Blockchain Security

Advantages and Disadvantages of Smart Contracts in Blockchain

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CyStack Editor

Content Executive @ Marketing Team|March 24, 2023

Advantages and disadvantages of smart contracts – do you want to learn more about the two sides of this hot blockchain technology?

Smart contracts are the heart of the hotcake blockchain, whose long-live has been confirmed for decades; the greatly exaggerated death of crypto exposes significant limitations of the blockchain and the core smart contracts.

Thus, read this article carefully to avoid falling into traps!

Advantages of Smart Contracts

Proven benefits of smart contracts
Proven benefits of smart contracts

To better understand the advantages of smart contracts, we need to know what smart contracts are. We have already had a topic for this: What Is a Smart Contract? – All You Need to Know!

Here we summarize the quick note for your reference:

“Smart contracts have two main parts: “smart” and “contracts.” The contracts indicate conditions designed to verify and execute transactions in a blockchain – for example, issuing crypto lends. The smart perspective means the conditions are programmed in code to run automatically without the interference of third parties.”

With this definition in mind, smart contracts can benefit users in four main ways.


Traditionally, transactions between two parties, such as lending, borrowing, logistics procedures, etc., must go through a lot of paperwork before the deals are sealed. This requires lots of human resources and time in between.

Smart contracts change the story. They are predefined rules that will make decisions in the chain, not third parties like brokers, agents, or financial institutions. This way, you can expect neutrality and automation in the transactions.


“If there is no external interference in the blockchain, how can we ensure the conditions are properly run” wondering you.

No worries, smart contracts improve transparency by logging all the history and copying the information to the nodes of all participants.

Supposing a user tries to add a piece of new information into the chain, the smart contracts jump in to verify it accordingly. Only when the information meets all defined conditions will it be added to the chain with a detailed timestamp. Once saved, the data are immutable against hacking and altering efforts for malicious purposes.

Cost reduction

Smart contracts eliminate two obvious costs in a transaction: the intermediation and costs wasted while waiting for the transactions to complete.

Imagine now parties having the same purposes can connect directly in the chain and trade for information and digitized values. There are completely no third parties asking for money to facilitate the work.

Transaction length also cuts down significantly, and time is money.

Wide applications

The applications of blockchain, in general, and smart contracts, in particular, extend dramatically, considering the above benefits.

Here are common industries that witness positive improvements thanks to smart contracts’ implementation.

Disadvantages of Smart Contracts

Limitations of smart contracts you might not afford to miss
Limitations of smart contracts you might not afford to miss

Smart contracts are not perfect, at least not for the time being.

We realize that blockchain is developing at a surprising speed, and smart contracts need to catch up with the pace, which results in their disadvantages.

Underlying loopholes

Pre-programmed conditions are the key to the execution of smart contracts.

There are ambiguities and omissions to facilitate parties to breach the agreed requirements. Not all parties follow the concept of good faith. Therefore, there is a likelihood of contract loopholes. The loopholes are usually hard to notice until the damage happens.

In the case of smart contracts, loopholes are more common. Participants who do not have deep knowledge or experience in the field might not be able to detect the underlying scams. That’s why third parties are usually involved in traditional contracts as neutral consultants and mediators.

Difficulties to change

A set of conditions cannot always be true against the test of time. Instead, traditional contracts usually have updates and modifications for the sake of both parties.

Smart contracts, however, are immutable. It is almost impossible to update the current pre-programmed conditions.

Changes, if any, must be added as a new transaction and can conflict with the existing ones. Even worse, there are technical errors and flaws, considering that blockchain developers created the code in the first place.

Scale problems

It is proven that transactions in a blockchain can take time because smart contracts copy every transaction to all nodes in the network. For example, the Ethereum blockchain only executes fifteen trades in one second or around nine hundred transactions in one minute.

The number of transactions sounds huge until you know thousands of transactions per minute in a fully-operating network. Any congestion delays the transaction and triggers more costs than you expected.

You must be considerate when joining or planning for a large blockchain distribution!

Final Words

Weighing both advantages and disadvantages of smart contracts, we confirm that the technology is still promising. It is just that you should know to get well prepared for bad cases. Prevention is better than cure, indeed!

Plus, developers in the industry are also working on improving smart contracts and blockchain for more convenient and safe applications. For example, experts at CyStack get insights into the vulnerabilities of blockchain projects and their contracts with comprehensive penetration testing services.

Contact us here for more information.

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