Blockchain technology has taken the world by storm, with cryptocurrencies like Bitcoin and Ethereum lighting the way. Well, for a disruptive technology that raked in billions of dollars for investors and miners in 2017, blockchain is a formidable force to reckon with. But, how much do you know about the inner gears of blockchain?
Most people already know about Bitcoin and a rough idea about cryptocurrency in general, but they have little or no clue about smart contracts. In this piece, we’ll get down to that and more, including how will smart contracts helps business, general applications of smart contracts, and how smart contracts can save money.
First things first, what’s blockchain? It’s a digital, decentralized ledger in which cryptocurrency transactions are stored/recorded publicly and chronologically. It comprises a network of computers that store and run codes such as PHP, Pascal, C++, etc.
Under the hood of blockchain technology is an enabler in the form of contractors. To understand what smart contracts are, let’s take a step back and take a look at traditional contracts. Usually, they are drafted by a lawyer, and they are legally enforceable. But, what if contracts could be made to be self-executing if particular conditions are met?
That’s exactly the basis for and the biggest smart contracts advantage. That is, smart contracts automate the whole ‘contract’ process, striking out the human middleman.
On a deeper level, however, smart contracts are fancy pieces of code that are stored and run on a blockchain. Put differently; smart contracts are written on top of the blockchain, allowing interaction with computers in the network. They self-executing, meaning that they are autonomous and doesn’t require a third party to execute.
Built on the back of blockchain, smart contracts boast the following features:
With that said, smart contracts help users transact or exchange shares, property, money or any valuable asset in a transparent, irreversible, and conflict-free manner while avoiding the services of a third-party (e.g., an attorney). More than that, digital ledgers like Ethereum enables programmers to develop their own smart contracts.
Like blockchain technology and distributed ledgers, smart contracts do have the potential to change the way we do business. By providing unmatched security, scalability, transparency, and performance at a much lower cost as well as eliminating the middleman, they can incredibly impact on how industries like insurances, banking, government, financial services, and health work. We are talking about split-second transactions, efficient trustless approach, and never-before contract-execution precision.
(1) Smart Contracts Save Money
By striking out the middleman, smart contracts save money for a business. It only takes about $0.02 to process a smart contract transaction. That’s a helluva lot of savings both in the short-term and the long run. Of course, attorneys and contract officers don’t come cheap — they could cost an upward of $1,000.
(2) Snappy Transactions
Speed is the most significant smart contract advantage. Again, smart contracts self-executed, saving business owners and employees plenty of precious time. That means the time can be used for something useful, improving productivity.
(3) Utmost Safety
Smart contracts for revenue sharing ensures that your sensitive information is intact and secure. How so? The decentralized nature of blockchain and the fact that smart contract documents are encrypted make it near impossible for hackers to penetrate.
Documents or transaction details for a smart contract are replicated many times over on the network. That means these vital business transaction documents can never be lost, altered or compromised.
(5) Autonomy Like Never Before
As smart contracts are autonomous, business doesn’t need third parties, who might not their interests at heart, and are often biased. Business can rest easy knowing the whole process is self-executing.
Government agencies and businesses like banks can use the high-level of transparency that comes with blockchain smart contracts. It can help them add a touch of transparency in their day-to-day dealings.
(7) No Errors
Smart contracts are highly precise because they only execute the code provided. There is simply no room for human errors in every aspect of smart contracts.
The blockchain is already disrupting things in banking and financial services sector. And the potential behind smart contracts can do wonders for banks and lending companies. With smart contract market expected to hit above $2.3 billion by 2020, banking industry can no longer ignore its implication.
Smart contracts are going to disrupt everything, from banking and legal to real estate and the backbone of government. The big smart contract advantage is multi-pronged, ranging from trust, transparency, autonomy, and speed to savings. There’s plenty of reasons for everyone to be excited about smart contracts.