As an entrepreneur, you often deal with business agreements and contracts that define the terms and conditions of the partnership or business relationship. But as the contract is written in human language, it is possible for you to have a different interpretation of the contract than the other party. And the more complex the contract is, the more there is a risk of disagreement.
Thus, you involve third parties in the contract to impose the law and to make a decision during a dispute. And this makes it a time-consuming, resource consuming and expensive process. But what if you can have an advanced way to seal the deal in digital format? Yes, we are talking about smart contracts. Smart contracts are basically tiny computer programs with ‘if X then Y’ logic that is executed based on certain conditions. Sounds like a no-brainer? Wondering what’s so smart about these contracts? Read on to find out.
What does Smart Contract bring to the Table?
Blockchain developers write the smart contract scripts in a way that is ambiguity-free and does not lead to interpretation. All the terms and conditions are translated into a computational code. And the code construes a set of protocols that are automatically executed and validated. And the best part is you don’t have to depend on a third party; cryptographic code will enforce it for you. Also, it is undeniably, faster, cost-effective, and more secure and efficient than traditional systems. But this is not all. Here are a few more reasons why adopting smart contracts can be a smart move for businesses.
- Absolute Transparency
As no intermediaries are involved in the contract, all parties involved in a smart contract can stay assured that the contract is carried out in a 100% neutral and non-biased way. There is no risk of fraud, manipulation or unauthorized modification.
- Trust
Encrypted on a shared ledger, smart contracts make it almost impossible for anyone to mess up with the documents. Also, its transparency and scalability eliminate any trust issues amid the parties involved in the agreement. In case any party is not complying with the terms of the contract, the smart contracts will automatically stop its execution and suspend any payment.
- Enhanced Security
Its hard-to-crack code makes smart contracts safe and secure so that no one can manipulate, infiltrate or have unauthorized access to the documents. The smart contract also enables management to track the activities inside the company and ensure that nothing goes wrong from the very beginning of the business process.
- Time and Cost Reduction
You often spend chunks of time and papers in manually processing documents. But with smart contracts, you no longer have to do that. Smart contracts automate tasks using software code thus trimming hours off a range of business processes. It also helps you to save on a number of costs that you had to spend on intermediaries like banks, escrow services, and even legal services. In fact, a report by McKinsey revealed that at least $50 billion can be saved by businesses in B2B transactions by 2021 using blockchain.
- Efficiency
Smart work can enable companies to handle tasks such as record keeping, cash flow, and fulfilment under one platform. By consolidating and automating tasks, it can help businesses to streamline their operations and boost efficiency.
- Smart Contract Applications Across the industries
Smart contracts are already in full swing to remodel the businesses in many industries such as the supply chain, education, finance, and healthcare. Let’s look at a few industries that are benefiting from the efficiency brought about by the blockchain-based smart contract.
- Supply Chain
The process of tracking packages that move around the world can be simplified by smart contracts. You can track where exactly every package is and exactly where each individual product came from. This saves costs and keeps the product safe. In fact, the Chinese e-commerce giant Alibaba is already using blockchain to identify fake goods on its platform.
- Real Estate
In addition to the supply chain, the smart contract is also useful in real estate deals especially for cross-border transactions that are painful for an ordinary person to tackle. No need to go through the months of legal negotiations, signing of papers and other nuances that come with transfers of property ownership rights, the innovative blockchain technology handles it all.
- Payment Services
Payment scams are one of the major challenges companies are facing in the current scenario. This calls for an administrative platform that ensures their validity and this is where the smart contract comes in. It ensures that both the payer and payee lock into an agreement without taking help from any other intermediaries.
- Healthcare and Insurance
Smart contracts enable healthcare professionals to have safe and instant access to the patient’s records from anywhere in the world. It also simplifies the process of trade clearing, insurance claim and micro-insurance for businesses.
- ICO
Another popular smart contract use case that is currently gaining hype is ICO or Initial Coin Offerings. It helps startups to raise funds for their ventures while avoiding conventional investing regulations.
In the End
It’s not hard to guess that the use cases of smart contracts are not limited to the ones mentioned above. These are just a few of the billions of possible implementations. Today, many enthusiasts are working at solving the acutest problems with smart contracts. But like every technology, smart contracts have their imperfections too. We can’t forget that after all, it’s a code written by a programmer. So, it can be prone to human error. What if a bug is there in the code or how governments will tax the smart contract transactions — we are yet to find the answers to such questions. The future of smart contracts lies in disentangling these issues. It’s a lot of work ahead for the smart contract developers. After all, it wouldn’t be that easy to change the world, right?