CHANGING THE WORLD OF FINANCE
SMART
CONTRACTS
Table of Contents
Points to discuss:
Introduction and Definition
01
Use Cases of Smart Contracts
04
How Smart Contracts Work
02
Challenges
08
03
Future Trends
09
Features of Smart Contracts on the
Blockchain
Concept by Nick Szabo (1990s)
What Are Smart
Contracts?
Self-executing digital agreements written in code
Removes need for intermediaries
Automates conditions like payments, ownership, confidentiality
Source: Bashir, I. (2023). Mastering Blockchain (4th Ed.), Packt Publishing
How automation works:
Conditions ("if/then" logic) are encoded into the contract
Triggered by on-chain events or transactions (e.g., user payment)
Once triggered, the contract executes without manual input
Technical elements:
Written in languages like Solidity, Vyper
Requires gas fees to execute on networks like Ethereum
Once deployed, cannot be altered
Key Features &
How They Work
WHAT IS BLOCKCHAIN?
A decentralized digital ledger that records transactions
across many computers.
HOW SMART CONTRACTS FIT IN?
Smart contracts run on top of blockchain networks like
Ethereum.
They automate transactions based on pre-defined rules.
No middlemen are needed — agreements are executed
automatically.
WHY IT MATTERS?
Smart contracts expand blockchain’s use beyond simple
transactions to complex applications like finance, supply chain,
and identity management.
Blockchain
Technology and
the Role of Smart
Contracts
Operate on the Blockchain
Smart contracts are stored on a decentralized blockchain, not
on a central server.
How Smart
Contracts Ensure
Decentralization
Immutable
Once deployed on the blockchain, smart contracts cannot be
modified.
No Central Control
After deployment, no authority can stop, censor, or take over the
contract.
Same Rules for Everyone
All users interact under the same contract conditions.
Source: Mangrulkar, R. S. & Chavan, P. V. (2024). Blockchain Essentials, Apress
Speed & Efficiency
• Automatically executes when conditions are met
• Zero manual intervention - Zero delays
Features of Smart
Contracts on the
Blockchain
Accuracy = Deterministic + Semantically Sound+ Enforcable +Secure
Eliminates traditional contract pitfalls
Human data entry errors
Ambiguous clauses
Subjective interpretations
Speed, Efficiency
& Accuracy
Trancparency → Complete Visibility
All transactions
Public blockchains → Fully traceable
Features of Smart
Contracts on the
Blockchain
Private blockchains → Visible to authorized parties
Trust → Immutable Records
Once confirmed
Irreversible
Unalterable
Indelible
Trust & Transparency
Chain-Link Protection
To hack a single block
→ Must hack the entire network
→ Need to compromise millions of nodes
Features of Smart
Contracts on the
Blockchain
Encrypted & Distributed
• Secured by algorithms
• Stored across globally distributed nodes
Security
Cut Out Middlemen
Eliminated costs
Bank transfer fees
Features of Smart
Contracts on the
Blockchain
Notary approval costs
Legal review fees
Time = Money
• Traditional: Days/Weeks-long processes
• Smart Contracts: Seconds/Minutes
Cost Saving
Smart Contracts on Blockchain Usage Fields
FINANCIAL SERVICES
P2P Lending
Automated Payment Systems
SUPPLY CHAIN MANAGEMENT
Inventory Tracking
Payment Automation
LEGAL INDUSTRY
Automating Agreements
VOTING SYSTEMS
Transparent Elections
Inventory Tracking and Payment Automation
Automated Payment upon Goods Delivery
Smart contracts can be used to automate the entire process of goods tracking
and payment. When goods are shipped, the smart contract automatically
monitors the progress of the delivery through IoT devices (such as GPS or RFID
tags). Once the goods arrive at the destination and conditions like quality checks
or delivery confirmation are met, the smart contract triggers the payment to the
Example Uses
Cases of Smart
Contracts
supplier or vendor.
Automating Legal Agreements
Real Estate Lease Agreements
Smart contracts can automate the process of executing real estate lease
agreements. Once both parties (landlord and tenant) agree to the terms, such as
the rental amount, lease duration, and maintenance responsibilities, the contract
is coded onto the blockchain. As soon as the tenant makes the first payment and
the lease conditions are met, the smart contract automatically executes,
transferring the lease agreement into effect. Additionally, the contract can
include automated reminders for rent payments or trigger penalties if payments
are missed.
Supply Chain Management &
Legal Industry
CYBERSECURITY
Cyber attacks collect vast amounts of personal data to
carry out theft and fraudulent acts.
DATA MANAGEMENT AND SECURITY
Consumers would like to know how their data is used,
who has access to it, and what happens to it should
Common
FinTech Risks and
Challenges
they choose to withdraw it.
TECH BOUNDARIES
Many places in the world are not yet fully equipped to
adopt FinTech and its complex systems.
The obstacles FinTech
faces in today's world
Challenges
SECURITY VULNERABILITIES
Reentrancy attacks, which allow malicious users to repeatedly withdraw funds, or integer
overflows that can mess with balances and calculations. These are not just theoretical —
real-world examples like the DAO hack have led to millions of dollars in losses.
IMMUTABILITY AND UPGRADEABILITY ISSUES
Once a smart contract is deployed, it cannot be changed. This is great for transparency, but a
huge risk when a bug or error slips through. Imagine deploying an app that handles money, only
to find a flaw — and you can’t update it. Some developers use patterns like proxy contracts to
allow upgrades, but even those come with added risks and complexity.
ORACLE PROBLEM
The problem is, these oracles are external sources, and if they’re compromised, the smart
contract could be fed false data. In other words, a smart contract is only as trustworthy as the
oracle it relies on. This remains a big challenge in fully decentralizing applications.
Zheng, Z., Xie, S., Dai, H.-N., & Wang, H. (2019). Smart contracts: Security challenges and research
opportunities. In 2019 IEEE International Conference on Blockchain (Blockchain) (pp. 509–514). IEEE.
THE FUTURE TRENDS IN SMART CONTRACTS
CROSS-CHAIN INTEROPERABILITY
In the future, contracts will be able to interact across multiple blockchains. This means a smart
contract on one chain can talk to another on a different chain, enabling more flexible,
collaborative, and powerful decentralized applications.
AI & INTERNET OF THINGS INTEGRATION
For example, IoT sensors could trigger smart contract events based on real-world activity, and AI
models could help contracts adapt to changing conditions. This kind of integration will bring
smart contracts closer to real-world use cases
ENHANCED SECURITY AND FORMAL VERIFICATION
It’s a method of mathematically proving that a contract will behave as expected. Combined
with better auditing tools and security frameworks, this can significantly reduce bugs and
vulnerabilities, making smart contracts much more reliable and trustworthy.
Khan, S.N., Loukil, F., Ghedira-Guegan, C. et al. Blockchain smart contracts: Applications, challenges, and future
trends. Peer-to-Peer Netw. Appl. 14, 2901–2925 (2021).
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