What Are the Key Differences between a Smart Contract and a Traditional Legal Contract in Finance?

The primary difference is in execution and enforcement. A smart contract is self-executing code that automatically enforces the terms of an agreement when conditions are met.

A traditional legal contract requires manual enforcement through the legal system, often involving intermediaries like lawyers and courts. Smart contracts are immutable and transparent on a blockchain, while traditional contracts are private and can be amended.

Furthermore, smart contracts handle digital assets natively, whereas traditional contracts often require separate payment and settlement systems.