Do you know what Smart Contracts are? It’s a piece of a program that allows businesses to automatically come to an agreement. They are similar to legal contracts but in digital form. Smart contracts are gaining more popularity because they are transparent, faster, and free from errors.
However, can smart contracts be the future of legal agreements? Well, read the full article to know about its advantages, drawbacks, and some notable use-cases. Before that, let’s understand how they work?
How Blockchain-Enabled Smart Contracts Work?
Smart contracts are possible due to Blockchain Technology. It’s the technology behind the most popular assets of the century, cryptocurrencies. It’s a distributed public record shared among the users in a network.
The public record contains each and every transaction or data flow, ensuring transparency and immutability. Due to these features, cryptocurrencies are possible, and you can learn more about them here.
Application in Various Industries
Smart contracts are one of the best innovations which make business agreements easier and quicker. The useful features of smart contracts make them popular in different industries.
One of the primary applications of smart contracts is in the banking sector. Some of the leading banks of the world come with legal agreements through smart contracts. The intelligent feature of the smart contract allows them to maintain transparency. Smart contracts help banks to offer loans, agreements with their partners efficiently, which saves a lot of time and expenses.
Real Estate Industry
Smart Contracts can bring much-needed security to the real estate industry. However, with smart contracts, it’s possible to eliminate those middlemen called real estate agents. This significantly reduces the price of the real estate property.
For example, if you want to purchase a property in a particular location, you need to hire a real estate agent. Typically, real estate agents charge commissions for dealing with the property for you. Hence, the process becomes time-consuming and expensive. With smart contracts, it’s possible to eliminate the mediators and make the process faster, transparent, and cheaper.
Supply Chain Industry
This industry can greatly benefit from smart contracts. The present supply chain model is not efficient because of miscommunication among the parties involved in the network. Due to improper data flow between manufacturers, retailers, and distribution managers, the system contains a lot of errors. It increases the cost and causes delays in the distribution process. With smart contracts, everyone can get real-time information from the network, which will reduce errors and save a lot of time.
Smart Contracts have the potential to make the Voting system more secure and transparent. Although the government claims that the present voting system is secure and transparent, they are less reliable than smart contracts. Since smart contracts are immutable, it’s not possible to change your vote.
Due to their advanced features, smart contracts offer several potential benefits. They are:
- Reliable: Smart contracts are the most reliable way of dealing with businesses. The immutability feature of the Blockchain technology removes the trust barrier.
- Save Resources: There is no need to pay someone to look after your contracts. This significantly reduces the overhead cost.
- Efficient and Automatic: Smart contracts can be automated with time, and it also allows you to automate transactions.
- Safe and Secure: Since smart contracts are encrypted by cryptography (256-bit encryption system), it makes your agreement safe and secure. Changes can only be made when both parties give their permission.
Although smart contracts offer several benefits, they also have some downfalls.
- Immature: Smart contracts have real-world applications, but they are still new in the field. Different industries still need to explore the challenges of smart contracts.
The presented facts show that smart contracts are the future. They can help different industries to come into a legal agreement with less cost and fewer complexities. Learning about blockchain technology will help you easily understand smart contracts and how they work.