Along with Blockchain, Smart contracts are of eminent business interest. Here you can learn what Smart contracts are? And how they impact the modern business in cryptocurrency, banking, healthcare, real estate, chain management supply, and others.
What is a Smart Contract?
A smart contract is similar to a physical contract, the only difference is it is computer coded and automatically executes all parts of the agreement stored on the blockchain. A smart Contract self-executes the terms and conditions of the agreement between the buyer and the seller. It automatically verifies and updates the terms of the agreement via a computer network. A smart contract removes reliance on the third party. It stores rules for negotiating terms of the agreement, automatically verifies fulfilment and then executes the agreed terms.
Why smart contract?
Smart Contracts introduces a transparent way to do business. The goal of the smart contract is to simplify the business and trade between two anonymous and identified parties without the need for any third party. It creates an environment of trust as the logic and code of the contract are visible to everyone.
How does a smart contract work?
A Smart Contract is a program that encodes business logic and works on a virtual machine embedded in blockchain or any other distributed ledger.
- A team of developers defines the criteria and desired behaviour in response to certain events and circumstances.
- Complex operations such as determining the values, releasing an insurance payment, etc will be coded using sophisticated coding.
- The developers then use a smart contract writing platform to create and test the logic. After the application is written, it is sent for testing purposes.
- Once the authorization process is completed, the contract is deployed on the blockchain or other distributed ledger.
- The necessary combination of events is obtained, and the smart contract is executed. Ready for use.
Benefits of a smart contract
Since it eliminates intermediaries within the blockchain, it helps remove additional fees. It is the most significant advantage of automated contracts.
The contract saves all the essential details with each transaction, which can be accessed along with a complete audit trail.
The terms and conditions of the agreement are visible and accessible to all relevant parties. There is no way to dispute once the contract is established.
Blockchain transaction records are encrypted and are difficult to hack. The Contract is digital and runs on the internet. Thus, executes quick transactions.
The transparent, autonomous & secure nature of the agreement removes any possibility of manipulation, bias, and errors.
Removes the need for intermediates and allows for transparent, direct relationships with customers.
Smart contract use cases
Smart Contracts can improve the healthcare system. They can improve clinical trials, insurance trials, increase access to improve cross-institutional visibility, and boost confidence in patient privacy. It can help in identifying, authorization and authentication of the data.
Supply chain management
Smart Contracts can provide real-time visibility in supply chains. It can be used to track items within the supply chain with full visibility and transparency. A business can use smart contract powered supply chains to improve tracking to a granular level.
Banking is the primary where smart contracts appear to be the most significant. It makes the payment, loans as well as all financial operations automated. It makes it easy to manage the data across the organisation resulting in reduced auditing costs.
Internet of things
There are areas where smart contracts intersect with other technologies, and the Internet of Things is one of them. A combination of smart contracts and IoT can enable significant transformations across industries.
Unlike the traditional centralised business, smart contracts and blockchain foster a new kind of business relationship built on trust. Smart contracts offer immutability and distributed storage, which makes them different from traditional agreements. With smart contracts, every agreement, every process, task and payment can have a digital record that could be identified, validated, stored and shared. The smart contract technology will continue to improve as it gets deployed in countless other industries. Smart Contracts are evolving and will evolve before they are widely adopted in use cases.