One of the most promising developments in blockchain is the use of smart contracts. Smart contracts are self-executing contracts in which the conditions of the agreement between buyer and seller are clearly written into lines of code. The code and the agreements enclosed within are stored across a distributed, decentralized blockchain network. Simply, smart contracts are computerized transaction protocols that execute the terms of a contract.
The probable advantages of smart contracts have seen businesses paying huge attention to smart contract development services. Unfortunately, the big spike in interest has also promoted the growth of some major misconceptions about smart contract development services: what they do, what their products are meant for, and what their products can do?
This article aims to go over some common misconceptions about smart contract development services.
Smart Contracts Will Replace Human Contracts
It has been widely perceived that smart contracts are billed to replace human contracts. However, smart contracts do not have the functionalities of standard legal contracts. The contracts developed by these services do not have the capacity to know in-depth contract details about things that happen in various industries.
For example, if a contract includes a non-disclosure agreement, and one party violates that Non-Disclosure Agreement by releasing private information, there’s really no way a smart contract can automatically know this fact. Although the contracts developed by these services are very good for keeping a record of an agreement between two people and storing that record on the blockchain, looking away from this, their visibility is seriously limited.
Smart Contract Development Services Work for Criminals
When smart contracts based on blockchain technology first emerged, they were commonly portrayed as a hub of criminality, principally on the dark web. Misconceptions abound smart contract development services work to enable criminal activities. Although the adoption of smart contracts for secure business transactions has spread, there remains a perception that smart contract development services allow criminals to operate in full anonymity. On the contrary, most smart contracts developed by these services are fully traceable and secure, as the technology enables businesses to track what is being sent between companies and clients.
Smart Contracts are Legally Binding
Probably because of its name, most people believe that smart contracts developed by these services are legally binding. Smart contracts basically act as a list of “if/then” statements that execute automatically when a precise condition or promise is met. However, there is nothing legally binding about them, and they can only exist within a blockchain network. Rather than viewing smart contracts as actual contracts, it’s more accurate to visualize them as a security tool.
All Smart Contract Development Services Provide the Same Service.
Another misconception that exists with both blockchain technology and smart contracts is that all smart contract development services provide the same service. It is worthy to note that most blockchain networks are either not capable of operating with smart contracts or only do so in an extremely limited capacity. Owing to this, it is imperative that smart contracts possess completely different features depending on the blockchain network they’re running on. Therefore, when looking to develop secure business solutions through smart contracts, smart contract development services build contracts based on different blockchain networks and based on which blockchain network will help meet the specific requirement of their clients.
Smart Contracts Can Operate Fully Autonomously
Some people have the perception that a smart contract developed by smart contract development services can dynamically scan the environment and execute in response to changes accordingly (i.e. a smart contract can query an external database and change its own state based on the outcome of the query).
However, the code of a smart contract is only executed when called upon by a transaction or message that is sent to the smart contract. This can either be carried out from an external account sending a transaction or another smart contract sending a message to the smart contract. When it comes to designing processes that involve smart contracts, these development services mainly develop reactive smart contracts that have limited information to work with, can only do basic calculations, and have limited interaction possibilities.
Smart Contract Development Services Are Cheaper Than Those for Conventional Contracts
There are misconceptions that smart contract development services are a cheaper alternative to conventional contracts. However, for a variety of reasons, generating smart contracts and installing them to the blockchain is surprisingly expensive — possibly as high as one Ether.
There’s no refuting that smart contracts are an influential new development, bringing up an entire universe of new possibilities. Despite their advantages, they have a few serious drawbacks that limit their potential applications.
Importantly, the issue of security is supreme. Establishments need to cautiously write developed contracts and test their logic extensively before they deploy them to the public ledger — once they’ve been released and are being used by people, there is no “undoing” transactions that clients didn’t fully intend to make.
Smart contracts are highly technically complex to build and operate. For companies that have never used one before, they may not budget for the project properly, or might even lack the right team and skill set. This will be especially difficult for startups without a strong existing base of knowledge.
If an establishment plans to develop smart contracts as a core part of their business, they’ll need to recruit and retain the right team of security professionals or look to a third-party for assistance for managing their smart contracts.