Open Money and smart contracts
How programmability and automation is changing finance

Smart contracts are another key piece of Open Money infrastructure. In a lot of ways, smart contracts embody the most important elements of what makes Open Money so revolutionary or game-changing.
Smart contracts make money composable and programmable. They also make money more interoperable. Some day, smart contracts will be the thing that our money-managing AI agents interact with to pay our bills, manage our finances, or make investments for us.
In some regards, you could say that smart contracts are one of the key innovations of crypto, and one of the most important concepts in decentralized finance.
Put simply, a smart contract is a self-executing program that is permanently stored on a blockchain. When people write smart contracts, they can create a mechanism that automatically enforces parameters or an agreement when certain conditions are met.
Smart contracts solve for two main things. First, they create a level of automation that drives efficiency. A simple smart contract might say something like, sell X% of my position in Y when the price moves up 10%. But a smart contract could also have more sophisticated parameters that are automatically executed. Like, I want to buy $5,000 of BTC if the price dips below 15% of the all-time high, etc.
Where things get interesting is when smart contracts can interact with real-world data. The result is that they can leverage data to automate important financial actions based on real-time information without needing the resources or expense of a trusted third-party. You could imagine scenarios like crop insurance premiums tied to weather patterns or automated car insurance based on how much you drive.
Smart contracts also make it possible to create new kinds of financial products that take advantage of automation and programmability. These new products, which range from fractional investing and basic money management to more complex trading setups, explain why DeFi has taken off so quickly.
Despite all of their promise, smart contracts aren’t without their drawbacks — the biggest issue is security. Since smart contracts are immutable once deployed, any vulnerabilities in the code can be exploited indefinitely unless mitigated by external mechanisms.
Bugs, misconfigurations, and malicious exploits have led to high-profile losses in DeFi, with hackers draining billions from insecure protocols. The reliance on oracles — external data feeds that smart contracts use to interact with the real world — also introduces risk, as manipulated or unreliable data can trigger unintended contract executions.
But like the rest of crypto infrastructure, smart contracts are improving including new kinds auditing, formal verification techniques, and robust security tactics. Just as the financial world has built layers of risk management over centuries, the crypto ecosystem must do the same.
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