Are smart contracts a smart choice for cybersecurity?

Smart contracts have existed in some form since the late 1990s when Nick Szabo first proposed them.

They have only recently gained mainstream attention with the widespread adoption of blockchain technology. Smart contracts are a set of terms for an agreement in the form of digital code that executes on a blockchain when a set of promises or predefined conditions are met. Each transaction carries a unique time stamp and is connected to the previous and next records on the distribution ledgers. Simply put, the parties can set conditions to trigger an action or a series of actions. 

By automating the execution of the agreement, all parties can be sure of the final outcome without any manual intervention or delays. Smart contracts can also automate a workflow, triggering the next action when conditions are met. This makes them great for automating transactions and ideal for decentralised workflows and securing networks. 

To begin with, both parties in any transaction (buyer and seller) can create a smart contract to automate the deal, similar to if-then-else-when programming logic. For example, goods are released to the buyer once the buyer pays the amount equivalent to the deal value to the seller.  

Let's take a closer look at what a smart contract is, its role in cybersecurity terms and how we can use smart contracts securely. 

Any smart contract consists of these components: 

• Database schema 

• Validation and verification logic of transactions in the ledger 

• Query optimisation logic for reading the ledger 

Benefits of smart contracts 

Enhanced security 

Smart contract-based ledgers are encrypted and stored in a digital ledger that is difficult to alter. This provides a high level of security for transactions, making it difficult for hackers to break into smart contracts and tamper with the records without being noticed. 

Trust and transparency 

Smart contract-based transactions can be fully trusted. They eliminate the need for intermediaries and increase transparency and trust among all parties involved. 

Automation 

Smart contracts are automated and are executed immediately once a condition is met. This increased efficiency can save time and money for all parties involved and reduce the risk of manual errors and fraud. By design, they leave no room for mistakes or delays. 

Industry applications of smart contracts 

Smart contracts allow developers to build various decentralised applications and tokens. Smart contracts can secure and automate virtually any kind of transaction. 

Any peer-to-peer transaction that can be performed based on a set of rules can easily implement smart contracts. Smart contracts can be applied across industries to securely execute transactions from your retail supply chains to banking, insurance, utilities, securities transactions, pharma distribution, international trade, and property transactions. They can be used in everything from cutting-edge financial tools to supply chains to gaming and are executed on a blockchain like any other crypto exchange once a smart contract app has been added to the blockchain. 

What smart contracts mean for cybersecurity 

Smart contracts are increasingly being used in financial transactions. But while they are more resistant to cyberattacks, they are not invulnerable. While it’s relatively difficult for hackers to break into smart contracts, the highly sophisticated hackers can find their way through a careless mistake made during their deployment. This is exactly why we have seen several episodes of high-profile crypto hacking, which together run into billions of dollars. 

Once you have written up the logic, it may seem good to go, but it's not ready to go live yet. Just like any software is tested before go-live, smart contracts need to pass through manual or automated security audits to find and fix any bugs, such as: 

• Reentrancy 

• Unsafe type inference 

• Gas limits and loops 

• Time stamp dependency 

• Malicious libraries 

• Indirect execution 

Smart contracts are effective, but the technology is still maturing 
While they hold a lot of promise, here are concerns around the adoption of smart contracts among enterprise leaders due to: 

Compliance 

Smart contracts are not governed by any government or international regulations, which can make it difficult for businesses to ensure compliance with industry standards and laws. 

Standardisation 

There needs to be more standardisation among different blockchain platforms, making it easy for businesses to implement smart contracts across multiple systems. 

Complexity 

Smart contracts can be complex to understand and implement, requiring a high level of technical expertise. This can make it difficult for businesses to adopt and use smart contracts effectively. 

Carbon footprint 

The environmental sustainability of blockchains is a big concern among enterprise leaders. However, enterprise blockchains have a significantly smaller carbon footprint than public blockchains. With more research underway, it will be interesting to see how computational resources can be reduced to make blockchains more sustainable. 

Don’t neglect due diligence when it comes to smart contracts 

Despite these challenges, the benefits of smart contracts make them a valuable tool for improving cybersecurity and streamlining transactions. As more businesses begin to adopt blockchain technology and smart contracts, it is crucial for cybersecurity experts to stay up to date on the latest developments and best practices for securing them. This includes conducting regular security audits, ensuring compliance, and staying informed of industry standards and regulations. 

Smart contracts signify the times and represent a significant shift towards automation and decentralisation in the digital age. They have the potential to revolutionise the way we conduct transactions and improve cybersecurity. However, newbies in the field must understand the benefits and risks to implement and secure them properly. As the adoption of blockchain technology and smart contracts continues to grow, it will be crucial for cybersecurity professionals to stay informed and adapt to the changing landscape.  

Businesses should consider the potential benefits of smart contracts and weigh them against the potential risks before deciding whether to adopt them. For those that choose to implement smart contracts, careful planning and execution are crucial to ensure security and compliance.