Benefits of Smart Contracts

Nick Sazbo, one of crypto’s OGs, summed up the function of Smart Contracts

“I call these new contracts “smart”, because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises”

Describing traditional paper contracts as inanimate was a clever way of contrasting the restrictions with the analogue way of reaching an agreement, with the benefits of Smart Contracts. 

Transparency & Trust

Smart Contracts increase trust as they are open and transparent and not lodged with an intermediary. Anyone can review the code and the logic to understand what will happen if an account interacts with it. 

Reviewing Smart Contracts does, however, require technical know-how, and the creator of the Smart Contract won’t necessarily share their identity. Independent contract auditing is now a significant part of Smart Contract deployment. At the same time, there are also a growing number of off-the-shelf tools that can allow you to review Smart Contract function yourself.

Automation

Smart Contracts are digital and based entirely on logical arguments; they can be executed automatically, saving both time and cost. With the added benefit of Ethereum’s composability, you can quickly build out connected Smart Contract based services like lego blocks.

Immutable & Secure

One of the fears of entering into any traditional agreement is whether the terms will be honoured and how you can check. With Smart Contracts, anyone can check the outputs using blockchain browsers like Etherscan. The nature of blockchains means that transactions are immutable – they cannot be changed – providing a great deal of reassurance and security. 

For the same reason, Smart Contract terns are secure and cannot be changed once committed to the EVM. But this is also a source of vulnerability, as we’ll now find out.