The global smart contract market is estimated to reach $1460.3 million by 2028, at a CAGR of 24.2%. Smart contracts, also called SC, are a digital contract that works on blockchain technology, using a decentralized and distributed ledger system (DLS). These contracts are digital, immutable, and executed automatically once predetermined conditions are satisfied.
How Do Smart Contracts Work?
Smart contracts use rules written in computer code on a blockchain. If all conditions are met and confirmed by a network of computers, the smart contract automatically does what it's supposed to do.
For example, it might include releasing funds, car registration, sending notifications, or issuing a ticket. Once done, the blockchain is updated, and that record can't be changed. Only authorized people can see what happened.
A smart contract can have numerous "if/then" coding rules to make sure businesses are satisfied with how things will be done. To set it up, people need to decide how the information will look on the blockchain, agree on the "if/then" rules, think about any problems that could happen, and figure out how to solve disagreements. Then, a programmer can develop a smart contract. But now, many companies that use blockchain offer templates, websites, and tools to make it easier to create smart contracts.
Types of Smart Contracts
Smart contracts are categorized into three types – legal contracts, decentralized autonomous organizations, and logic contracts. Let us now discuss all of these in detail.
Smart Legal Contract: Smart contracts follow the structure of legal contracts. These contracts provide a higher level of transparency than traditional documents as they are stored on blockchain, these contracts can not change. All authorized parties involved are allowed to execute contracts with digital signatures. Smart legal contracts may be executed autonomously if all the conditions are met. In case of failure to comply, stakeholders can face legal consequences.
Decentralized Autonomous Organizations: Decentralized Autonomous Organizations (DAOs) are governed by a blockchain-based community, sharing common goals and making decisions based on a specific set of rules. Think of a DAO as an organization on the blockchain with a common goal, but instead of being run by a boss or president, it's managed by its members. The rules of the organization and how money is spent are all written into the smart contract's code, so everything is transparent and automatic.
Application Logic Contacts: Application Logic Contracts are developed using application-based code that is easily synchronized with various blockchain contracts. It allows interactions between numerous devices, such as the Internet of Things or Blockchain integration. Unlike traditional contracts, these contracts are signed between machines and other contracts.
How Much Does it Cost to Develop a Smart Contract?
The cost to develop a smart contract depends on project complexity and business requirements, including development time, developer’s location, team experience, platform experience, and technology knowledge, among others. In general, the cost to develop a smart contract ranges from $3,000 to $50,000.
However, this cost is not fixed. The cost can increase or decrease based on business requirements. Also, the cost depends on additional services such as consulting and maintenance can add to extra charges.
For example, if you want to deploy your smart contract on Ethereum, the factors that will affect the smart contract development cost are: The Ethereum price, the size of the contract in bytes, and the current gas price on the Ethereum network. To learn more about the contract cost, you can get an estimate of the cost using the contract deployment cost calculator.
Benefits of Smart Contract Development
Wondering why should businesses opt for smart contracts? Lately, smart contracts that execute on blockchain, have grown a lot in popularity.
Here are the following benefits of developing smart contracts for your company:
Increased Effectiveness: There are numerous tasks related to contracts. This includes identity verification, payment execution, and contract enforcement. These tasks can easily be automated with smart contracts. Now, businesses can easily streamline the contract execution process without any middlemen. This saves businesses both money and time.
Enhanced Security: Once smart contracts are implemented on a blockchain, they cannot be changed or tampered with. This makes them more secure, decreasing any possibility of fraud. Additionally, a smart contract can use encryption to secure contract data, allowing only authorized parties to access it.
Higher Transparency: Smart contacts are based on blockchain technology that does not allow any change in the records of all transactions. All parties have access to the same information and records, promoting transparency.
Low Expenses: Smart contract decreases the cost involved in carrying out a contract by removing the need for middlemen including bankers, attorneys, and other intermediaries. Additionally, smart contracts reduce the possibility of mistakes and disagreements and help businesses cut more expenses.
Enhanced Reliability: As we discussed above, smart contracts automatically perform when predefined conditions are met. This gives confidence to businesses that contracts are carried out accurately as defined, reducing the space for mistakes or carelessness.
Accelerated Speed: Smart contracts enhance the speed of the contract execution process by automating numerous stages. This decreases the required time needed to carry out an agreement and can be of great help for contracts with tight deadlines.
Higher Accuracy: Now that, smart contracts automate their process in response to the predetermined criteria, lowering the possibility of mistakes and increasing the accuracy with which contracts are executed.
Adaptable Contract Conditions: As smart contracts follow a set of coding rules set by businesses, these are customized as per business needs. This helps you ignore the off-the-self contract templates, enabling you to customize the terms of the agreement as per your business requirements.
Getting into a Global Marketplace: As above, you learned that smart contracts are carried out using blockchain technology, making them accessible to the global market. However, this allows businesses to sign contracts with people of diversity around the globe, increasing the potential of your business.
Enhanced Trust: As being carried out on blockchain technology, smart contacts help businesses enhance trust with other parties. This lowers the miscommunications or disagreements among parties, leading to enhanced trust.
Challenges of Smart Contracts
Now that we have discussed the benefits of smart contracts. Let us shed some light on the challenges associated with smart contract development:
Inconsistent Support: One of the biggest challenges in smart contract development protocol is that modifying it is extremely touchy or nearly impossible. Different countries have different laws, hence even if smart contracts conform to the law of a country, there is no guarantee that they are adhered to worldwide.
Unquantifiable Data: In an industry such as agriculture or finance, where data is quantifiable, it is easy to put together smart contracts. However, not every industry has quantifiable data, making it difficult to develop smart contracts.
Conflict with GDPR: According to the General Data Protection Regulation (GDPR), if a user wants to delete their data available online, they can raise a remove request and get it deleted. However, if the smart contract has some data that an individual wants to delete, it won’t be possible.
Skills Shortage: The development of smart contracts requires expertise in software engineering. The development process of smart contracts is different from traditional software development. Smart contracts need programmers with business expertise and knowledge of the required coding language. However, finding developers with higher levels of expertise is hard to find.
Develop Smart Contracts With ToXSL Technologies
With the evolution of smart contracts, how agreements are carried out among businesses of various verticals has changed to a greater extent. Smart contracts automate procedures and increase transparency, leading to more secure and efficient transactions.
However, it is crucial to understand that creating and evaluating smart contracts can be a challenging process. Hence, it is advised to understand and research properly the advantages and dangers before implementing smart contracts.
With continuous development in blockchain technology, the future of smart contract deployment is bright, and we can look forward to more innovation and creativity in the development of smart contracts.
ToXSL Technologies is an award-winning smart contract development company, renowned for offering the best smart contract development services to businesses globally. We hold more than 13 years of experience in offering the best software development services. Our team of experts ensures to understand your market needs and develops the most efficient and effective smart contract solutions.
Are you ready to develop smart contracts? Get in touch with our experts today and leverage our expertise.
