Blockchain has revolutionized our economy with its immutability and transparency features as well as anonymity, security and decentralization capabilities - offering business processes several benefits that have changed significantly due to this revolutionary technology.
Blockchain's growing popularity can be traced to its ability to eliminate intermediaries. Smart contracts, particularly Ethereum contracts, mitigate conflict resolution while saving both time and resources in transactions.
What Are Smart Contracts, and Why Have They Grown So Popular?
Smart Contracts: What are They?
As The Guide to Blockchain Technology highlights, Smart Contracts form one of three key pillars that comprise this emerging field. Blockchain-based Smart Contracts provide an efficient and conflict-free method to exchange any value. Smart Contracts, or self-executing agreements, are agreements designed to automatically assess whether all conditions of an agreement have been fulfilled and then take the appropriate actions if any aren't.
EOS or Ethereum: Which Platform Is Best Suitable for Smart Contracts?
After reading our Smart Contracts Explained section and becoming acquainted with its meaning, let's dive further into why smart contracts appeal to you - both their benefits/offerings and any limitations associated with smart contracts.
Let's delve deeper into blockchain and smart contracts.
What are Smart Contracts?
Let us use an example to clarify smart contracts and the Blockchain environment. Imagine Albert would like to offer Nancy his car in exchange for cash; smart contracts allow them to reach an agreement via Ethereum Blockchain.
Nancy will acquire ownership of her vehicle upon presenting a payment of approx $25k to Albert. Because a smart contract is placed on blockchain technology, Nancy does not need to worry about Albert unexpectedly demanding more money or paying an administrative fee to a third-party service like banks, attorneys or car brokers to prove that payment was received.
Smart contracts execute automatically once their conditions have been fulfilled. They come to fruition as soon as the condition has been fulfilled and do not need manual execution by someone manually unless desired explicitly by both parties involved.
Let's discuss both the advantages and drawbacks of Smart Contracts.
Smart Contracts - What They Promise to Do
Self-determinationSmart contracts based on blockchain are decentralized. The smart contracts do not need to be supervised by a third party. The autonomy of the process is preserved.
Accuracy
The Smart Contracts system is based upon the fact that the contract terms must be recorded in full.
Transparency
Smart contracts minimize the number of disputes to zero.
Smart Contracts have TnCs that are easily visible to everyone and accessible, which eliminates the possibility of a dispute. A smart contract has no clauses between the lines and is definitive. This eliminates the possibility of a dispute.
High Speed
Smart Contracts are based on computer codes and therefore execute transactions much faster than contracts requiring person-hours for paperwork.
Data Storage
Smart Contracts store several essential details for every transaction. This means that the details you enter in your contract are stored permanently and can be retrieved in the future.
Trustworthiness
Smart Contracts are also embossed with several features, such as Transparency and Security. They have no chance of being manipulated or influenced. The ecosystem gains trust from this.
Cost Savings
Smart contracts services reduce the costs associated with their implementation by automating most tasks and removing third-party mediators.
Back up your Data with Confidence
Intelligent contracts can replicate every transaction, making it easier for the parties involved to keep a copy of the entire data even if the storage device malfunctions. Let's move on to the second part of the smart contract guide. This is the case study of smart contracts.
Smart Contracts: Applications in Different Industries and Sectors
Financial services
Smart contracts are transforming traditional financial services.
- Clearing trades - Manage the approval workflow between counterparties and then transfer the funds after the settlement amount has been calculated.
- Insurance Claim: Performs the routing, error-checking, and workflow approval and transfers the payment once it is correct.
- Micro-insurance: Estimates micropayments based on usage data from IoT-enabled devices.
- Transparent auditing: Incorporates essential tools for accounting, removes infiltration from records and allows stakeholders to participate in the decision-making process transparently.
- Micro-lending: You can audit and store the collateral value securely in a database. This allows you to make each transaction quick, transparent, and invariable.
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Healthcare
Smart contracts are also transforming the healthcare industry.
- EMR: Enable the transfer of the patient's health record after the patients and doctors have obtained the approval.
- Research in Medical Science - Researchers have access to health information by paying micropayments for the participation of patients.
- Track Health: Track the health events that patients experience through IoT. Rewards can be given when patients reach a particular milestone.
- Health Insurance Reduces inefficiencies by automatically adding patient information to policy forms and eliminating intermediaries. This also prevents the hacking of the database.
The Media
Smart contracts powered by blockchains have many different features that allow anyone to enjoy the benefits of smart contracts.
- The freedom to license media in the manner that a copyright holder wants.
- Transactional processes that used to be performed manually can now be automated.
