Smart Contract

Smart Contract and Blockchain

A smart contract is a computer program or a transaction protocol which is in­tended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. Smart Contract is a computer protocol intended to digitally facilitate, verify, or en­force the negotiation or performance of a contract. It is a computer code run­ning on top of a blockchain and it is managed by a P2P network of computers.

Smart contracts help in exchange of money, property, shares, valuable assets, without the involvement of middlemen. It is the simplest form of decentralized automation.

Benefits of Smart Contract

Speed, efficiency, and accuracy

Speed, efficiency, and accuracy

Since smart contracts are digital and au­tomated, once the conditions are met the contract is automatically executed saving time spent on error checking and hours of various business processes.

Trust and Transparency

Trust and Transparency

Smart contract does not involve a third party so information cannot be altered once the conditions are defined hence providing full trust among the parties.

Security

Security

Transactions in blockchain are encrypted so it is hard to be hacked and since each record is connected to the previous record in the distributed ledger hackers would have to go through the entire chain of records to change something which makes the security very high.

Autonomy and savings

Autonomy and savings

The absence of intermediary in smart contracts results in cost savings and eliminate the risk of manipulation of the contract by third parties.

Technology Behind Smart Contract

With the help of blockchain technology, we are able to decentralize smart con­tracts so that they are fair and trustable. By decentralizing, I mean that they are not controlled by one central party (like a bank, broker, or government, etc.). The blockchain is a shared database run by many computers (called ‘nodes’) belong­ing to many different people. Because of this, not one single person or company has control of it which means its near impossible to hack it — the hacker would need to hack more than half of the nodes if they wanted to attack the blockchain or the smart contracts that run on it. Therefore, smart contracts can run safely and automatically without anyone being able to change them!

Smart Contract Use-Cases

Voting system

Smart contracts provide a secure environment for voting since it will be ledger protected which is extremely difficult to decode and is less likely to be manipu­lated.

Supply chain automation

Blockchain can nullify risks by delivering an accessible and secure digital ver­sion to the parties involved in the supply chain. Smart contracts can be used for inventory management, automation of payments and various other tasks in the supply chain.

Automation of business processes

Smart contracts incorporate critical tools for bookkeeping and eliminate the possibility of infiltration of accounting records which enables shareholders to take part in decision making in a transparent way.

Healthcare

Blockchain can store health records of patients with the help of a private key, granting only specific individuals’ access to the records for privacy concerns. Research can be conducted securely using smart contracts.

Insurance

Insurance has been one of the most use-cases of smart contract. Since most disputes happen in the insurance sector it is easy to solve many problems trough smart contracts. For example, let’s take car insurance as an example. Here, smart contracts can be used to settle the insurance as soon as possible.

Characteristics and Traits of Smart Contract

Self-enforceable

Helps in reducing human intervention as they are self-executing. The code is logic-driven, and it is executed when the pre-agreed conditions are met.

SelfVerifying

These contracts don’t need third parties to verify if the determined conditions have met, as they are programs written and will execute automatically when the conditions are verified.

Tamper-Proof

There is no way to change the agreed-upon terms and conditions of an agreement, which reduces the risk of manipulation and unfair ad­vantage to any party. The only way to edit these contracts or make changes is to add another block to the existing chain with the mutual consent of all parties.

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