Blockchain technology promises to bring about a change in the way of doing business or in multiple ways in industries from real estate to financing to payments to voting and many more. The blockchain is a decentralized system that works without any intermediary or third party thus saving time and stress. It is definitely more secure, faster and cheaper than traditional methods due to which even banks and government agencies are turning towards them.
Smart Contracts can be defined as a decentralized cryptocurrency protocol with decentralized encryption and security between trusted parties all observing the digital agreement of observation, privacy, verification, and enforceability.
What are Smart Contracts?
It was Nick Szabo, a cryptographer and computer scientist who introduced the term ‘Smart Contract’ over two decades ago. A Smart Contract is a digital contract stored in a blockchain represented by a computer program. It is a software that contains the terms of the agreement, execution of the plan on the agreed terms and verifying complete digital security and fulfillment. Since there is no third party in the agreement the parties can directly conduct transactions with each other.
Smart Contracts are being implemented in several blockchain networks, but the most important is Bitcoin and Ethereum. Bitcoin offers a programming language allowing smart contracts like payments, escrows, time locks and multi-signature accounts. Ethereum, on the other hand, is programmed in Solidity language that helps to run contracts without fraud, downtime, censorship or interference from the third party.
How do Smart Contracts Work?
Smart Contracts is basically a contract or code that contain specific and already agreed upon events. These work in the following ways
Autonomy – As the agreement is made by you, there is no need for a lawyer, broker or intermediary. So any kind of manipulation by a third party is ruled out as all the work is done on the network.
Trustworthy &ndash Since all your documents are encrypted on a shared basis there is no chance of anything being lost
Security – Your documents are secure with encryption of the website and hacking is just not possible as cracking the code and infiltration is almost impossible.
Back-up – Your documents are duplicated several times on the blockchain as all the parties have full access to all the terms and conditions of the contract.
Speed – Manual paperwork entails a lot of time while automating tasks on Smart Contracts using the software code saves you hours working on business processes.
Saves Money – Having no third part or intermediary in Smart Contracts can result in more savings in terms of money as you do not have to pay a witness or notary while signing the contract.
Accurate Results – Smart Contracts besides being quicker and money saving also leave no place for errors that often come with a manual filling of forms.
How Can You Use Smart Contracts?
Smart Contracts have gained a lot of popularity being implemented in several sectors like banking, healthcare, financial, real estate, legal issues and government systems. In certain areas, Smart Contracts combine with other technologies like the Internet of Things enabling remarkable transformation in industries making way for new applications.
To conclude Smart Contracts, unlike traditional business models, support an innovative business relationship that is built entirely on trust in the form of immutability and distributed storage.