Smart contracts are revolutionizing investors' handling of their crypto investments.
From security to automation, risk reduction to efficiency improvements, there are several key ways in which smart contracts are enabling advanced investors to explore greater possibilities.
Automation and Efficiency:
Execution of automatic trades, transfers and other actions based on predefined conditions and rules is reducing the need for manual intervention as well as limiting mistakes due to human error.
Complex Investment Strategies:
The implementation of sophisticated investment practices such as automated portfolio rebalancing, stop-loss and take-profit orders, and dollar-cost averaging are all made possible by smart contracts.
Enhanced Security:
A significant concern for all investors, not just advanced ones. Smart contracts stored on the blockchain are tamper-proof and transparent, and also provide a clear audit trail.
Reduced Counterparty Risk:
Taking intermediaries out of the picture by using smart contracts minimizes the risks of defaults and other negative outcomes. Smart contracts hold funds in escrow until conditions are met and fulfilled.
General Risk Management:
Automatic enactment of risk management strategies including collateral management in DeFi lending, and liquidation procedures, are ways in which smart contracts are helping investors mitigate risk.
Asset Tokenization:
Creation of tokenized versions of traditional assets by smart contracts is helping increase investment accessibility.
The descriptions provided above are all based on publicly available information, and cannot be considered as financial advice or encouragement to invest. Sources of information used in this post include Investopedia and IBM. All transactions involving digital assets involve certain risks, which you should familiarize yourself with prior to any investment.