O ne of the finest things about the Blockchain is that it is a decentralized system that exists between all legalized parties and there is no need of forfeit intermediaries (Middlemen). Blockchains have their own problems; however, they are unquestionably faster, cheaper & safer than the conventional system and that is why the government and banks are shifting towards them.
In the year 1994, Nick Szabo, a legal scholar & cryptographer, comprehended that the decentralized ledger could be utilized for smart contracts, or else called self-executing contracts, blockchain contracts, or digital contracts. According to the format it can be converted into computer code, replicated on the system and can be supervised by the network of computers that operates the blockchain. This would also result in ledger feedback like transferring money & receiving the product or service.
What are Smart Contracts?
Smart contracts help you to exchange your money, assets, shares or anything of value in a transparent, conflict-free way by keeping it away from the services of an intermediary (middleman).
The best mode to illustrate smart contracts is to compare the technology to a vending machine. Usually, you would go to a lawyer or a legal representative, pay them & wait as you receive the legal document. With the use of smart contracts, you can drop a Bitcoin into the vending machine & your escrow, driver’s license into your account. Consequently, smart contracts not only term the guidelines & penalties around an agreement in the similar way that a conventional contract does, but also involuntarily implement the responsibilities.
Let take an example that you rent an apartment from ABC. You can do this through the Blockchain by paying in cryptocurrency. You get a receiving which is held in the virtual contract; ABC will give you the digital entry key which will come up to you by a specific date. If the key doesn’t come on time, the Blockchain releases a reimbursement. If ABC sends the key before the rental date, the function holds it releasing both the fee and key to you and ABC respectively when the date arrives. The system functions on the if-then principle and is witnessed by hundreds of individuals, so you can expect a flawless delivery. If ABC gives you the key, he is sure to be paid. If you will transfer a certain amount in Bitcoins, you receive the key. Confidential documents are involuntarily canceled after certain time period & the code cannot be impeded by anyone without the other knowing about this as all participants are simultaneously alerted.
You can use smart contracts for all sorts of situations that range from financial derivatives to insurance premiums, breach contracts, property law, credit enforcement, financial services, legal processes and crowdfunding agreements.
Smart Contract In Different Industries
Smart contracts can be employed in different space from financial services to healthcare to insurance. Here are some examples:
Smart Contracts and Supply Chain and Logistics
A smart contract permits you to track the movement of the product from the factory to the store shelves. IoT devices can mark location data directly to a smart contract that allows you to simplify the tracking process. Such feature provides you the real-time visibility of a complete supply chain. If sent goods are jammed at customs, you will know about it straight away. Advanced tracking provides you the added benefit of reducing the threat of fraud & pilfering as well.
Smart Contract And Automobile
There is no doubt that we are rolling from idle pre-human vertebrates to super-smart robots. Think of a future where everything is computerized. Google is moving there with smart glasses, smartphones, and even smart cars. That’s the area where smart contracts facilitate. One such example is the self-parking or self-autonomous vehicles, where smart contracts could take part as a kind of oracle that could identify who was the culprit in a crash; the driver or the sensor, and countless other variables. Utilizing smart contracts, an automobile insurance corporation could indict rates in a different way based on where, and under which, conditions clientele are operating their vehicles.
Smart Contract And Real Estate
You can earn more profit through smart contracts. In general, if you want to rent your bungalow to somebody, you have to pay a middleman like Craigslist or a newspaper to promote and then again you will need to pay an important person to verify that the client paid rent and followed through. The ledger cuts your expenses. All you do is pay through Bitcoin & encode your contract on the ledger. Everyone witnesses and you carry out regular fulfillment.
Smart Contracts And Healthcare
Health record of a patient can be encoded & stored on the blockchain with a private key which will provide access only to specific people. The similar approach could be used to ensure that investigation is conducted through HIPAA laws (in a confidential and secure manner). Receiving of surgeries can be stored upon a blockchain & automatically sent to insurance provider as proof of delivery. The ledger could be utilized for general healthcare management like guideline compliance, supervising drugs, testing results & controlling healthcare supplies.
Smart Contracts And Entertainment Industry
Smart contracts can even facilitate with the royalty payments problems within the industry. There are usually some known drawbacks like determining the ownership of a particular song or the other work of art that is lawfully obligated to receive royalty payments. A smart contract resolution will facilitate in tracking all possession rights. Any amendment in information needs the approval of all parties on the network that ensures trust in possession. Dealing is broadcasted across the blockchain, thus any stakeholder will right away emulate this in his accounting.
If you desire to implement smart contracts for your business, there are two major alternatives for you. You can either rely on software Development Company that distinguishes better how to deal with it or utilize a smart contract platform such as Ethereum.
Know what smart contract offers you:
- Autonomy – You are the one who is making the agreement; there is no need to rely on a lawyer, broker or other intermediaries (middleman) to authenticate. This also knocks down the threat of manipulation by a third party, as execution is handled automatically by the network, rather than by one or more, probably biased people who can make a mistake.
- Trust – Your legal documents are encrypted on a shared ledger. There is no other way that someone can declare that they have lost it.
- Backup – Just imagine if your bank lost your savings account. On the Blockchain network, your friends have your backup. Your confidential documents are replicated many times over.
- Security – Cryptography, the encryption of websites, keeps your legal documents secure. There is no way to hack your confidential records. In fact, it would take an unusually smart hacker to crack the code & break-in.
- Speed – You’d normally have to pay out chunks of time & paperwork to manually process your confidential documents. Smart contracts make use of software code to automate tasks, thereby shredding hours off a range of business procedures.
- Savings – Smart contracts help you to save you money as they knock down the existence of an intermediary (middleman). For example, you have to pay a notary to witness your transaction.
- Accuracy – Automated contracts are not only cheaper and faster but also shun the errors that arrive from manually filling out heaps of forms.
Although the smart contracts has a lot of potentials, we can just start using them regardless of anything until agreements that can be made with government, companies etc to tokenize or in some form signify physical assets so that they can be traded & the consumer can trace their purchase without the government or a company on which they can rely.
With the use of smart contracts, we only need to secure the beginning of the chain to the real world. All ownership transactions after that can be completed digitally. Or rather the work generally was done by the trusted third party can be done automatically. People still need to interact with the outer world & confirm things before they sign off.