The rule of smart contracts in Financial transactions
The smart contracts allow the monetary values to be exchanged in financial transactions in a transparent and reliable way, and reassured that there is no need to go through an intermediary to guarantee the legality of the operation. The smart contract appears to be a guarantee which assures the execution of the mutual commitments between the both parts. On the one side, it suggests receiving the currency equivalent of the counterpart. And on the other side, it effectively guarantees the discount of the object.
This new form of contract can be used in any financial situation; like insurance premiums, disruption contracts, property laws, credit deposits, financial services, legal processes and mass financing agreements, it is enough just to fill a survey with your personal information which identifies you and data will be created.
The main technique behind the smart contracts is blockchain who tracks back to the non-modifiable contractual terms of security. The smart contract can understand a very useful programming language system which uses peer to peer techniques to automatically calculate and execute cash flow operations.
Among the main risks in the financial sector : difficulties of trading financial flows in the high-balance-sheet operations between great classes of assets. But the real advantage of a smart contract is to ensure a balance of payments. For this reason all the system errors, which can lead to maximize people’s earnings, are potentially dissipated effectively.
Also, the smart contracts are going to take the responsibility of insurers in the event of autonomous vehicle accidents in the right way. Based on Blockchain, we can determine exactly who causes an accident : a person, the embedded computer, or the car itself, which allows the insurance companies to base their reasoning on data from other climatic and technological perimeter …
Now, the risk which could exist in this type of technological progress appears in two area.
In the financial domain, this type of contract allows to emit, exchange and sell financial assets, which can be considered as a risk for the most part of the financial intermediaries, such as the sell-side, the stock exchanges, the multilateral negotiation platforms, the clearing houses, the central agencies, the payment agencies and the networks information. Because of their active roles in this domain, the risk will decrease. Then we have to remember, all businesses can be affected. Therefore, the bank account is not necessary, at least in the absence of any statutory adaptation for this immense ambiguity of technological innovation.
Technically, the Blockchain system is at risk if a security breach intervened. So, a possible attack by unidentified people can lead to a malfunction of the program and we won’t be able to to fix anything because there’s no regulation pointing to who’s responsible in this case.