- Processes faster, more accurately, and at a lower cost
Public Sector Voting
Blockchain can store public data, and with Smart Contracts, it can send the information to parties who request them while keeping the data owner in the loop.
By entering the blockchain ecosystem, it is possible to validate the voting criteria and take a specific action.
Supply Chain
Smart contracts are also allowing for various actions to be performed, including -
- The transfer payment is possible once the letter of Credit has been approved with multiple signatures.
- Product Provenance is used for port payments following a change of custody on the bill of lading. It also allows for a chain of custody in supply chains, where the party with custody logs evidence regarding the product.
Smart contracts of various forms are revolutionizing the Internet of Things ecosystem. Part of the Blockchain of Things, smart contracts provide sensors and connected devices with their nodes on this global database that tracks orders in real time to guarantee product delivery on schedule.
Smart contracts have rapidly transformed business sectors. Startups and established organizations alike are turning towards blockchain developers for support to shape this promising technology whose market value could surpass approx $300 Million by 2023.
There exists a problem. Smart contracts have yet to become mainstream in Blockchain environments despite their many benefits; they also contain limitations that must be overcome to work optimally. Let us now examine areas that highlight limitations within the Smart Contract concept. This aspect has yet to be explored.
What Smart Contracts do not promise to do
Easy of Correction
Smart Contracts, another component of Blockchain technology, share its immutability benefits while setting standards for security; however, their immutability also comes with some restrictions and constraints that must be observed. Even minor errors can prove costly and time-consuming to correct once a contract has been deployed.
Blockchain developers have found De-Facto Mutability an effective solution to this challenge, even though their code remains immutable in many aspects. Developers follow this principle and store addresses of contracts they wish to utilize within storage that allows modifications.
Loopholes are a Common Occurrence
Lack of clarity exists regarding an implied contract of fairness and good faith, defined in US Law as dealing fairly and not depriving each other of benefits. Smart contracts make it hard to ensure all terms will be fulfilled.
Imagine this: you ordered an autographed tennis ball but received something fake instead. Under normal circumstances, this matter might have gone to court with Contract Law at work for both sides to resolve. But with Smart Contracts, there's little chance this case would go anywhere near court.
Third-Party Elimination
Smart contracts pose several difficulties, one being their ability to rid third parties from contracts quickly - yet still need to do so entirely. Blockchain offers one potential solution but still leaves third parties unavoidable in certain instances.
Take lawyers as an example: although users won't need to visit lawyers directly to create contracts, developers need to stay in contact with them to understand the terms of an intelligent contract agreement. Third parties' involvement in smart contracts won't change; instead, they will assume different roles.
The Clarity in the Law
Smart Contracts play a critical role in the ecosystem of blockchain. Where paper contracts may involve vague statements like "Sufficient Cause," in Smart Contracts, this could happen as soon as someone passes on evidence that code had been modified improperly or altered without approval from its original designer.
Users will likely need to initiate legal proceedings to determine who is correct; one of the primary drivers behind Smart Contracts was this need for dispute resolution.
Smart Contracts provide various mechanisms for handling disputes efficiently.
- Votes are the only way to resolve disputes with Smart Contracts. Businesses can vote to determine which parties are proper if there are several contracting parties.
- Introduce the arbitrator or arbitrators, who will serve as judges in case of a dispute.
- Both parties must sign the contract before it can be closed.
Management of Vague Terms and Conditions
Contracts often contain numerous implied conditions and terms, many of which may not be black and white. While smart contracts are an excellent solution when there are only a few parties participating, and events they must complete are simple enough when dealing with more complex events - like what was described above - smart contracts might not be best used as they require too many participants for the performance of events to take place simultaneously.
Smart contracts present various legal complications, most significantly their incapability to handle vague TNCs. If this concept gains mainstream adoption, then this issue must be dealt with quickly. Smart contracts have yet to be widely adopted, and this issue has surfaced as just one among several. As more issues surface due to the growth of this idea. Examine all of the advantages a Smart Contract could bring your business, and you will likely recognize some limitations; however, these can quickly be addressed.
Read More: Trends And Features Of Smart Contract
Smart Contracts: How to overcome Their Limitations
Either you can ignore the limitations of Smart Contracts in hopes that they will transform your business or take steps to render them unhackable regardless of whether your Smart Contract was constructed on Ethereum, another platform or elsewhere.
This article describes hiring a team of Blockchain developers with experience who understand parallel programming and smart contract code writing errors that may arise when writing smart contract code. Hire a competent contract team if you want to obtain complex contracts.
Smart Contracts: 5 Use Cases in Real Life
Smart contracts are digital agreements between two parties with predefined terms that can be deployed onto blockchain networks. While cryptocurrency enthusiasts tend to associate smart contracts with cryptocurrency trading, their use extends far beyond cryptocurrency.
