16 June 2020
Smart Contracts: A Life-Changing Blockchain Application
The invention of blockchain technology has brought forth a revolution in our world.
Blockchain technology is gradually bringing innovations into every sphere of life. One of the most popular applications of blockchain technology is Smart Contracts.
Let’s understand how Smart Contracts are making life easier by reducing the demand for mediators and their commission.
What Are “Smart Contracts”?
Before getting started, we need to ask a few questions.
Would you be comfortable doing business with someone you barely knew?
If no, What’s the reason?
Lack of trust?
Have you ever bought a house or a car? Or claimed insurance?
Can you recall how frustrating the entire process was? Usually, these involve lots of long, tedious steps, verifications, approvals, and meetings with various mediators.
What if we there were a platform for the entire complicated process involving all “IFs” and “BUTs”? What if the whole process became super quick with no possibility for human error and tampering?
Sounds great, doesn’t it?
Indeed, this is the concept that brought Smart Contracts to fruition, and this is how they seek to make life more accessible than ever before.
Smart contracts are self-executing contracts written in lines of code, containing all the terms and conditions agreed upon by all the parties involved. It involves a set of conditions or rules (agreed by each party), on meeting these conditions the code (contract) self-executes and produces the set output. You can use Smart Contracts for exchange or trade of items of value, be it property, shares, money, etc.
In other words, we can say that Smart Contracts eliminate the need for a third party or any mediator. Once the contract has written in the code with all pre-requisites for it to initiate execution, no party can change the conditions without consensus. Therefore, this completely eliminates the possibility of fraud. There would be no need to use typical contracts because every party can monitor the real-time status of the contract, and no human interference would be possible.
How Do Smart Contracts Work?
Smart Contracts are saved on the blockchain platform. This means that the Smart Contract cannot automatically access any information that is off-chain on its own.
If a pre-requisite to self-execute the contract requires external information or information which is not available on the blockchain network, they get it through a program called Oracles. Oracles provide the off-chain information necessary to execute the smart contract, in electronic format.
The Key Takeaways
- No need for third-party verification: Smart contracts do not need any third party to verify or approve any step involved, these are self-verifiable by the parties involved.
- Self-executing: Smart contracts do not require any third-party involvement to execute the contract. They are self-executing contracts.
- No trust breach and tamper-proof: All the details are tamper-proof as they are stored on the blockchain network and shared with all the nodes on the network. Thus, no possibility of tampering or fraud.
- Transparency: Every detail and clause of the contract will be stored on the blockchain, and each party can remain updated with real-time progress of the contract. Smart Contracts bring more transparency to the entire process.
- Safety: Smart contracts are safer than traditional contracts because all information is saved and protected with the help of cryptography.
Why Are Smart Contracts Important?
Smart contracts are something that can make a massive difference to traditional forms of business collaboration, trade, etc. These can enhance the efficiency of the entire process by saving time, efforts, and cost of contract-execution by eliminating the need for third-party involvement. Smart contracts are a potential tool for bringing innovation and efficiency in every field. Let’s have a look at some industries where you can make use of Smart Contracts.
- Buying a property or transferring property rights
- Mortgage or loans
- Managing intellectual property rights
- Supply chain accountability
- Business collaborations
- Employment contracts and many more
In the future, wherever a traditional contract can be made, you might be able to opt for the security and transparency of a Smart Contract instead.