A smart contract is a blockchain-based computer program or self-executing code developed for monitoring and enforcement of obligations. This is a type of digital contract that contains the terms of transactions in the code and sanctions for their failure. Smart contracts independently analyze the input data to determine if all terms have been properly fulfilled and trigger a transaction only after that.
While in the traditional financial world parties have to rely on centralized institutions to govern transactions, smart transactions provide participants with the following advantages:
- Security. The parties are protected against unauthorized changes in the network thanks to distributed ledger technology based on p2p governance.
- Transparency. It’s possible to track the stages of smart contract execution as they get registered on a public ledger.
- Anonymity. Although all contracts are stored on a distributed ledger publicly, the parties can remain anonymous and confidential that contributes to security.
- High speed of work. Blockchain enables instant transfer of funds and works 24/7.
- Timely payments. It’s a common situation when legal entities postpone payments, miss the deadline, etc. The self-executing mode of financial transactions, on the contrary, ensures that funds will be transferred in time.
The sphere of smart contracts application is wide, beginning from financial organizations that offer automatic payments for their services to insurance companies that leverage smart contracts to process claims. What’s important, smart contracts are effectively used for cryptocurrency transactions and different types of crypto derivatives. With their help, many projects can enhance their offer by adding transparency to the funds’ usage.
As for the underlying technologies, it’s important to say that any Ethereum-based token presents a smart contract that makes use of the Ethereum blockchain. ERC-20 has become the technical standard for all smart contracts on Ethereum used by numerous famous digital currencies such as OMG, BAT, MKR, etc.
How much does smart contact development cost?
Smart contracts make it very convenient to conclude an unbreakable agreement with predefined rules. However, many companies delve into the new technology for different reasons striving to get the benefits of the first movers in adapting blockchain to their particular needs and offer better services to their customers.
The development of a smart contract is not a cheap activity, though, as it can vary in price from 7,000 USD for a simple one to 45,000 USD for a complicated smart contract. The price can reach 100,000 USD when smart contracts are developed for large organizations and require a narrow focus for their development. This price doesn’t include the deployment of smart contracts on the main net so the ultimate price of work can increase even more.
Smart contract transaction costs
An important thing to keep in mind is the cost of transactions. In some cases, smart contracts may incur higher expenses than traditional contracts which is one of the topical problems of the blockchain. As Ethereum still struggled with the implementation of Sharding, the network fees remain high, impacting transactional costs.
BitInfoCharts: transaction fees on Ethereum have particularly grown over the past year due to the increase of the blockchain popularity
Initially, smart contracts were developed to economize on third-party involvement. But the lack of an external adaptation mechanism can decrease the efficiency of smart contracts. Sometimes, an external enforcer displays better flexibility and solves the problem more efficiently. Such things as force majeure can hardly be translated into computer code due to their binary nature.
Smart contract audits costs
The companies that offer smart contract audit services usually charge from 5,000 to 15,000 USD on average depending upon the complexity of the code, but the price can be even higher in some cases. As a result, the auditing company comes up with a report that outlines potential problems of the code and gives additional recommendations to increase its security. Also, the experts analyze the contract dynamics that reflect the modern security patterns.
As you see, the expenses on development, deployment, and technical support of smart contracts can ultimately become too high, serving as a stop factor for blockchain adoption. However, the potential bugs in the code may result in even higher expenses, which is why smart contract auditing is highly recommended regardless of the scenario where you want to use them.
TokenGuard can help you with smart contract audits in order to secure your smart contract and analyze it in terms of the investor’s perspective. Those who can’t afford a comprehensive survey can resort to automated technical checks performed by Tokenguard which can help you check the code and increase your protection against potential mistakes.