It can be defined as a computer program which is alternatively known as Smart contracts. It allows direct control over the transfer of digital assets or currencies between any parties concerned, bound by certain parameters or condition. It essentially defines the penalties and rules associated with an agreement which is quite similar to any conventional contract that enforces the implementation of the defined obligations.
The information used is assigned with a specific value which then sets the rules within that contract, executing the necessary actions accordingly. An easy example of this would be the assessment of whether an asset should be sent or returned to the original owner of an asset.
These contracts are an implementation that is stored within Blockchain tech. Blockchain is a decentralized and globally accessible ledger which underpins cryptocurrencies like Bitcoin, Ethereum, et al.
TLDR: If we had to explain smart contracts in short then it could be defined as a computer protocol which aims to digitally verify, enforce or facilitate the performance or negotiations associated within a contract. They also allow the performance of any credible transactions conducted between parties without any third-party intrusion.
Smart Contracts are Complex: Here’s how They can be Used
Smart Contracts are essentially complex and their usability transcends beyond the simplicity of defining transaction parameters. Their implementation can be used to execute several kinds of transaction spread across different fields i.e. from insurance to legal processes to even crowdfunding. Their implementation can essentially set all kinds of financial parameters and the derivatives associated. They can potentially disintermediate the financial and legal sectors, particularly through automation and simplification of processes that require people hiring lawyers & banks.
The role of any lawyer can soon be shifted to smart contracts once they gain enough traction in the areas that pertain to adjudicating conventional legal contracts by making customizable templates for these contracts. Moreover, the ability of these smart contracts doesn’t only restrict itself to the automation of these repetitive processes, they can also control the behavior with real-time risk assessment and auditing, furthering compliance.
The flexibility it provides can be used by several developers to store any kind of data within the blockchain sphere with a wide range of options which the end-users can avail of. The deployment of smart contracts won’t just change lives, it would radically change the course of work, or how we have looked at work as of yet.
As discussed, smart contracts can be used across several other sectors that range from healthcare to financial to even insurance. Some of these sectors are mentioned below:
Supply chains are often hampered by the existing paper-based system where the forms are being passed through several channels before it gets approved. This increases the chances of fraudulent activities and losses that are unprecedented. But with the introduction of Blockchain, the intrusion of such instances gets nullified since it provides an accessible and secure digital version to the parties involved in the existing chain. This system can thus automate the regular tasks and their subsequent payments.
With a broker involved, the chances are higher for a hiked-up fee for something that you could’ve paid the original price otherwise. So, with the implementation of smart contracts, that extra money gets saved. Without it, you’d naturally pay for ads, or hire a middle man, which again requires additional fees. The incorporation of the ledger, on the other hand, would essentially cut down on the redundancies of paying service fees for something which you didn’t need to begin with. You can pay via cryptocurrencies like Bitcoin while encoding the contracts on your ledger. Everyone across the platform can see the contract which accomplishes the fulfillment of obligations. Anyone within the real estate sector can use this for effective management and for a streamlined workflow.
The inclusion of blockchain and smart contracts don’t only streamline the workflow, it also provides one ledger which can be called trustworthy. There will be a smaller number of snarls in the entirety of the workflow structure due to the automation, transparency, and accuracy the system provides.
Conventionally, a business structure has to endure a due process which is run through several channels for approval, including the assortment of internal/external issues. The blockchain, however, streamlines this and essentially cuts down several other discrepancies that typically might appear within such independent processing, leading to delays and expensive lawsuits.
Health records, personal or otherwise can be stored and encoded with the help of smart contracts. It would just require a private key that will grant access to the individuals concerned. This strategy can also provide research possibilities in a confidential and secure way.
Insurance companies can also access the medical receipts as a proof-of-delivery that’s stored within the ledger. The implementation can further benefit other management structure within healthcare sectors such as regulation compliance, drug supervision, medical history, test results and management of supplies.
The voting system is vulnerable to exploits which means that it can be rigged easily. But with smart contracts, such instances can be allayed with the introduction of a better system that provides better security. Ledger-protected votes would all be encoded which means that if someone wanted to exploit would require a lot of time and computing power to hack the entire system.
Smart contracts in this sector would also solve the issue of low-voter count by providing better accessibility. Much of the problems arise from the existing system of identification, queues and paper works. But with smart contracts, the voters can easily vote online which subsequently eases the entire process.
The progression of innovation is apparent and innovation has always been the key all along. A future that banks of automation are not anticipation anymore, it is a future which can very well be executed. Google has already gotten a portion of it with their AI, smart glasses and cars. This is also where the implementation of smart contracts comes in.
