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The Value Proposition of Smart Contracts

by icosuccess
, The Value Proposition of Smart Contracts

2019 is the year of cryptocurrency and blockchain adoption. While cryptocurrencies continue to be under speculation, smart contracts have been revolutionizing the way we are operating business through the value proposition of smart contracts, trustless systems through P2P exchange and transactions on the blockchain. As a foundational technology, smart contracts are built on top of blockchain which goes beyond the utility of cryptocurrency. Blockchain technology has changed how we interact with real estate, banking, insurance, healthcare and many other sectors.

Anatomy of a Smart Contract

Smart contracts are enablers of blockchain technology. They help users exchange value like money, real estate, stocks and bonds in a transparent way without the middle man like a broker or escrow. Smart contracts are self-executing contracts that have the terms and agreement written directly in the code. It is this code that is then utilized, distributed, and forever registered on the blockchain.

Smart contracts are the most convenient mode of exchange of value for corporations and business entities because they can be programmed to perform calculations, store and update account information, and provide an immutable ledger of all transactions that go through the smart contract.

Why Smart Contracts are the true value behind Blockchain


The need to rely on third parties is eliminated and processes are autonomous. This makes smart contracts a reliable and viable option for most companies.


The need to trust third parties is eliminated by blockchain as it generally applies the Byzantine Fault Protocol for consensus. Smart contracts are the first choice for applications like supply chain and logistics. All information and updates are on a distributed ledger and everyone in the network has access to the same information. In essence, you never have to wonder if the “paper trail” is accurate.

Maintenance of Records

Entries are updated as frequently as the blockchain smart contracts are scheduled to find blocks. As long as consensus is reached, records are safely stored on the blockchain. The ledger is maintained and updated by a network of computers so there is no single fail point.


Documents shared using smart contracts are encrypted and are nearly impenetrable by hackers. This assures users of the safety of the information shared on the blockchain. In fact, for hackers and bad actors to do this, they would need a greater amount of compute power and majority votes by network users.


Smart contracts self execute thus saving the hassle of coordinating and getting it executed. This also increases the speed of processing in supply chain and logistics.


Smart contracts follow the exact logic that they were programmed for, which ensures zero errors and maximum efficiency. The only issue would be if there was a problem with the code. Often the code is open sourced for peer review.

Public blockchains have explored more and more ways to harness smart contracts. One principle advantage of smart contracts is the mitigation of risk of nondiscriminatory execution which leads to economic benefits. The lack of counterparty agreements makes it faster and more efficient. The previously untapped market of public blockchains is being explored with smart contracts.

The private blockchain industry is rife with competitors providing robust smart contracts for execution. Their solutions offer a means to settle transactions with a fair degree of certainty in its security and trust in the smart contract.

Ethereum is the only top project that has offered a robust smart contract platform for everyone. And while it does exist, smart contract features available in the Bitcoin space is limited so there are expectations that private and permissioned blockchains are the staging ground for prototyping their public network.

Smart contracts have not been regulated in the past and seeing the increasing need for smart contract implementation in these companies, it is likely to get regulated and then adopted widely for trustless public settlement.


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