The idea of smart contracts originated over 30 years ago. Photo: Freepik
Smart contracts are digital agreements that are executed automatically under specified conditions, without the involvement of intermediaries. The idea of such agreements was proposed back in the 1990s, but it was only with the advent of blockchain technologies that it was possible to implement it. Today, smart contracts are already actively used in the digital economy.
How they work, where they find practical use, and what prospects they have — read the material from Delo.ua.
From idea to implementation
Essentially, a smart contract is a small program that runs on the blockchain and triggers an action when a certain condition is met. This approach really helps reduce intermediary costs and make processes faster. For example, in finance it can be instant money transfers, in insurance it can be automatic compensation for flight delays, and in real estate it can be simplified renting or buying a home.
When experiments meet reality
However, along with the advantages, there are also limitations. The code of a smart contract cannot be changed after launch, so errors in the program can lead to financial losses. In addition, a legislative framework is needed for the widespread implementation of such agreements, since digital contracts are not legally binding in all countries. An additional problem is the complexity for ordinary users, who may not always understand the mechanics of the technology.
Another factor is the high transaction costs on blockchains like Ethereum during peak times. This makes the use of smart contracts unprofitable for small operations. There is also the issue of scalability: modern blockchain networks are not always able to process a large number of transactions simultaneously.
Where smart contracts are being implemented most actively
The use of smart contracts is most developed in the finance and cryptocurrency sectors, where decentralized exchanges and DeFi projects operate. They are actively experimenting with them in the US, Switzerland, Singapore and Estonia, as well as in countries that are betting on digital transformation. In some countries, including China and the EU, there are discussions about creating a legal framework to regulate smart contracts, which could open the way to wider use.
In theory, buying an apartment could be simplified to a single transaction on the blockchain, where the title deed is automatically transferred. However, in practice, such transactions are hampered by legal restrictions: in most countries, digital contracts do not have the same force as paper contracts and require additional legislative regulation.
Smart contracts are also being actively tested in the field of electronic voting, as they can ensure transparent vote counting. At the same time, questions arise about privacy, technical failures, and possible pressure on voters beyond the boundaries of technology.
So, smart contracts already allow us to automate transactions, launch new financial instruments, and experiment with digital identity. But along with the prospects, they carry risks: from technical errors and hacker attacks to legal uncertainty. It is the balance between innovation and security that will determine whether this technology can truly transform the global economy.
Recall that by 2030, the mobile security market will reach $22.7 billion — seven times more than in 2020 .
