Smart Contracts: Market Demand, Features, and Development Process Explained

A smart contract is a transaction protocol — a pre-programmed condition or action on the blockchain — designed to automate the control, execution, and documentation of events according to the terms of an agreement.

This reduces the need for intermediaries and arbitrators and significantly cuts down on fraudulent schemes. Smart contracts are essential for DApp development. They're also a critical part of building decentralized networks.

This article introduces the market demand, features, and development process of smart contracts.

Overview and Market Size of Smart Contracts

Smart contracts became a key component not only of the Ethereum contract platform but of decentralized finance more broadly. The concept was coined by scholar Nick Szabo, who envisioned it as "a set of promises specified in digital form."

Also, while a smart contract is a digital agreement rather than a paper one, it can't be equated with an online legal contract. There are various types of such contracts, but that's not our focus here.

Reference: What Is Web 3.0? The Next-Generation Network Built on Blockchain

Smart contracts are most common in North America, where the continent accounts for 43% of market share, with Europe and the Asia-Pacific region far behind. The developers involved need no introduction — they include IBM, AWS, Oracle, and many others.

According to an industry research report on the smart contract market, the global smart contract market is projected to grow from US$315.1 million in 2021 to US$1,460.3 million by 2028, at a CAGR of 24.2% from 2022 to 2028.

How Do Smart Contracts Work?

Smart contracts operate on good old "if/when...then..." conditions — once conditions are met, the blockchain is updated. This means the transaction cannot be altered, and only the parties granted permission can see the result.

To set conditions, participants must decide how transactions and their data will be represented on the blockchain, agree on the rules governing those transactions, examine exceptions, and determine how disputes will be resolved.

Pros and Cons of Smart Contracts

What can smart contracts do for businesses? If they're just programs running inside a blockchain, why do they deserve this much explanation?

The benefits of smart contracts are numerous and clear.

・No intermediaries. Smart contracts let parties transact without an intermediary, and since the agreement is broken into conditions on the blockchain, neither party can deceive the other. It's pre-programmed, and once triggered, no one can interfere with the process.

・Security and reliability. This follows from the previous point. Smart contracts have the same level of security as cryptocurrency. While this protection isn't perfect, it's currently considered one of the most trustworthy available.

・Transparency. Smart contract code controls the execution of pre-agreed conditions, and transactions are tracked and cannot be reversed. There's no way to tamper with them. This transparency, decentralization, and integrity of transactions all combine to make this relatively new technology trustworthy.

・Speed. With smart contracts, there's no need to wait for "banking hours" to execute transactions of any size. This process can also be automated at set intervals.

・Digital document workflow. Documents reflected in program code can be found easily and quickly whenever needed. Paperwork doesn't disappear, burn, or decay. With correct parameters, records land in archive folders and generate specific logic without ever losing integrity. The only real risk is accidentally losing access to the data.

That said, smart contracts aren't without drawbacks. These are less about the technology itself and more about the environment around it — for example, there's still no clear legal framework governing the use of smart contracts within blockchain network ecosystems.

Some systems have data transfer speeds too low to complete transactions reliably. A smart contract could also be coded incorrectly, collapsing the whole transaction — though that's a matter of the development company's skill. On the whole, the benefits still far outweigh the drawbacks.

Reference: What Is a DApp? Understanding Decentralized Applications at Their Core

Examples of Smart Contract Use Cases

One of the most organic implementations is smart contracts in healthcare. Healthcare is a field where patient well-being can depend heavily on privacy, which is why EHR/EMR information security is so critical.

One example is a decentralized healthcare network that issues tokens to support smart agreements between healthcare providers and patients. This system lets users connect and manage collaboration based on Ethereum blockchain smart contracts. In addition, the digital agreement tracks every patient interaction, performance metric, and the patient's impression of their interactions with the healthcare provider.

Reference: Promising DeFi Services and Development Process Explained

Smart contracts are also useful in science. For example, NASA sponsored a research project that used Ethereum-based smart contracts to automate spacecraft maneuvers and avoid space debris.

What Is Smart Contract Development?

Smart contract development is a complex process that includes various activities not directly related to development or programming itself.

How to Create a Smart Contract

Because a smart contract is code that represents a specific agreement, it's usually written by a smart contract developer.

The main programming language for developing smart contracts is Solidity. Solidity is a high-level, object-oriented language heavily influenced by established programming languages such as JavaScript and C++. It's the first contract-oriented language. Instead of binary/code, programmers use letters and numbers to write smart contracts for the blockchain world.

Reference: What Is DeFi? Understanding Decentralized Finance at Its Core

Solidity comes with built-in commands that make blockchain development more accessible. For example, programmers can easily access a given blockchain's addresses and timestamps.
Contracts function much like ordinary classes in familiar object-oriented programming languages. As such, you declare the variables and functions that need to be accessed from outside/inside the contract.

Can You Create a Smart Contract Yourself?

Even without being an expert, you can create your own smart contract. Today, companies whose businesses are built on blockchain provide templates and interfaces that simplify the structure of smart contracts.

You can use these, but keep in mind that such solutions aren't always 100% suitable and could accidentally undermine your intent. That's why we recommend leaving smart contract development to professionals.

Reference: What Is DeFi? Understanding Decentralized Finance at Its Core

Beginner's Tutorial for Smart Contract Development

Without getting into technical details, the steps for developing a smart contract don't differ much from a standard software development process. As such, it's not just about programming — it's also a business model.

・Create requirements. Analyze and decide what you expect from the project, what conditions the smart contract needs to include, and who the stakeholders are.

・Architecture, design, and development. After a detailed business description of the project, technical specifications follow, and programming begins on your chosen platform (Ethereum being optimal, though not mandatory).

・Testing and acceptance. This kind of development may look easy at first glance, but it can't be done without prior testing. Never skip this step. Internal acceptance is carried out through a local blockchain and test network.

・Deployment. Launch it on the market.

・Operation and maintenance. It's important to monitor compliance with the smart contract's conditions. While you can't interfere with an existing smart contract, you can always redo it with a new approach at any time, factoring in any flaws that have been found.

Reference: What Is an NFT? Examples, Features, and Future Potential of Non-Fungible Tokens

Conclusion

The outlook for further growth in this industry is very positive, and momentum is picking up fast. Even though the legal status of smart contracts remains uncertain around the world, many lobbyists are working to bring smart contracts into a legal framework.

Still, many see the lack of government oversight as a benefit, not a drawback. Any process must eventually reach the legislative level to become civilized. And wouldn't a paperwork-free world be beautiful?

Document development companies range from the most prestigious firms to small teams with tight coordination. At Miichisoft, we can provide an experienced team or individual staff for your project depending on its details, and can propose from the idea stage — please feel free to contact us.

Source: The App Solutions (What is Smart Contract Development)