How Smart Contracts Work and What Industries They are Most Likely to Affect

Like any new technology, blockchain has progressed from a concept to a hot topic in the market and provided solutions in real-world applications. The concept introduced in1991, enterprises are beginning to implement it into their applications in their production technology that’s why Smart contracts appear to become into consideration.

What are smart contracts?

Smart contracts are simply the sets of rules, coded within the blockchain environment, that control transactional agreements hosted on the blockchain network. Smart contracts are simply if-else conditions that are integrated into the blockchain application. One thing to remember is that once the smart contract is deployed, it is immutable meaning that it can’t be altered or changed. For any transactions to take place on the blockchain, smart contracts ensure policies to execute an exchange of information when meeting the set of rules predefined in the smart contracts. For example, if a car sales application runs on the blockchain, the smart contracts would ensure the buyer’s credit card balance and profitability, etc. If it does match the requirements then the transactions would be valid.

In simple words, smart contracts are the enabler and disabler of the blockchain environment.

The main issue that smart contracts pose to businesses is a lack of participation from high-level decision-makers and stakeholders. Smart contracts are being designed and built mostly by technical experts and resources with prior expertise developing the blockchain network.

As smart contracts are immutable so a great deal of knowledge and expertise is required during the development of smart contracts. Despite the challenges that smart contracts face in gaining general acceptance, businesses must consider the benefits when planning their strategic IT roadmap.

The urge to automate is one of the key goals of blockchain adoption. Smart contracts use programming code to execute on a pre-determined set of outcomes between two parties. This eliminates the need for human intervention in the contract execution process and speeds up the transaction compared to previous approaches. This automation, in addition to its time-saving benefits, provides for greater contract accuracy. Because the programming code specifies how and when the contract should be finished.

What makes smart contracts secure

Smart contracts are created and implemented on the blockchain inheriting some of the characteristics of blockchain;

• They’re immutable: which means they can’t be modified and can’t be tampered with or broken by anybody.
• They’re distributed: which means that the contract’s execution is verified by everyone on the network, just like any other blockchain transaction. An attacker would be unable to obtain control of funds to be released since all other participants would identify such an attempt and label it as invalid.

To take control of smart contracts, one has to temper the smart contracts. Otherwise, it is really quite impossible to temper the smart contracts.

Smart Contracts Use Cases

As smart contracts are in the developing phase and have been implemented across many sectors which we will discuss.

1. Banks: Through blockchain technology, smart contracts offer automated insurance claim processing to the banking industry. Smart contracts allow the customer to file a claim, which is then validated automatically by the codes written into the blockchain network.

2. HealthCare: In every region and country, a major problem is maintaining patient data, which leads to incomplete or inaccurate information. This has led to the cause of death. The solution is to create a blockchain-based system that holds patients’ data. Along with that, it can also provide cross-institutional data.

3. SupplyChain: The current financial ledgers and enterprise resource planning systems do not consistently allow the three parties in a simple supply-chain transaction to access all essential information, inventory, and money flows. The blind spots are eliminated with a blockchain system. These blinds spots can easily be seen and eliminated via blockchain. This can be used as an inventory tracking of the system. Mistakes in inventory data, missed shipments, and duplicate payments are all examples of execution faults that are difficult to discover in real time. Worse, supply chain operations are frequently highly complex. One way to verify the transcitions is to audit the transactions. Verifying transactions through audits is a typical way to optimizing supply chain execution.

4. Governance System: Blockchain technology can even bring a wide shift in Government systems. Governments can employ blockchain technology in voting systems. This technique ensures voter confidentiality. The voting record is immutable at all times using the technology of blockchain and smart contracts.

5. IoT (Internet of things): The famous ledger know as a distributed ledger in a blockchain system is tamper-proof and this eliminates the need for trust among the involved parties In this way, no party will have control over the vast amount of data generated by the IoT devices. Using blockchain to store IoT data would provide an additional degree of protection that hackers would have to go around to have access to the network. The blockchain technology provides a far higher degree of encryption, making it nearly difficult to delete existing data records. As we know that the block is encrypted with hashs and there is a chain of blockchain

Wrap Up:

By inheriting blockchain properties, smart contracts offer immutability and distributed storage, which is what distinguishes them most from traditional agreements. Immutability and distributed storage allow smart contracts to become a credible means for making business agreements and performing transactions.