What is a smart contract in blockchain?
Smart contracts are contracts made between a buyer and a seller with the agreements and the terms written in code. It’s a contract based on blockchain technology, which means that the contract exists across a distributed network with transparency and traceable, irreversible transactions.
One of the fundamental characteristics of smart contracts lies in the fact that they are decentralised and do not rely on a central authority, system or external system to enforce the terms. This means that the terms and conditions rest solely on the buyer and seller and the agreement is enforced within the technology.
In the basic form, a smart contract is essentially lines of code stored on a blockchain that executes automatically once the conditions are met. At the fundamental level, they can be perceived as programmes which operate in the same way set up to run by those who have developed them.
It’s important to note that a smart contract does not necessarily compromise an official or legal binding agreement. Rather, smart contracts are a way of ensuring obligations are performed owing to the technology and automated response and code in place. As a result of the automated obligation (if a contract is in place, an action will occur according to the terms) it is imperative that the code and programming language is sound.
The benefits of a smart contract
Smart contracts are fantastic for business collaborations, where agreements are enforced without external legal action.
- Faster because you don’t need to spend time processing paperwork and compiling legal documents needed for traditional contracts.
- Cheaper because there’s no need for intermediary resources to validate the terms and verify the agreement.
- Automatically backed up and information won’t risk any loss.
- More secure for managing agreements because the agreement is written in transmutable irreversible code which is encrypted and extremely difficult to hack.
What are the uses of smart contracts?
There are countless use cases for smart contracts.This ranges from finances to supply chain agreements. Smart contracts can be used for the following:
When it comes to processing related to insurance claims, processing financial documents, checking on the legal regulation and checking everything is in order, smart contracts can be immensely helpful. Digital checking can introduce assistive tools for elements in the financial field like bookkeeping and securing records. It also introduces an inherent trust across the board because of the transparent nature.
Healthcare and medical documents
Smart contracts and blockchain technology can act as a means to store health records of patients using a private key which only particular individuals would be able to access. This offers security of documents but also means that there can be a database which health-care facilities can share. As a non-public data-base, this would heighten security and reliability of health care forms and would increase the ease of aspects in the medical field such as drug-monitoring, regulation compliance and supply management.
As a voting system
Smart contracts offer a safe, reliable medium which makes a system of voting much more secure from manipulation or rigging. The use of smart contracts would also allow for transparency, so it would be evident if there is an attempted breach.
In addition to the security of the system, the process of voting also benefits using smart contracts because it would offer a higher volume count. This is because of the ease and automation for voters who wouldn’t need to stand in a queue, show identity, rely on human resources and slow manual form-filling and tallying.
Supply chain and logistic management
Supply chains experience issues when it comes to manual, paper-based approaches. Not only is the process outdated because it’s tedious and requires unnecessary amounts of time, but it also suffers the risk of fraud and loss. Reducing human error and alleviating the laborious process in the supply chain would address the risks and offer a more secure, accessible system.