Smart contracts, also known as the crypto contract, is a computer program that manages the transaction of digital currencies or assets between two or more parties under specific conditions. A smart contract defines the rules and penalties of any given agreement just like the traditional agreement. Smart contracts execute digital transactions automatically and enforce obligations when required. This task is done by taking in information as input, conveying value to that input via set rules in the contract, and implementing the defined activities as per the contractual clauses. The main benefit of using Smart Contracts is that all transactions are traceable and irreversible. Smart contracts work on Blockchain technology, which also known as a “decentralized ledger”. This technology is ideal for smart contracts storage due to its security and immutability.
Various Blockchain Platforms used For Smart Contract
The list of blockchains platforms is growing longer with time. Before you miss out on these technologies, this post provides details about of the important platforms of blockchain and its role in the use of smart contracts. The Blockchain platforms are Bitcoin, Ethereum, and Hyperledger Fabric.
The evolution of Bitcoin has enhanced the compatibility between bitcoin and Smart contracts. Smart contracts do not function as programmable and extensible on Bitcoin as it does on Ethereum. However, adding features to Bitcoin through improvement proposals, certain smart contract functionality can be achieved through Bitcoin scripting.
It is a public Blockchain platform and is one of the ideal operating systems for smart contract functionality. Ethereum, with time, has gained popularity as a form of Blockchain for building smart contracts. In fact, one of the primitive agendas for designing this platform was to create smart contracts. The main difference between Ethereum and Bitcoin is that Ethereum houses a technology called smart contracts.
Hyperledger is an open platform, built by collective effort to develop cross-business blockchain technologies. It is a global association, accommodated by The Linux Foundation. Hyperledger is unlike Ethereum and bitcoin doesn’t own a currency. It is a software built for processing. The agenda behind designing Hyperledger is to offer vigorous and efficient standards for blockchain ledger technology to ease profitable implementations.
Smart Contracts is amid the core implementation of the blockchain. The fact cannot be denied that business logic is the driving force for many things in the blockchain, and Hyperledger eases things comparatively more for Smart Contract application.
Features of Smart Contract
The key features of smart contracts are:
Autonomy infers that once the smart contact is unveiled, the contract creator is not mandated to take part anymore in the process.
Smart contracts are not hosted on a single server, it is rather distributed network with various network point, which makes it decentralized.
Blockchain-based smart contracts are self-executing. They tackle trust issues of the parties who’re a part of the agreement. This means they automatically utilize the terms of any given agreement between parties on pre-set logic without any intermediaries. The computer network takes control of the process with the support of consensus protocols to agree upon the sequence of actions resulting from the contracts’ code.
Benefits of Blockchain Enabled Smart Contracts
For an array of developing applications, blockchain-based smart contracts deliver efficient benefits and they are:
The swiftness with instant updates: Smart contracts employ software code to automate tasks that are typically done by humans. Hence, Smart contracts increase the speed of diverse business processes.
Accuracy with Minimal Performance Risk
Automated transactions are not only faster, it protects the transactions from fatal manual errors. This decentralized process also eliminates the risk of manipulation, nonperformance, or errors since execution is automatically done by the network and not by an individual/party.
Fewer Mediators & Reduced Expenses
Smart contracts reduce and eventually eliminate dependence on third-party intermediaries that facilitate “trust” such as a bond or a security between two or more parties. Smart contracts minimize also eliminate transaction expenses of contracting. The reason being, the elimination of middlemen by the Blockchain technology.
New business or operational models: Smart contracts is an economical as it ensures the reliability of the transactions pertaining to clauses. It also empowers novel kinds of businesses, from peer-to-peer renewable energy trading to automated access to vehicles and storage units and more.
Smart Contracts Based Applications
Smart contracts eliminate the chaos and ambiguity from an agreement because the execution is automatic. Thus, the underlying concept of smart contracts is applicable to a wide variety of businesses and operations. To list a few: healthcare, financial services, mortgage and any sector that could perform better with high security, automated actions, which is based on certain conditions. Let’s learn about some of the industries that benefit from smart contracts.
Smart Contracts In Financial Services
Smart contracts, enabled by Blockchain, is the one-stop solution for multiple problems of traditional financial contracts. This has held back the sector of finance from nearing towards the digital age. Reliance on physical documents leads to delays, inefficiencies, and increases exposure to errors and fraud. Alternatively, Blockchain technology is secure, which implies that smart contracts are more sheltered than traditional contract law. Also, the use of smart contracts reduces several transaction costs associated with contracting, as blockchain technology eradicates middlemen.
Smart contracts can program mortgage contracts to work automatically with the spontaneous involvement of the parties involved. Smart contracts make the mortgage a frictionless and error-free process. In addition to this, they automatically process payment and release liens from land records when the loan is paid. Also, smart contracts allow a fair record for all related parties accompanied by precise payment tracing and authentication. It reduces errors and costs associated with manual processes.
Smart Contract In Healthcare
The use of Blockchain in Healthcare undeniably diminishes inefficiency and saves time. Currently, the healthcare sector is chaotic and there is a lot of mistrust among all stakeholders. This makes the transition to value-based care very difficult. The shared ledger capability of a healthcare Blockchain will eliminate blockage and offer complete transparency to all parties. This allows both payers and providers to negotiate about complex vital healthcare claims, linked to the fee-for-service model. Furthermore, Smart contracts also make the claims adjudication process seamless.
Future of Smart Contracts
Smart contracts a ground-breaking innovation built in hope that it will allow effective utilization of time and money because of its robotic nature. It is often among the best innovations in blockchain technology as it eliminates intermediary costs and speeds up the process. Thus, Smart contract delivers the necessary parameters such as efficiency, transparency and economic value to a multitude of sectors and services.
Smart contracts also boost the productivity of presently alongshore assets. However, businesses have their roles to play and to effectively benefit from these innovative solutions and gain worth for their businesses, organizations must adopt the Blockchain technology more widely, as it helps to digitally and vigorously manage any form of contracts.