Locating smart contracts may take some work. Let's examine five examples of real-world smart contracts and explore how they have transformed traditional practices in different industries.
Financial Services
Cryptocurrencies rely heavily on smart contracts as an integral element of decentralized finance, making smart contracts a critical asset in today's financial landscape. Through smart contracts and decentralized finance, methods have proven themselves as more cost-efficient ways of funding transactions than their predecessors.
DeFi's market has an estimated total value (TVL) of 54 billion dollars, showing its immense potential. DeFi offers lending and borrowing options; P2P transactions may also occur here, but be wary as this market can be dangerous due to scams or liquidity crises.
Smart contracts, in addition to traditional and digital finance, have also found use within insurance. Smart contract technology enables trades at both an individual-to-individual (P2P) level as well as enterprise level to be automated utilizing Insurwave's smart contract solutions, which enables insurance companies to use blockchain for faster execution of portfolios while at the same time being more secure insurance products for faster execution times and increased safety measures.
Healthcare
Smart contracts can transform healthcare by increasing transparency and efficiency in data collection. They also have numerous applications across hospitals, labs and research in healthcare.
Smart contracts provide an effective means of supporting clinical trials. Hospitals use them to manage appointments and track patient information more transparently. Encrypgen, an application in healthcare that uses blockchain for DNA data transfer, provides one such example. Gene chain separates users' DNA data from personal details to prevent big companies from selling this sensitive information and give more control back to users themselves.
Gamer
Blockchain and smart contracts have revolutionized the gaming industry. A type of play-to-earn game known as play-to-earn is now popular with gamers who wish to earn real cash while they play, offering them opportunities for cash earnings while they game. Other benefits included cryptocurrency or non-fungible tokens as financial rewards to gamers while playing.
After 2020, pay-to-earn (P2E) gaming became very mainstream, with titles like Sandbox Axie, Decentraland, and many more becoming widely played. Paying-to-play titles allows you to acquire native tokens such as MANA, AXS or SAND and then redeem those for real-life items or services.
Smart contracts have also been used in fantasy sports, rapidly gaining popularity over recent years. Strait Research estimates that fantasy sports will reach approx $78.5 billion by 2030; smart contract technology enables fans to participate in team decisions using blockchain's capabilities, further exploiting its strength.
Real Estate
Smart contracts could revolutionize the real estate industry. Their trustless technology allows for automated transfers of ownership or rent agreements - thus making real estate transactions safer as all parties adhere to terms.
Smart contracts cut costs by eliminating go-betweens such as lawyers and brokers, providing transparency during registration processes and improving service for real estate companies such as Propy, SMARTRealty Rent Peacefully PropertyClub and Vairt.
Propy was launched in 2017 as one of the initial Web3 service providers and offered an online marketplace to buy or sell property using smart contracts. Competitor SMARTRealty also provides blockchain rental solutions with smart contracts to facilitate buyers and sellers.
Legal Industry
Smart contracts are an excellent addition to the legal field, providing legally bindable agreements for business or social situations, eliminating attorneys, or serving as electronic signatures on contracts between parties, reducing unnecessary legal disputes.
Smart contracts are legal in certain North American states; for instance, CoinDesk reports that California marriage certificates and birth certificates may be created using blockchain smart contracts to register marriage/birth events.
Smart contract security audits offer a solution to these concerns by verifying documents stored on an unalterable distributed ledger instead of physical documents, which may become lost or altered over time.
Certoshi is one platform that integrates blockchain technology into legal documents. This certificate issuance, verification, and cryptographic security system for documents using Ethereum smart contracts provides users with secure certificates at minimal costs.
Smart Contracts Are Revolutionizing Virtual Agreements
Smart contracts, commonly associated with cryptocurrency but with many other applications beyond digital transactions, can be implemented into multiple industries, including healthcare, legal services, and finance. They have found their way into automating complex money transfers like those for insurance policies or helping facilitate clinical trials - to name some of their uses!
This article looked at five industries that have already adopted smart contracts. However, these technologies can also be applied across other fields, including supply chains, voting, the music industry and voting processes. With their potential to transform all domains requiring virtual agreements, this technology could play a pivotal role in shaping the industries of tomorrow.
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Conclusion
Smart contracts have quickly become one of the most sought-after technologies over recent years, helping solve numerous issues while increasing trust within digital systems and potentially disrupting traditional business practices.
We can guide you through the blockchain world, assist with creating your smart contract to meet your organization's specific needs and implement it seamlessly within processes. Choose carefully when selecting an agency to assist with smart contract implementation and completion! Our professional, smart contract company ensures all agreements are appropriately honored.