One instance would be the self-parking cars where the implemented smart contract can detect the defaulters causing a crash. With the smart contracts, the insurance companies can also charge based on the condition the driver was in while operating their car. This exactly would lower the discrepancies associated with car insurance and unfair assessment.
Advantages of Smart Contract:
There are various ranges of advantages that one can avail of. Smart contracts won’t just be changing lives, it will be changing the way we have looked at mundane regularities.
Some of the advantages pertaining to smart contracts may entail the following:
- The autonomy you will be able to exercise is one of the most appealing parts of smart contract implementation. You will no longer be required to rely on any third party or any such intermediaries for approval. It is also the case that it streamlines the chances of encountering any sort of malpractices propelled via third parties. The execution will solely be done through the network, rather than individuals where bias is the primary variable as opposed to the objectivity that smart contract will provide.
- You will have zero trust issues as the documents you use will be encrypted within the shared ledger. There is literally no way you can lose the documents which is a case for many instances.
- Imagine losing everything that you have ever saved on your saving account. While this has been a reality for banks when they lose saving accounts, blockchain will have your back like a friend. Your documents will have multiple copies and will also be duplicated several times.
- Cryptography will make sure that your websites are kept safe along with your documents. There will be zero chances for vulnerability since hacking it would require god-like computing power and a lot of time. Infiltration is next to impossible, so you wouldn’t have to delve into the paranoia of being hacked.
- Paperwork takes a lot of time and effort. Your impatience can easily vouch for that. When it comes to smart contracts, user can just use the program code to start the automation of tasks, thereby streamlining the hours invested otherwise.
- Automated contracts are cheaper and faster. They also avoid any possibilities that come to errors while filing the various details. The paperwork also goes through a series of channels for approval, which makes malpractices a possibility as well.
- It provides a range of options and flexibility.
The Blockchains Which Supports the Smart Contracts:
Bitcoin which is one of the largest crypto franchises can process BTC transaction with the help of Blockchain technology. However, it has a limited ability to process documents.
NXT is a blockchain platform available for the public which has a series of limited templates for smart contracts. If you are not a coder yourself, this can be a very good place to make use of things that are readily available.
This is a name which runs parallel to Bitcoin and offers various other scopes as opposed to Bitcoin when it comes to processing smart contracts.
Ethereum is also another widely used public blockchain platform and has advanced options for processing contracts. You can also code things according to your wish but you’d be required to pay for the computational power via ETH tokens.
The Future of Smart Contracts:
The biggest role smart contract has to play for future implementation is the entanglement of the webs where each of these intricate issues hang from. For instance, in Cornell Tech, the lawyers who have vouched for smart contracts are constantly researching the concerns that may arise for furthering the contract implementation.
When it comes to this particular venture, it would seem like we are stepping into the territories of fiction whereas it is more plausible than ever. The anticipation is now being manifested into a reality where we are currently living in.
Search Compliance which is an IT resource center has suggested that smart contracts will effectively be impacting various niche industries like law. In that very sector, lawyers will be able to transfer from writing the conventional contracts to making standard smart contract templates which are very similar to the traditional contract templates on various websites. Other industries like credit companies, insurance agencies, merchants and even accountants will be able to employment contracts for real-time assessment of risk and for audits.
The smart contracts can be located in the future through a merging between digital and paper content, a hybrid if you may add. These contracts will subsequently be verified through the blockchain technology employed with a physical copy to substantiate itself under paperwork.
There is a huge potential for smart contracts to develop into a full-fledged system that can accommodate any given industry that is there. While the future is filled with possibilities, smart contracts are the possibility you can vouch for. There are various countries that are already starting on blockchain implementation.
Canada is one of the front runners of this particular venture has been providing government assistance for blockchain implementation. Cryptocurrency is the future which can largely streamline the various problems that the world is facing with Fiat. It doesn’t only surface as a primary structure for regularities, it also implements automation, something that we have seen in fiction. The cumulative time saved will also be put in some good use, increasing the overall productivity of industries. It is the catalyst that the world needs and also the structure that the world can bank on for a better reality.
Since there is literally no end to the number of industries it can impact, the implementation can only be a testament to the success it might harbor. It holds the potential to alter prospects of the reality we are in as of yet. The change won’t just be a possibility for technical changes but will also be responsible for a tectonic shift within the social spheres. That isn’t just astounding but is a future that we can vehemently count on.
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