How Does the Immutability of a Smart Contract Affect Risk Management?
Immutability means the contract code cannot be altered once deployed on the blockchain. This drastically reduces execution risk, as all parties are guaranteed that the terms will not be changed mid-agreement.
It also removes the risk of a counterparty reneging on the deal. However, it introduces smart contract risk, as any bugs or vulnerabilities in the initial code cannot be easily patched.
Glossar
Smart Contract
Code ⎊ The contract is fundamentally self-executing code deployed on a distributed ledger, embodying the terms of the agreement in an immutable format.
Regulatory Compliance
Framework ⎊ Regulatory compliance involves adhering to the laws, regulations, and guidelines established by governmental and financial oversight bodies.
Immutability
Provenance ⎊ Immutability within cryptocurrency, options, and derivatives signifies the unalterable record of transaction history and contract terms, crucial for establishing trust and mitigating counterparty risk.