- Smart contracts – self-executing agreements embedded in blockchain – offer the promise of seamless execution without human intervention.
- However, the rapid adoption of this revolutionary technology comes with significant technological, legal and cybersecurity-related risks.
- Here’s why adopting a multi-faceted approach is essential to addressing these risks and enhancing the security and reliability of smart contracts.
Imagine a world where contracts are executed seamlessly without human intervention, reducing costs and enhancing efficiency across industries – from finance to real estate. This is the promise of smart contracts, self-executing agreements embedded in blockchain technology.
However, the rapid adoption of this revolutionary technology comes with significant risks. In 2016, a coding flaw in the Decentralized Autonomous Organization (DAO) smart contract on the Ethereum platform led to a theft of $50 million worth of ether, illustrating the potential vulnerabilities.
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How is the World Economic Forum promoting the responsible use of blockchain?
The World Economic Forum’s Platform for Shaping the Future of Blockchain and Digital Assetsensures equity, interoperability, transparency, and trust in the governance of this technology for everyone in society to benefit from blockchain’s transformative potential.
- The Forum helped central banks build, pilot and scale innovative policy frameworks to guide the implementation of blockchain, with a focus on central bank digital currencies.
- TheRedesigning Trust with Blockchain in the Supply Chain initiative is helping supply chain decision-makers implement blockchain, while ensuring that this technology is utilized in a secure, responsible and inclusive way.
- The Centre for the Fourth Industrial Revolution UAE is testing the application of digital assets and tokenization to improve financial systems.
With the smart contracts market projected to reach $73 billion by 2030, expanding at a compound annual growth rate (CAGR) of 82.2% as reported by Grand View Research, the urgency to address these risks is paramount.
Smart contracts are playing an increasingly important role and being more widely adopted across various sectors. As platforms like Ethereum continue to dominate the market, ensuring their security and reliability is crucial for the broader adoption and trust in smart contracts.
Technical risks of smart contracts
Smart contracts are highly dependent on the precision of their code and the security of the blockchain infrastructure they operate on.
Even minor flaws or oversights can lead to severe consequences such as unauthorized access, fund misappropriation or unintentional legal disputes. To enhance the security and reliability of smart contracts, adopting a multi-faceted approach is essential.