Last Updated on July 8, 2019In this era of digitalization, things with minimum human interaction and intervention give a cutting edge in the competition. A Smart contract is a computer program, which is designed to facilitate, verify and enforce the agreements. On its successful implementation, a smart contract aptly replaces the need for a notary or an attorney for signing any document that can later be upheld in the court.
The smart contract executes itself when all the clauses in the contract are met. Let’s have a look at how a Smart Contract Works.
A smart contract is based on the principle of the blockchain, replicated across thousands of computers as a ledger, instead of being at one location. The update process for this distributed ledger is carried out by the system itself with rules defined to verify and ensure the correctness of the data. The entry or transactions in the ledger are publicly verified as they are hosted by a lot of systems across the world. However, the individual participants’ identity is anonymous, which minimizes the chances of conflict.
As smart contracts are used for condition driven operations, they take out the confusion or uncertainty from any agreement. This makes the concept of smart contracts workable for a variety of businesses and operations. Some of the real world applications of Smart Contract include:
1) Personal Identity – With a smart contract, every individual can digitally hold his/her identification proofs and grant access to authorities on the basis of the need. This reduces the friction of identity management to a great extent and makes the process of Know Your Customer (KYC) quite simpler. Smart contracts are way more secure as well.
2) Supply Chain – Logistics companies can make a very strategic use of smart contracts in updating their suppliers and inventories as per the deliveries. Also, a smart contract can help to define the delivery, payment or receivable status in the supply chain.
3) Insurance – Insurance policies can be replaced with smart contracts to some extent. Insurance companies can disburse the health insurance via a smart contract after receiving the confirmation or Proof of Work for a surgery or health procedure. Also, the Proof of Work can have the blockchain system as the basis where the records of all the patients are maintained with certain authorities having the key to access the data.
4) Real Estate – Smart contracts can make the real estate transactions less stressful. The buyers and sellers can draw a smart contract, which can transfer the ownership of the defined property to the buyer after receiving the agreed upon amount.
The smart contracts have a great way ahead to go before they get accepted as a norm. Hiring a smart contract developer can help to replace complex processes and contracts with standardized and enforceable contracts. With the growing acceptance of blockchain as well as Bitcoin, we are definitely in the right direction for Smart Contracts.