[JumpCrisscross]

> counterparty risk is eliminated between bankA and bankB

Correct, but in its place is a new systemic risk with a real-world nonzero probability: the contract itself getting hacked. There isn't analogy for this in modern banking since the equivalent issue would either (a) get rolled back or (b) fold into the bank failing envelope. (There is analogy in pre-modern banking, though it largely revolved around debasement and invasion.)

[csumtin]

True although I'm not talking about Ethereum smart contracts, I'm talking about Bitcoin ones which are very limited and not Turing complete. The lightning smart contract is like 20 lines and has been live since 2018, I feel the probability of the contract getting hacked is very low(famous last words!) https://github.com/lightning/bolts/blob/master/03-transactio...