Smart contracts - Key use-cases and their Importance

Smart contracts can be converted into modes capable of being stored on computers, replicated by the network of computers and be made to transfer money once the transactions have taken place. There are various problems that are still attached to the blockchain technology, but on the whole, they are quicker, more efficient, cheaper and more secure than traditional systems. A decentralized ledger has many features that make it an important technology in today’s market. One of the major side advantages to have emerged from the blockchain revolution is the ability to produce and store smart contracts.  In this article, we will look at the importance of smart contracts, and what added benefits they provide us with.

What are they?

Exchanging money, shares or property have always revolved around certain middlemen services that have given rise to the banking industry. Smart contracts allow such exchanges to occur without the need of middlemen, giving rise to a transparent, efficient system that can enforce the same rules and regulations that were present in the case of middlemen. In its most basic form, a smart contract is a set of computer protocols that aim to facilitate the various requirements of a contract without the need of third parties. The transactions are irreversible and trackable, giving rise to a self-executing system that is cheaper and more secure. Here, the terms between a buyer and seller are in the form of computer codes, existing across the entire blockchain network. With the blockchain technology mostly revolving around creating a secure exchange system for bitcoins, smart contracts as an invention has various other benefits as well.

Ethereum (ETH) and NEO blockchain are the two major platforms driving smart-contracts and smart economy respectively.

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Ethereum Vs NEO ( ETH Vs NEO ) - a side-by-side comparison

Autonomy

Perhaps the most important feature that smart contracts have lent to the cryptocurrency industry is the autonomy and ease involved in the transactions. A deal initiator does not have to do anything once he has initiated a smart contract. The contract, which is in its simplest form a computer algorithm, makes sure that all the requisite requirements of the contract are communicated to the other party and that the entire transaction is in line with the set of rules and regulations that the deal initiator has put into the contract. The smart contract is able to collect the money, transfer it to required destination, distribute resources, and spend funds to allow a larger capacity of storage and computation power. Such efficiency and ease in transactions of high value have not been possible till now.

Real Estate

Although smart contracts are currently only used in the blockchain industry, other industries and sectors also have potential to benefit from them. Ordinarily, in the real estate industry, a person needs to pay various middlemen in order to get the property the best desires. This not only consumes more time but also requires a high amount of investment in advertising, search-related costs and other types of fuel consumption. In such a scenario, smart contracts offer an easy method to validate transactions that can be seen by everybody involved. A person in search of a property does not need to inform the other party once the payment has been made. Smart contracts allow everyone to see the transactions that have been made, thereby saving costs of all the parties involved.

Management

A smart contract not only provides an accurate and trustworthy way of transaction, it also avoids possible discrepancies in the communication and the workflow during transactions. Ordinarily, businesses require filing for approvals and time-consuming formalities in order to maintain their records and to participate in transactions. Smart contracts provide a quick method to maintain accounts and cuts out the discrepancies during transactions that often lead to large value settlement cases. Hence, smart contracts are beneficial for businesses to manage their accounts with high levels of security.

Supply chain and logistics

In case of large businesses, the number of transactions and the transfer of goods and services is one of the most important tasks. Even in the case of smaller businesses and shops, smart contracts help to track the goods right from the factory to the store shelves. Various IoT devices can be used to save the location data into smart contracts, making it easier to track the goods. Such features can be beneficial to businesses and allow them to get real-time information about their goods, providing real-time information in all cases, whether the goods got seized by the customs department, or if there is an instance of fraud or theft.

Life Insurance

Recently, Deloitte came up with a proof of concept for life term insurance in the form of a blockchain run smart contract. Various industries where the claim processes take a high amount of time are the ones where smart contracts can potentially solve problems. In such scenarios, the work involves manual human action and takes a lot of time, also causing additional burden on the customer. A smart contract can have various measurable parameters such as the earthquake magnitude, or even policies where various documentations need to be deposited in order to prove a condition, such as death. In such cases, the input conditions can be changed whenever an insured event takes place, thereby making the whole process easier, quicker and more efficient.

Other Industries

Smart contracts allow real-time tracking of information and goods. There are various industries that can benefit from smart contracts. In the entertainment industry, one of the biggest problems that people face is the problem of tracking the ownership rights of a said art piece, be it a song, a movie, or a video clip. Smart contracts allow such sensitive information to be shared on a platform where it can be seen by prospective clients and customers, thereby reducing the risk of artists being stolen off their work and ideas. Such real-time tracking of ownership rights will also allow royalty payments to be made out quicker and more efficiently. Smart contracts can thus allow writers to be paid for the number of copies sold by their publishers, the moment a transaction occurs. Such real-time tracking has the potential to help various other industries where conditional payments are to be made, with the parties only required to enter the information that will allow the transaction to go ahead.

What do you think? Will smart contracts be an important part of future transactions? We would love to hear your comments.


By Rishabh Bhatnagar:
Rishabh is a law student with a passion for Blockchain / Cryptocurrency, Internet of Things (IoT), Cloud Computing, Artificial Intelligence, and Startups. He is an avid reader with a taste for writing. He likes learning about new things and is a writer at TechSutram. You can contact him at our contributors' section. Opinions expressed by techsutram contributors are their own.