Smart contracts are digital contracts or pieces of code that are self-executing and self-enforcing with the help of blockchain or distributed ledger technology. Smart contracts greatly reduce the need for trusted intermediaries and enable automated performance and enforcement of the terms of the agreement. Smart contracts find wide application in payment processing, financial derivatives and loans, asset registry, content/user rights management, identity management, insurance claims processing, supply chain monitoring etc.
Market Opportunity:
The opportunity in the area of financial services automation offers significant potential for growth of the smart contracts market. Smart contracts can automate many routine back-office functions in areas such as lending, insurance underwriting, financial reporting etc. without requiring human intervention. They allow streamlining processes, reducing transaction costs and turning around applications and claims more quickly. For example, smart contracts improve efficiencies in loan origination by automating steps such as eligibility checks, compliance verifications and fund disbursal based on pre-defined conditions. They are also being implemented for automated insurance underwriting and claims settlement based on policy terms reducing processing times. The ability of smart contracts to eliminate middlemen and automate manual, paper-intensive workflows in financial services makes this a major market opportunity driving increased adoption over the forecast period.
Porter's Analysis
Threat of new entrants: The threat of new entrants is moderate as developing and deploying blockchain based smart contracts requires significant technical expertise and infrastructure investment.
Bargaining power of buyers: The bargaining power of buyers is high given the abundance of options available and standardized nature of smart contracts. Buyers can switch between platforms easily.
Bargaining power of suppliers: The bargaining power of suppliers is moderate given rising demand and need for expertise in developing blockchain applications and platforms.
Threat of new substitutes: The threat of substitutes is moderate as alternative solutions are emerging though none have the scale and network effects of incumbents yet.
Competitive rivalry: Competitive rivalry is high given the presence of numerous startups and established firms targeting the smart contracts market.
SWOT Analysis
Strengths: Smart contracts enable automation of contractual clauses without intermediaries lowering transaction costs. The technology provides transparency and security of transactions.
Weaknesses: Bugs and flaws in smart contract code cannot be patched or corrected once deployed on blockchain. Understanding the legal intricacies of smart legal agreements is complex.
Opportunities: Growing adoption of blockchain technology across industries is expanding use cases for smart contracts in insurance, banking, real estate sectors among others.
Threats: Vulnerabilities may still exist in smart contract infrastructure exposing networks to hacking risks. Regulatory uncertainty poses challenges to commercial adoption.
Key Takeaways
The Global Smart Contracts Market Demand is expected to witness high growth supported by expanding blockchain adoption.
Regional Analysis: North America currently dominates due to extensive technology development and presence of major players in the region. Within smart legal agreements, payment applications account for the largest share with smart contract platforms handling payment transactions, digital asset exchanges etc.
Key players operating in the smart contracts market are DeviantArt, Nifty Gateway, SuperRare, Foundation, MakersPlace, KnownOrigin, Async Art, ArtBlocks, OpenSea, Rarible, NTWRK, ArtStation, Artsy, Saatchi Art, Singulart, DigitalArt4Climate, Hic et Nunc, Showtime, Verisart, Artmajeur. Major players are focused on scaling platforms, expanding developer networks and forming partnerships to drive wider commercial use of the technology.
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