It is a well-known fact that Blockchain has changed the entire crypto space. This technology’s key features such as its simplicity, immutability, decentralisation, and security have brought significant changes to the business process
However, the elimination of intermediaries is one such feature that has made blockchain much more popular. The technology in the form of smart contracts helps in saving time and makes the process faster, cost-effective, and efficient.
In this article, we will provide you with a complete guide on the smart contracts and its overall aspects. Now let’s look at this smart contracts guide,
What is a Smart Contract?
Smart Contract is a computer protocol designed to promote, check or execute the execution of a contract digitally. The word “smart contract” was first coined in 1994 by Nick Szabo, an American cryptographer and computer scientist.
Smart Contracts help you share assets in an open, conflict-free Blockchain based ecosystem. The smart contract is being built and further deployed on the top of the blockchain. They are the automated or digital versions of the traditional contracts.
How do Smart Contracts work?
The smart contract can be compared to the vending machines. One will go to the lawyer or a notary, pay their charges, and then wait to obtain the certificate. However, in the case of smart contracts, it is required to just drop bitcoin into the ledger. After which, your license, escrow, or else drops into your account.
Similar to the traditional contract, smart contracts also define some rules and penalties around an agreement. In addition, they also automatically enforce those obligations. The smart contracts can work on their own, and can also be enforced along with any number of other smart contracts.
Benefits of Smart Contracts
1) Security: The smart contract provides entirely safe websites for the user’s documents. That makes cracking and hacking practically impossible. And they will be one of the best locations for your papers.
2) Interruption free: There will be no interruption or involvement of any third person in the smart contracts. There is no need to wait for any lawyer or broker to offer confirmation. Therefore the whole process is absolutely free of any coercion.
3) Fast Performance: It normally takes time to manually process. The smart blockchain contracts do work digitally. Through the software code and the internet, they process all the tasks automatically which saves time.
4) Profits: You will have to pay some commission or fees when there is any broker or third party involved. Smart contract blockchain eliminates this and helps in saving money efficiently.
5) Error Free: There are many errors associated when it comes to manual processing. But in the automated smart contract, there will be no single mistake, as they automatically conduct the entire process.
Smart Contracts Applications
The smart contracts find its extensive applications in different industries which can be described in detail as below:
1) Real Estate Market: One of the major applications of smart contracts is the real estate market. The real estate industry has become a lot simpler and easier with the use of this method. No need to meet face to face to finalise some contract. That’s because digitization of this smart blockchain technology is complete.
2) Supply Chain Management: Starting from the material collecting to the product delivery, the entire records are being maintained by the smart contracts blockchain. The complete details of the entire process are recorded through the concerned persons.
3) Records Storing: The smart contracts allow users to automatically store, release and update records as necessary. They can also remove any record permanently if required.
4) Mortgage System: With the use of the smart contract blockchain, all the procedures to get a mortgage would be very simple , inexpensive, and fast. The full procedures will be open to all members of the parties involved.
5) Healthcare Services: Smart contract technology can also be used by healthcare institutes as their recording system. It needs huge information for its operation and safety purposes in such areas. The blockchain technology would be able to manage a vast number of records.
6) Trading Activities: The smart contracts rule out the involvement of the middlemen in trading finance. This helps in bringing the entire trade finance process quite simple and more efficient. It also ensures less cost for buyers and suppliers.
7) Government Voting Service: The ledger-protected voting system comes with a smart contract. This system offers highly secured coding and improved computing power. Decoding and accessing the whole machine is virtually impossible. At the same time, this mechanism would be fully reliable and quicker than the manual voting system
Popular Smart Contract Platforms
1) Ethereum: Ethereum is considered to be the market leader when it comes to Smart Contracts. The Ethereum platform was founded back in the year 2015. They have the highest amount of market capitalization which makes it on the top of the lists.
2) Hyperledger Fabric: Hyperledger Fabric is known to be Ethereum ‘s greatest competitor, the industry leader. The Hyperledger project was started in the year 2015. They are less vulnerable compared to Ethereum when it comes to safety and security issues.
3) Stellar: Stellar is much simpler than Ethereum, and has a more user-friendly interface. They usually concentrate on Smart Contracts and ICOs. Stellar is the oldest blockchain-based Smart Contract platform founded in 2014.
4) NEO: NEO is commonly called the “New Ethereum” or “China Ethereum.” It is essentially Ethereum but much stronger and faster. The Chinese Government and IBM help NEO. It can accommodate 10,000 trades per second.
5) NXT: NXT was founded in 2013 and is in fact older than Stellar and Ethereum. It helps you to transfer your assets easily by signing bonds and complex procedures, without the hassle of the conventional system.
Smart Contracts Limitations
1) Confidentiality: There are some smart contract examples like Hyperledger providing its users with a private smart contract. But smart contracts like Ethereum do not offer that privacy to its users.
2) Error: The smart contract technology is encrypted with coding. However, there are chances of making mistakes in the code by the coders. This would eventually lead to some loopholes.
3) Unreliable Information: There is some possibility to store the wrong information. This could eventually lead the whole process to an error with that false information.
4) Rogue Contracts: Smart blockchain contracts are self-executing. Except in situations where a hacker inadvertently compromised the device, he will be able to carry out any illegal activities
Smart contracts allow you to trade assets, real estate, stocks, or something of value. It operates in a straightforward, conflict-free way while eliminating a middleman ‘s services. Smart contracts will save you a lot of money by doing away with the lawyer or the agent.
Smart Contracts aim to bring fundamental improvements to the way we currently run the company. Any transaction is transparent, traceable and irreversible on that network. The unique features of the Smart Contracts make the system so attractive and effective.