The Pain of Classic Contract
Do you make agreements? And are you always 100% Confident that the other party would Fulfill Every Single Commitment? The answer is obvious! And here comes the ache of both parties who are using the traditional approach to contract:
- Distrust between the two parties
- Fear of non-completion of tasks by one of the parties
- Multiple intermediaries (or middlemen) between the parties can be an insanity
Now, if the same agreement is made digitally on a computer and executed automatically, it will stamp out not only mistrust, financial and other fears but put an end to needless intermediaries too! And it has become viable to apply it in any trading domain. This Digital Contract is generally known as a ‘Smart Contract‘
Get to Know Smart Contracts
In plain words, the smart contract is a piece of Self-Executing Code that is programmed onto a blockchain and defines the terms of a specific transaction. It automatically executes and performs its assigned tasks or set of instructions upon the receipt of an input
Ever wondered why a bulk of industries around the world is eventually twirling their interest towards the booming smart contract technology on a blockchain?
WELL, the concept of a smart contract existed even before the launch of Bitcoin in 2010 as it was already put forward by Nick Szabo in 1997. Nonetheless, the invention of ‘Ethereum’ in 2014, at last, brought its idea into existence. Five years later, after the adoption of its idea by various other blockchain projects, developers now can conveniently build distributed applications (dApps), code smart contracts, and issue digital tokens on their desired blockchain platforms.
The “blockchain” is a distributed ledger (a kind of digital registry) where all transactions are recorded. Here, it records and stores the out-and-out history of your transactions that you can easily view. Blockchain technology makes sure that all the programmed data and record is fixed, accurate, encrypted, and transparent. It is a platform where two or more parties clinch business deals Without Even Knowing Each Other!
Common Properties of Smart Contracts
Smart contracts share some properties that are common among them.
- Just like RAM in a computer, smart contracts also have a state which is shared over the entire network, so each node that’s running this blockchain holds a copy of the contract’s state.
- These digital contracts are irreversible and cannot be altered.
- There’s no room for reframing the smart contract as its logic cannot be twisted, hence the name.
- They could be programmed to deliver funds for your or someone’s fee each year or to deliver payment once you acknowledge receipt of goods.
Reasons for Turning to Smart Contracts Technology
Currently, a great deal of industries is making up their minds to do business by using smart contract technology. Their reasons are valid on the score of its ultimate benefits including accuracy, transparency, autonomy, and safety.
Benefits of Smart Contracts
Following are some of the Diverse Benefits or reasons for using a smart contract.
No Need of Intermediary
A smart contract’s main attribute is that it is Trustless. That is, you don’t have to pay extra money for taking it to the help of any lawyer or notary as it lets you transact with people around the globe without the need of any expensive intermediary, which ultimately minimizes the costs of middlemen.
No Fear of Manipulation
There’s no fear of manipulation, as no third-party is entailed and execution is handled automatically by the entire network which also leads to the minimization of administration and saving time.
A smart contract executes transactions automatically according to pre-defined rules and since every specific detail is backed up onto the blockchain, the contract guarantees deep-dyed safety of data. So, that no one can alter it for their personal gains.
Can Be Used Anytime, Anywhere
You can use this powerful new technology anytime and anywhere in the world when trading real estate and movable property.
Paper-free, Precise & Saves Time
The less interaction between the parties aids in speeding up the deal process, consequently saving a substantial amount of time and money. Moreover, since there’s no paperwork to process and no extra time is devoted to reconciling errors, the digital contract is super-fast and less prone to errors that often occur in human-filled contracts.
Hard to Hack
A Smart Contract is hard to hack. No one can either lose such a contract or make it disappear as you’ll always have access to it. Every bit of data on the blockchain is recorded and encrypted, that’s why you can count on a smart contract on the grounds that it is truly safe and secure.
Although industries are shifting from classic contracts to digital ones, they might face one challenge. And that is its ‘irreversibility’. If the code has any bug, then an unwanted transaction occurs as the contract executes exactly as it’s been coded, including all bugs and there’s no way introduced to date to undo it.
By now, it must have been clear and made sense to you why a smart contract could be so demanding. There are umpteen of dApps over different blockchain networks that use the coded contracts in numerous ways and to divergent ends. So, now let’s take a closer look at the industries where this efficient technology could be applied.
Areas of Its Applications
Digital contracts are knocking the worlds of real estate, finance, banking, gaming, healthcare, insurance, elections, and more! They can be used in the following areas of applications:
Government Voting System
The smart contract technology makes the voting system less susceptible to manipulation by providing a secure environment on the score that votes will be ledger-protected which makes it way too difficult to decode. Besides, online voting can significantly magnify the number of participants in a voting system.
Blockchain technology is capable of securely keeping the encoded health records of patients with their private keys. And as far as privacy is concerned, only certain individuals would be provided access to the records. The ledger stores patients’ receipts that can be shared automatically with insurance companies as proof of service. It can also be used to manage supplies, supervise drugs, and regulate compliance. Moreover, you can conduct any kind of research confidentially and securely with the aid of a smart contract.
A smart contract records property ownership of any construction and allows for a cost-effective and more transparent alternative to property title management. It keeps complete track of a property’s location, history, and every single detail. Also, it keeps you safe from any kind of fraud through its tamper-proof encrypted codes.
The traditional system of supply-chain is solely based on paperwork. And to get approvals, the forms have to pass through several channels which notably raises its risk of fraud and loss. While blockchain technology nullifies the risks and grants you a protected and accessible digital version to every party involved in the chain. So, you can painlessly manage inventory in real-time and automate tasks and payments with the help of a smart contract on the blockchain.
Smart contract technology can astoundingly transform traditional financial services in numerous ways. It can effectively carry out routing, error-checking, and transfer the payment to its user when everything’s found appropriate. A smart contract lets shareholders take part in decision-making in a transparent way. Besides, it reduces the probability of infiltration of accounting records and incorporates critical tools for bookkeeping.
Smart contracts help in speeding up and streamlining the claims process. Let’s take the example of life insurance. When someone passes away, a notarized death certificate is provided as soon as the input triggers for the digital contract to grant the payment to the named beneficiaries.
Digital contracts possess the potential to transform different industrial sectors, and that transformation has already been started in industries of real estate, finance, healthcare, insurance, and even elections!
The thriving digital contract technology has opened up a world of possibilities for various use cases of blockchain by dint of providing maximum transparency and precision, bona fide security, and reducing bureaucratic costs. As the years tick by and technology develops, it is beyond the shadow of a doubt that digital contracts will replace the traditional contracts and will be equally playing a vital part in our everyday lives as the internet!