A smart contract is a programmable electronic protocol stored on a distributed ledger that automatically enforces itself when certain conditions embedded in its code are met. Smart contract development is commonly used in finance, real estate, and supply chain sectors.
the CAGR of the smart contract market size from 2023 to 2030
Grand View Research
the value of the smart contract market in 2022
Grand View Research
Smart contracts adoption by industries
While smart contracts have proven exceptionally useful in various industries, the BFSI segment receives the most benefits from smart contracts, followed by healthcare and logistics.
Scheme title: Global smart contracts market by industry
Data source: grandviewresearch.com — Smart Contracts Market Report
With the mainstream adoption of cryptocurrencies like Bitcoin and Ethereum by both individual investors and financial institutions, including banks, blockchain technology and smart contracts work as a technological backbone for P2P transactions, automated claims processing, and various auditing processes.
Healthcare institutions are increasingly using smart contracts technology to address the complexities of sensitive medical data management. Healthcare organizations leverage smart contracts with built-in transparency and security to streamline patient data privacy management, clinical trials and research, as well as drug traceability.
Logistics & supply chain
Logistics and supply chain is the next biggest contender for smart contract adoption. Payment settlements, inventory management, order processing and tracking, regulatory compliance, dispute resolution, and origin verification are some of the many other areas where smart contracts can enhance visibility and enable automation.
Leverage the power of smart contracts in your niche
Top smart contract use cases & real-world examples
Trade clearing & settlement
Insurance claims processing
Smart contracts can help insurance companies streamline lengthy claims management by automating claims validation and execution based on predefined conditions. When an insured event occurs, the smart contract can automatically assess the data from an on-chain source or Internet of Things-powered sensor and execute payouts, eliminating the need for mediators. Moreover, smart contracts substantially increase trust between parties in the insurance industry, as everyone can access a single source of truth on the blockchain network.
Decentralized finance (DeFI)
Implementation barriers & potential solutions
Smart contract bugs
Smart contracts are bug-prone
Smart contracts are still a relatively new technology that is yet to be fully explored and understood by the development community. Smart contract engineers are constantly discovering new bugs and coming up with best practices. Therefore, smart contract development calls for an unconventional development approach along with some definitive measures to minimize the risk of failure:
- Have a plan for failure
Especially if it's a non-trivial smart contract, developers have to be ready for bugs to slip through. Companies should have a clear protocol for pausing smart contracts to minimize the amount of automatic transfer of funds between parties.
- Deploy in phases
In general, it’s advised to approach smart contract rollout iteratively. Deploying phase by phase, gradually expanding the user base, and continuously testing before and after each deployment are all crucial measures for safe smart contract implementation.
- Prioritize clarity over performance
While most software development initiatives don’t tolerate any compromises, smart contracts are a definitive exception. So companies should ensure that the contract logic is as simple as possible, use ready-made code when applicable, and focus on clarity rather than performance. While it’s tempting to optimize code for performance, it will most likely increase its complexity, leading to more errors.
External data manipulation
Smart contracts are susceptible to external data manipulation
Value-adding smart contracts often rely on oracles to execute terms. They connect blockchains to external systems, allowing smart contracts to execute terms using data from the real world. Therefore, in many cases, smart contract performance depends entirely on the quality and accuracy of external data. Here are some steps you can take to mitigate risks associated with external data manipulation:
- Use multiple oracles
Сross-check external data against multiple external data sources. Smart contracts can be programmed to execute terms only when data from multiple oracles matches.
- Use fallback mechanisms
Given that oracles are controlled by a third party, there can be unforeseen situations where external data becomes unavailable or unreliable. This is why companies should come up with a fallback mechanism. They can use historical data instead of real-time data or simply pause smart contract enforcement. In any case, involved parties should have a clearly defined plan for what should happen if the oracle is unavailable.
Unlock the true power of blockchain with smart contracts
AI & smart contracts
While AI holds immense potential for advancing smart contract performance, reliability, and development, there are currently two actionable use cases:
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