A smart contract is computer code that can automatically monitor, execute and enforce a legal agreement. They are used to automate the execution of an agreement so that all participants can be sure of an immediate outcome without any intermediary involvement or loss of time. The term, smart contract, were first proposed by Nick Szabo in the early 1990s, using it to refer to a set of promises, specified in digital form. Smart contracts are computerized transaction protocols that execute terms of a contract. The risk of fraud is minimal and it eliminates the middle party services, cumbersome paperwork, and decrease operational cost by atomizing the contract enforcement. This in turn is expected to augment the smart contract market growth.
Governments around the world are adopting smart contract services, as they help reduce costs incurred in contract handling and require less human intervention. For example, in November 2019, the UK Jurisdiction Taskforce of the Lawtech Delivery Panel has today published a legal statement on the status of cryptoassets and smart contracts under English and Welsh law, which makes the UK the first jurisdiction to clarify that cryptoassets can be treated as property and that smart contracts are capable of being enforced in the UK. Moreover, in October 2019, the Hangzhou local government announced that its blockchain judicial platform has adopted smart contracting in its legal proceedings.
The outbreak of COVID-19 has also had a positive impact on the smart contracts market, as adoption and awareness regarding smart contracts has increased due to social distancing norms and remote working. Moreover, there has been an increase in adoption of smart and automated technologies across enterprises of all sizes in both developed and developing regions. Thus, there is an increasing demand for smart contracts worldwide. For example, in March 2021, Cardano, Switzerland-based cryptocurrency platform, launched smart contracts processing and developing into a DeFi platform. The company also planned to launch a decentralized app with which it will also be possible to create custom tokens.
Smart contracts are developed using blockchain technology, and the presence of blockchain technology providers such as IBM, Microsoft, and Google and a large IT sector is expected to drive the growth of the smart contracts market. However, the lack of interchangeability and standardization of blockchain platforms creates a challenge in developing smart contracts and can lead to errors, which in turn is expected to impede the smart contract market growth.
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