The Benefits and Limitations of Smart Contracts, and How We Can Make Them More Mainstream

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by Egor Pavlovich · 4 min read
The Benefits and Limitations of Smart Contracts, and How We Can Make Them More Mainstream
Photo: Hans Splinter / Flickr

Millions of legally-binding contracts are created and signed each day. They are integral to every business, and the number of contracts in existence only continues to climb higher with each passing year.

In a nutshell, a contract is a voluntary written or spoken agreement, intended to be enforceable by law. It can either be a spoken or written agreement, and often concerns employment, sales, or tenancy.

Despite being used globally on a daily basis, contracts still have many major flaws – many of which can be extremely time consuming and costly if one party attempts to back out of the contract without consent, or tries to edit the terms of the contract once it has been signed.

If one party breaches the contract, it can have serious repercussions for everyone involved. Unfortunately, those most likely to be affected by these repercussions include small businesses and individuals, who don’t have the resources to hire a lawyer or take the issue further. In many cases, even after a contract is breached, nothing is done to rectify the situation.

Even drafting a contract usually requires third-party intermediaries such as banks and lawyers, which require both time and money. When these transactions are international, even more resources are required.

The process is unarguably clunky and difficult to regulate. Yet, until very recently, there was no alternative solution…until the invention of smart contracts.

The Hype Behind Smart Contracts

Smart contracts are self-executing contracts that are powered by Ethereum. They have the terms of the agreement between all parties directly written into the code, and this code is contained within a distributed, decentralized blockchain network. All transactions across this network are traceable, transparent, and irreversible.

While a standard contract merely outlines the terms of a relationship, a smart contract enforces the relationship with cryptographic code. It ensures the contract will execute exactly as it is set up, removing the administrative and legal barriers of an ordinary contract.

This completely eradicates the need for a central authority, legal system, or external enforcement mechanism, and makes it impossible for anyone to breach the contract or change the terms of the agreement once the contract has been signed by both parties.

Ethereum smart contracts are set to change the system as we know it. Startups are already finding numerous ways to implement them and create new, revolutionary products and services that are based on smart contracts. Just like we never predicted the invention of The Cloud, or social networking when the Internet first started up, it is currently impossible to imagine what the future of smart contracts could bring.

Why Smart Contracts Aren’t Mainstream Just Yet

However, despite the buzz and excitement that seems to radiate around these new and innovative ideas, it’s impossible to ignore their limitations.

The main barrier right now is that smart contracts just aren’t accessible for those without programming knowledge. They simply remain a concept. And because most people aren’t programmers, this makes them unusable for a huge proportion of the population.

Programming knowledge is required for smart contracts because the terms of the agreement are directly written into the code. It currently requires someone with specialist knowledge to make edits and updates to the contract.

Smart contracts may eradicate the need for a lawyer, but they certainly don’t remove the need for a programmer. A third-party is still required, which is exactly what this process is trying to eliminate.

Unfortunately, this is one of the major obstacles that currently blocks smart contracts from becoming the universal, mainstream solution this new technology has the potential for.

Unlocking the Potential of Smart Contracts by Making Them Accessible to All

Of course, most people have already realized that this is a major issue. Some developers have even taken steps to make smart contracts more accessible.

One such platform is Confideal. It is a visual smart contract editor, specially designed to be used by everyday users without coding skills. Its purpose is to bridge the gap between expert programmers who understand the complex inner workings of blockchain technology, and the increasing number of users who want to use smart contracts.

This straightforward interface completely simplifies the process and eliminates the vast majority of overheads and involvement of external parties that are currently associated with smart contracts.

It might just be the key that brings us yet another step closer to the technology-centric future we’re all waiting for.

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Egor Pavlovich

Egor Pavlovich is CTO of Coinspeaker and a major bitcoin enthusiast. Egor is a specialist in radiophysics and is a keen follower of new and disruptive technologies – from the first moment he discovered bitcoin he knew immediately it was something special. After beginning a bitcoin mining operation he combined forces with Siarhei in 2014 to build professional provider of news for the cryptocurrency/blockchain community. His roles at the site include monitoring analytics, handling the site’s public relations campaigns, overseeing the editorial content in an executive capacity as well as dealing with advertisers and sponsors. You can contact Egor via [email protected]

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