Smart contracts can ensure transparency in transactions: Bitay’s Amanjot Malhotra

The widespread use of blockchain is expected to increase the importance of smart contracts, which are self-executing contracts written in lines of computer code. As stated by Market Research Future, a market research company, the global smart contract market is expected to reach around $300 million by the end of 2023, with a 32% compound annual growth rate (CAGR), between 2017 and 2023. Speaking to FE Digital Currency, Amanjot Malhotra, Country Head – India, Bitay, a cryptocurrency exchange, talks about the benefits of smart contracts and how it can impact the Indian financial sector. (Edited excerpts)

What is the connection between smart contracts and blockchain?

When a transaction takes place through the execution of smart contracts, the information is stored on the blockchain network. This process occurs through the proof-of-work (PoW) mechanism, which refers to the method of verifying and tracking transactions that occur on the blockchain. Blockchain contains all the time stamps, which are the digital record of an event, related to smart contract-based transactions.

What are the advantages of smart contracts compared to traditional contracts?

Smart contracts can ensure transparencies of transactions, as they are mapped by blockchain validators, who are responsible for verifying digital transactions in the network. On the other hand, transactional contracts have problems related to counterfeiting, confidentiality and the involvement of an intermediary.

For which blockchain-related sectors are smart contracts important?

I believe that sectors such as healthcare, supply chain, education, among others, can utilize blockchain for various applications and have started using smart contracts. Right now, the main issue is the dollar fee required to make transactions happen on the blockchain. In the financial sector, smart contracts can provide many benefits.

How secure are smart contracts?

I feel that smart contracts are not completely reliable. In general, smart contracts have a reduced risk of fraud as they are audited by security experts who scan them for vulnerabilities. It is still an ongoing process.

Are smart contracts subject to regulatory oversight?

It is not possible as smart contracts are internet based codes. If a decentralized exchange or protocol wants to open its base of operations in another country, it should follow its financial regulations. Otherwise, smart contracts are outside the regulations, as they are not supported by the Know Your Customer (KYC) mechanism.

How viable are smart contracts in Indian blockchain scenario?

Indian blockchain scenario is not that different from global blockchain scenario. Almost all the top blockchain networks have their base of operations based in India. The level of smart contract-oriented transactions will increase in the Indian blockchain market if the one-dollar fee is reduced. In the Indian financial sector, smart contracts can ensure that lending and borrowing money is easy and loans can be processed faster. I feel that if Central Bank Digital Currency (CBDC) is introduced, it can benefit Indian financial sector in the long run.