One of the key social and economic problems that blockchain solves is
What are Smart Contracts?
Smart contracts are pieces of code (software), containing a set of rules and terms, that lives on a blockchain network.
They are self-executing contracts containing the terms of the agreement between the parties involved in the transaction, directly written into lines of code. This code is and the agreement is distributed across the whole decentralized blockchain network.
Smart contracts allow executing trusted transactions and agreements, between anonymous parties, without the need of a central authority, trusted third party, middlemen, legal system or another external enforcement mechanism. Stored on a blockchain network, transactions are rendered transparent, traceable and irreversible.
Smart contracts can find their use case in a large portion of our every-day life. They can be used for storing patent records, ownership and verification of digital assets, exchanging value (money), shares, data, property or anything else in a transparent way without involving third-party services like a middleman.
Relying on a smart contract to execute a transaction is much quicker compared to the real-world contracts, which require man-hours for paperwork and. documentation.
Key take aways
Smart contracts contains the following characteristics:
- Self-executable and auto-enforcing – as agreement terms are stored in the code, the smart contract automatically enforces the execution of the rules after being triggered by action from parties involved
- Immutable – being stored on a blockchain they are immutable and
- Verifiable and Safe – the code is transparent and can be verified and it is cryptographically safe
- Cost saving – removing intermediaries leads to saving costs and fees
- Speed – smart contracts can be used for automating business tasks, thus saving hours of paperwork
- Autonomy – removes the need of third parties or escrow/broker agents
How can we help you?
We are providing full-stack smart contracts development, auditing, and consulting.
So if you are wondering how smart contracts can help your business, or you are just curious about their potential, use-cases and capabilities and you need expert advice, development or consulting – our services are just what you need.
Questions & Answers?
What Is a Smart Contract?
In general, contracts are agreement papers that have a set of terms and conditions that clearly define how to process a transaction, and outlines the role and responsibilities of the parties involved in it. If you replace the same terms and conditions in a traditional contract with lines of codes that self-execute when certain conditions are met, you’ll have a smart contract.
In other words, a smart contract is an agreement between two people in the form of computer code that is run on the blockchain, so it is stored on a public database and cannot be changed.
How do smart contracts work?
First, as in a traditional contract, the contractual parties should determine the terms of the contract. Since this is a “smart” contract, after the contractual terms are finalized, they are translated into programming code, created with the help of Ethereum, which is a popular Blockchain platform and programming languages such as Solidity, Python or GoLang.
Basically, the code represents a number of different conditional statements that describe the possible scenarios of a future transaction that works on a condition-based principle IF-WHEN-THEN. There is no limit to the conditions one can include in a Smart Contract. And, it’s only when these set of conditions are successfully met, the Smart Contracts would execute and validate a transaction.
What problems do smart contracts solve?
Smart contracts have the ability to solve some really fundamental problems regarding the trust, transparency and accuracy difficulties in traditional smart contracts systems. Here is a list of problems that smart contracts solve :
Speed, efficiency and accuracy – Because smart contracts are digital and automated, there’s no paperwork to process and no time spent reconciling errors that often result from manually filling in documents.
Trust and transparency – Because there’s no third party involved, and because encrypted records of transactions are shared across participants, there’s no need to question whether information has been altered for personal benefit.
Security – Blockchain transaction records are encrypted, which makes them very hard to foul play.
Savings – Without the need to involve any third-party, middlemen or intermediary, individuals and businesses would be able to significantly reduce operational and transactional costs. Thus, saving a lot of money in return.
What industries use smart contracts?
Smart contracts come with many benefits like speed, efficiency, accuracy, trust and transparency and security. There are many industries that can implement these benefits to optimize their internal processes.
Here is a list of industries that can use smart contracts:
Insurance – With Smart Contracts, an insurance company can automate the claim process by defining terms and conditions or setting pre-agreed parameters that will help companies improve customer relationship and trust.
Supply Chain – Supply chain can use smart contracts to streamline supply chain processes, track inventory, manage invoices and reports to monitor compliance. Thus, leading to reducing fraud and costs.
Real Estate – with smart contracts one can easily create agreements(renting, buying or selling) and make transactions all without paying a dime to brokers, middlemen or real estate agents.
Health Systems – Medical and healthcare industry can use smart contract to access patient identity and cross-institutional data, therefore providing better medical services.
Management – Smart Contracts can help with smooth business management and seamless workflow within an organization.
Banking – From loans and payments to online identity management and other financial operations, Smart Contracts can help streamline various processes safely and securely.
Government – One area where smart contracts can be a great aid for the government is the overhauling of the Voting systems.
Charity – Smart contracts could make charities more accountable and increase trust among supporters.