Smart contracts are computer programs designed to execute automatically. It happens when the terms or conditions of the contract are met. Its purpose is to eliminate the intermediaries in a transaction while making them faster and safer. Smart contracts play a key role in making crypto payments more reliable than their traditional counterpart. They slash the arbitration costs and decimate the chances of fraud.
Introduced by Ethereum, smart contracts are integral to decentralized finance. They maintain the anonymity, efficiency, and security of all digital assets. But like many other components of blockchain, smart contracts is also advancing with artificial intelligence.
AI Agents For Smart Contract Management are making these contracts smarter and much more adaptable. AI is helping smart contracts overcome all the existing challenges while getting better in terms of functionality.
To understand how one needs to understand smart contracts and their limitations. Then, the AI agent’s role in its betterment gets clearer. While smart contracts are already dynamic, automation gives it an edge. It makes this blockchain-based more feasible for a large number of industries. So let’s take it from the top and get familiar with the basics.
Smart Contract- In a Nutshell
As mentioned above, they are self-executing contracts that operate on a blockchain. As far as the execution is concerned, it follows the blockchain’s modus operandi. The data stored on a smart contract cannot be modified or manipulated. In a way, they are not very different from the traditional contracts. However, it’s the decentralization part that makes them different.
Smart contracts execute arbitrary computations on a blockchain network. When a transaction is executed, it gets implemented and ensures proper functionality of a coin. Ethereum, the network that introduced smart contracts, is also the most prominent user of it. Also, some people find it hard to differentiate smart contracts from smart legal contracts.
All you need to remember, is that smart contacts are not enforced by laws or regulations. Whereas smart legal contracts are sanctioned by a court or a legislative body. Furthermore, you can get into more technicalities, but not everyone can understand this. Thus, just remember that these are self-executing contracts that maintain the decentralized nature of digital assets.
Having said that, it’s also important to know its limitations. A smart contract is definitely an advanced fintech solution. Nonetheless, has its own share of challenges just like blockchain. So let’s see what they are and how AI can fix them.
Existing Challenges in Smart Contract
The decentralized networks that use smart contracts face the following limitations.
Security Issues
Though decentralized in nature, smart contracts are not indomitable. In the past, they have become victims of reintrancy attacks and various bugs. The blockchain networks have also lost their assets due to these vulnerabilities. Developers have tried to make smart contracts along with the entire ecosystem stronger. But no promising results have surfaced on this front yet.
Depends on External Sources
The smart contracts that blockchains use right now operate on external data called Oracles. This creates a problem for decentralized ecosystems that want to maintain the total security of their assets. It also poses a risk of the crypto mechanism getting feeble. That’s because the external data mostly comes from centralized sources.
Rigid Nature
Smart contracts function quite like pre-programmed bots. They work as per their coded structure and do nothing more than that. To put it simply, they don’t act like smart contracts at all. And many times, this limitation becomes a big problem for crypto users. These programs can’t tweak their process if something unprecedented occurs.
Now you know that smart contracts still need a lot of upgrades. Thankfully, AI agents for smart contract management gives all that and improves the whole ecosystem. Not only does it address the limitations, but it also makes the program much more adaptable. The integration of AI agents works favourably for crypto users and entrepreneurs. Let’s see how this union is changing the game for smart contracts.
Here’s How AI Agents For Smart Contract Management Improve Smart Contracts
AI agents for smart contract management work on multiple fronts of smart contracts to upgrade them. They bring all-encompassing changes to the network while making it efficient and safer.
Efficiency and Adaptability
So far, the smart contracts have worked like bots. They don’t have the ability to adapt according to a new situations. AI agents for smart contract management are changing it by bringing self-learning traits into the traditional contracts. With these updates, smart contracts start observing past interactions and transaction history. As a result, they adjust their work and make informed decisions. More than that, the contracts can also be updated automatically without any intervention.
Making Security Reliable
AI agents for smart contract management can search and detect all types of vulnerabilities in smart contracts quickly. Using Large Language Models (LLMs) or machine learning, these autonomous programs make this process very quick. They also monitor all the transactions and highlight fraudulent activities. With all these capabilities, AI technology makes smart contracts quite invincible to security threats. Furthermore, they enable contracts to mend themselves without any intervention.
AI-Powered Oracles
As stated above, external data (oracles) are a problem for decentralization. AI agents for smart contract management also fix this problem with AI-based oracles. When the AI verifies data, it ensures that they come from reliable sources. It also ascertains the accuracy of the data before integrating them into smart contracts. This upgraded data is generated after the thorough analysis of global tidings and market trends. This definitely helps crypt investors and entrepreneurs in their trade strategy.
Streamlined Contract Execution
AI agents reduced gas fees remarkably making smart contracts cheaper and faster. With their implementation, the execution of smart contracts gets way more optimized. Simultaneously, they minimize blockchain congestion by making the most of computation resources. Another benefit is that smart contracts can predict network congestion with AI. This helps networks adjust gas fees as per the requirement. Last but not least, smart contracts can settle disputes without any manual intervention.
Customized Smart Contracts
AI empowers smart contracts to evaluate user behaviour with transactions and preferences. The agents take this one step ahead and let the network create personalized smart contracts. These contracts can customize their terms and interest rates based on the risks. They also keep an eye on the ongoing market updates to keep the assessment precise. By keeping this all-inclusive approach, they give the most favourable results to crypto users.
Boosts Cross-Chain Operations
Blockchain domain has different networks and their interoperability has always been a challenge. Again, AI agents for smart contract management solve this problem with their learning capabilities. AI agents can ease the interaction between two different smart contracts. They act as a middleware and eliminate all the complications. Consequently, the decentralized mechanisms improve their speed as well as scalability.
For all obvious reasons, AI agents for smart contract management are laudable. Still, there are things that need to be straightened in this technological union. It certainly makes smart contracts much more efficient, but it’s still not perfect.
Challenges to be Addressed in AI-Powered Smart Contracts
While the concept sounds novel and praiseworthy, there are some practical issues that need to be addressed.
Scalability
In a few cases, the working of AI and smart contracts could work perfectly. But things aren’t the same for most other blockchains. The integration of AI agents prevents smart contracts perform some of its core functions. This becomes distinct in the scalability of contracts and decentralization.
Privacy and Security
While AI fixes some security, it creates some unique challenges too. AI is not designed to follow decentralized protocols. It gives results mostly from centralized sources which raises some serious security concerns.
Computational Issues
AI requires high computation power just like the minting of cryptocurrency. Together, they make the whole operation a lot costlier. It may be affordable for well-funded projects, but not for startups.
Future Lookout
Even with some challenges, AI agents for smart contract management are gaining popularity. Many industries have already started adopting this newfangled technology. Companies that deal directly with lots of paperwork and backlogs have it as a go-to solution. From logistics agencies to law firms, many businesses have found AI agents in smart contracts very useful. Moreover, the future looks quite favourable too. Experts are hoping the few existing challenges get resolved soon.
AI certainly makes blockchain better in many ways. The advancement in smart contracts raises many other possibilities, too.
