Contest Alert 📢: S4B Crypto Contest - Season 19
Fellow steemians, you all welcome! For all of us here, it is really very important that we discuss an essential aspect of the crypto ecosystem involving the smart contracts, the role of smart contracts in decentralized finance, including the security measures that are needed in smart. Discussing this aspect of the crypto ecosystem would broaden and enhance our knowledge on smart contracts. This would go a long way making us understand how smart contracts works in order for us to know how we could go about it while performing some actions on it.
I therefore, move forward to give some explanations on this aspect of crypto business contracts.
In the real world business environment, there are documentations put in place. These documentations captures contract terms which various parties involved in the business must sign and deliver. This serves as an evidence of the existence of agreement between parties involved.
Now in the crypto space, this same thing happens. Technology has enhanced the ease at which we could own, transfer and trade crypto with ease. Trades and transaction agreement happening or signed on blockchains as the evidence of agreement reached and accepted.
Smart contracts automatically executes the buys, the sells, the transfers or crypto ownership and stores it on a blockchain in accordance to reaching up to a prescribed requirements or conditions. This implies that smart contracts executes contract agreements itself having the terms of the agreement written directly to the codes.
There are various types of smart contracts that exists in decentralized finance. They are as follows:
- Yield farming contracts
- Decentralized exchange (Dex) contracts
- Lending and borrowing contracts
- There is also the insurance contracts
THE ROLE OF SMART CONTRACTS IN DEFI
source
Smart contracts has played some major roles in decentralized finance. These roles has really upgraded the the formal traditional finance sector as it makes use of blockchain technology to build an autonomous and innovations which could provide financial solutions. Some of the roles of smart contract in Defi include:
- Decentralization
- Independent or self execution
- It acts trust less
- Cost efficiency in execution of smart contracts
Smart contracts are posed with numerous risks which necessitates some security measures to be taken. For the protection assets, the following security measures are put in place in smart contracts as follows:
Real time monitoring of the blockchain protocols
Conducting formal verification of contracts
Conducting smart contracts audits
Smart contracts has added so much value to the decentralized finance system. It has brought about transparency, automation, and efficiency which has transformed the formal financial system.
That being said of the benefits of smart contracts, it also comes with risks that it requires a strong security architecture to prevent loss or theft of assets.
Thanks for @waqarahmadshah to bring this an all important subject for discussion. It is broadening our knowledge in the crypto space.