What Are Smart Contracts?
Taking business automation to the next level
May 27, 2021
Today we're talking about smart contracts and how this revolutionary new technology will change business as we know it.
Let me explain...
Have you ever faced difficulty in selling assets like a house, business or anything that requires a contract?
If you go through the traditional process, you would have to deal with an agency. Here, the agency will take up some commission depending on sales, leaving you with a minimum profit or in some cases you'll just reach the break-even-point.
It'll eat your valuable time, and also energy in processing all of the documentation regarding the sale.
In the end, you'll be heartbroken instead of being happy with the deal you've made.
So, what if we tell you that you don't need to go through this hassle, everything will be done automatically, and you don't even have to share your profit with anyone else! Got a smile on your face?
Let us introduce you to our hero, smart contracts. These are business applications that will assist you with data security, ensure your documents are permanently recorded, automate business deals and much, much more...
What are Smart Contracts?
Smart contracts don't refer to the regular contracts we witness in our daily lives.
These are sets of computer codes that enforce and execute legal transactions through blockchain technology.
The best thing about this technology is, you won't need any third party involved. Everything will be done by automation.
These smart contracts are so transparent in their work that sometimes people refer to it as replacing the lawyers (consider it a lousy law joke!)
You remain in a peaceful state, exchanging money, shares, assets, and all other dealings through this wholesome technology.
How does a Smart Contract Work?
Like traditional contracts, smart contracts also outline agreement between two parties within all of the terms and conditions mentioned.
However, the deal isn't done on plain white paper but through machine learning languages.
Using blockchain technology, these contracts are built with programming languages such as Solidity, Python, Go Lang, etc.
The main principle here is the IF-WHEN-THEN condition, which is applied all through the contract.
The contract declares its fulfilment only when the money is received along with the agreed terms and conditions.
So, this is how it resolves all of the buying and selling issues that people undergo every time they enter into a trade.
Where Are Smart Contracts Used?
Smart contracts are currently being used in multiple areas of life, and their application is ever-expanding. It won't be long until almost all business dealings are done through smart contracts.
Here are a few current applications of smart contracts:
Smart contracts can add value to business operations to sort out internal and external issues.
By using a blockchain streamline, you’ll be able to build transparency and accuracy in the workflow, making your daily task loads automated.
You can also diminish the costs associated with legal notices and settlements by adopting this technology.
In voting government syndicates, a smart contract can transparently secure the whole election. A ledger and high codes can protect the votes.
It will require specialized knowledge and highly efficient computers to crack those codes.
Besides, it’ll make it more comfortable for people to select their representatives unbiasedly.
Banking sectors are already adopting smart contracts to smooth the banking process.
These intelligent contracts enable banks to become more cautious and transparent while dealing with partners and regulators.
Many banks from China, Russia, the USA, etc., are prioritizing smart contracts now to work more efficiently and safely.
- The Mortgage System
Mortgage dealings involve costly procedures like estimating and collecting information about credits, earnings, expenses, etc.
The process needs time to prepare everything, increasing difficulties in the mortgage system.
However, with smart contracts, all struggles are cut down to a minimum point and are made right for your budget.
Pros of Smart Contracts
The best thing about a smart contract is that it has almost negligible errors in it.
Unlike traditional contracts, these contracts are made by computer codes. These codes tend to give an alert when there is an error and doesn’t provide an ending unless it’s fully completed.
So, you can remain tension-free while using a smart contract.
Fundamentally, smart contracts are designed with highly encrypted codes.
Nobody can easily crack these codes unless they are super genius and also possess a high-end computer.
Therefore, all of your documents and agreements are secured enough to use through smart contracts.
Smart contracts provide automated tech support to your legal dealings.
You won’t need a broker, a lawyer, or other third parties to agree if you’re using a smart contract.
Once you’ve entered into a smart contract, you will have to forget all the anxiety you used to have to preserve your documents.
These intelligent techs will save your documents and dealings as multiple backups and provide you with relief from losing records.
Cons of Smart Contracts
Adopting smart contracts are the reason for gaining leverage in certain agreements.
However, they are not 100% reliable. Mistakes can happen and invite bugs which can be an advantage to scammers.
Also, the practicality of this newbie technology remains a question to the government and the mass people.
The blockchain has no regulations to maintain.
So, how much smart contracts can comply with the law is unknown to all.
The Future of Smart Contracts
Without a doubt, the smart contract is a transformative opportunity for many industries.
However, any serious implementation initiative must start from a solid understanding of this technology's legal and technological capabilities, which doesn't usually happen when the great demand for technology becomes apparent.
However, it is worth noting that the media often portray blockchain as a technology that exists in a loophole.
It is important to understand that the current legal restrictions on traditional contracts inevitably apply to smart contracts. Depending on the jurisdiction, this can significantly limit the self-enforcement capabilities of smart contracts.
This technology should be viewed as advanced software that takes advantage of distributed environments rather than an abstract concept designed to break real-world contractual relationships.
Once a particular smart contract application requires linking to off-chain events, it promises independence from intermediaries, and self-enforcement often becomes irrelevant.
In addition, in this case, the main advantages of the blockchain also largely disappear, as the level of security would now depend on an oracle, be it an IoT device or a human.
In contrast to the established approach of only applying emerging technology solutions to a valid problem, smart contracts can rarely solve a problem with sufficient ROI.
From a business perspective, blockchain and smart contracts all deserve criticism.
However, as smart contracts gain attention, many barriers from decades of business relationships are exposed, making this a fundamental but cumbersome and lengthy process of re-evaluating and updating current administrative mechanisms.
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In a Nutshell
Being a new technology, smart contracts are easing people’s lives. Although the practicality of this brilliant system is uncertain and yet to be discovered, it has its own advantages to carry on.
However, no matter which method you urge for, always prioritize the terms and conditions provided by the concerning parties.
So, now that you know what smart contracts are, see if it helps to smooth up your dealings and make life and business more efficient.
Have a great day!