” The Benefits and Risks of smart Contracts”. If you have any questions or comments, please feel free to comments section below. And I will get back to as soon as I am able.

And again I want to encourage you to give a visit to Aikon.com and take a tour around their website. Because there is a ton of helpful and useful information there that will not only educate you on smart contracts and blockchain. But will also teach you additional ways to keep your cryptocurrency investments secure. As well as a host of other viable information that will help sharpen your crypto Spidey Senses to perfection.

I would also again like to say “Thank You” to Avery Wright for this awesome informative article and the opportunity to publish it on our site.

And again thank you for reading our Guest’s Post, “The Benefits and Risks of Smart Contracts.”

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