Blockchain has already changed our lives by introducing reliable and decentralized solutions. Records in the blockchain are immutable and cannot be altered, which is why it inspires the highest level of trust. Smart contracts enable cryptocurrency transactions to be conducted quickly and efficiently.

What Is a Smart Contract?

A smart contract — is an application on the blockchain of a specific cryptocurrency. Such an application is protected by cryptography, while at the same time allowing users to conduct transactions transparently, providing information about the deal to all participants. Essentially, a smart contract is a digital equivalent of real-life paper contracts that confirm the execution of some important action.

Main advantages of smart contracts:

• no errors — the process is fully automated, eliminating human error;
• no fees — smart contracts operate without intermediaries, with the only fee being gas payment;
• fast transactions — execution time starts from just a few seconds;
• no downtime and high security.

In Which Areas Can Smart Contracts Be Used?

Smart contracts are primarily used where transparency is required:

• insurance and real estate transactions;
• tracking supply chains of goods;
• healthcare;
• bank loans;
• elections and government activities.

In most of the areas mentioned above, smart contracts are already being applied and delivering certain results.

In the field of cryptocurrencies, smart contracts are used in the blockchains of the following coins: Bitcoin, Ethereum, Stellar, Neo, EOS, etc.

What Are the Disadvantages of Smart Contracts?

The main disadvantage is the lack of legal regulation in most countries. Legislations are unfamiliar with terms like «cryptocurrencies», «blockchain», or «smart contracts». Therefore, users' funds are not protected by law.

Other drawbacks:

• vulnerability — most users are unaware of how smart contracts function, which poses a certain risk that the code may behave incorrectly;
• distrust — blockchain is a young technology that not everyone trusts yet;
• immutability — newly uncovered circumstances may need to be reflected in the contract, but a smart contract does not allow changes to be made. This is one of the main internal conflicts of such applications.