Smart contracts are self-executing contracts written in the form of computer code that automatically execute programmed conditions when they are met. They are run on blockchain platforms and operate in a decentralised manner, eliminating the need for intermediaries. Smart contract solutions include tools for creating, implementing, and managing contracts, enabling business process automation and secure transactions between parties.
Smart Contract Solutions
Type of technology
Description of the technology
Basic elements
- Contract scripts: Code defining the terms and conditions of the agreement.
- Smart contracts platforms: Environments, such as Ethereum, to run and monitor contracts.
- Digital tokens: Virtual assets used as a payment mechanism under contracts.
- Verification mechanisms: Algorithms to check the correctness and execution of contract terms.
- Oracle systems: External data sources providing real-time information for contracts.
Industry usage
- Finance: Payment automation and investment management.
- Insurance: Automatic payment of claims based on the terms of the policy.
- Identity management: Registration and verification of digital identities.
- Property management: Automatic settlement of real property leases and sales.
- Logistics: Tracking shipments and managing the supply chain automatically.
Importance for the economy
Smart contracts are revolutionising the way contracts are made, eliminating the need for trusted third parties and automating many business processes. They enable new business models, such as decentralised exchanges, asset management systems, and insurance services. With smart contracts, companies can reduce operating costs, minimise the risk of errors, and increase transaction transparency.
Related technologies
Mechanism of action
- Smart contracts are created in blockchain programming languages, such as Solidity, and deployed on decentralised platforms. Each contract contains certain conditions that must be met for the contract to be executed. When the conditions are met, the contract automatically performs assigned operations, such as token transfers, changes to data registers, or the launch of subsequent contracts. This eliminates the need for intermediaries, increases transaction security, and reduces operating costs.
Advantages
- Process automation: No manual execution of contracts.
- Cost reduction: No need for intermediaries.
- Cybersecurity: Irreversibility and transparency of transactions.
- Flexibility: Ability to adjust contract terms to meet changing needs.
- Speed of transaction: Automatic execution when conditions are met.
Disadvantages
- Errors in the code: Gaps in scripts can lead to undesirable consequences.
- No change is possible: Difficulties in updating or cancelling contracts after implementation.
- Problems with oracles: Incorrect data from external sources can cause contracts to malfunction.
- Legal regulations: Lack of clear regulations on the use of smart contracts.
- Risk of attacks: Contracts can be the target of attacks, such as reentrancy.
Implementation of the technology
Required resources
- Smart contracts platforms: Ethereum, Hyperledger, and Binance Smart Chain.
- Data management systems: Tools for storing and verifying contract data.
- Oracles: External data sources to verify contract terms.
- Development teams: Programmers who specialise in creating smart contracts.
- Computing servers: High-performance units to run and monitor contracts.
Required competences
- Programming smart contracts: Knowledge of languages such as Solidity and Rust.
- Application security: Ability to secure contracts against attacks.
- Data analysis: Use of data from external sources in contracts.
- IT systems design: Creation of complex applications based on smart contracts.
- Project management: Coordination of contract development and implementation teams.
Environmental aspects
- Energy consumption: High energy demand of servers supporting contract networks.
- Emissions of pollutants: Indirect emissions from the use of electricity.
- Raw material consumption: High demand for electronic components used to build infrastructure.
- Waste generated: Electronic waste from equipment replacement and upgrades.
- Recycling: Difficulties in recovering materials from decommissioned equipment.
Legal conditions
- Data protection: Regulations for the processing of user data in contracts.
- Financial regulations: Regulations for the legality of transactions based on smart contracts.
- Protection of intellectual property: Patents for technologies used in smart contracts.
- Automation regulations: Standards for the use of automation in contracting.
- Industry standards: Contract quality and safety standards.