From the past to the present, various contracts are used in different fields. Contracts present an agreement between two parties, and they can be both written and spoken. Contracts can be enforceable by laws, and they are used since the time of ancient Rome. They are very important items in business, so experts try to improve contracts. Thanks to the efforts of the experts, we encounter smart contracts in blockchain technology. Now, we would like to explain smart contracts that are known as the future versions of contracts.
What are smart contracts?
In blockchain platforms, there is no need for an intermediary for fulfilling transactions because the platforms are utilizing smart contracts. These contracts are computer protocols which ease the verification, execution, and control of an agreement digitally, and they are beneficial for blockchain platforms. In other words, all transactions on a blockchain platform are involved by smart contracts.
Smart contracts are similar to traditional contracts; they identify the rules and penalties of agreements, and they push these circumstances, like traditional contracts. Generally, smart contracts consist of three main things: Signatories (the parties of the smart contract), the subject of the agreement, and the specific terms.
Smart contracts are used on blockchain platforms because they are cheap, fast, and secure for managing and arranging agreements. However, changing some transactions and dealing with complex transactions can sometimes be problems for smart contracts. In other words, some technical issues about smart contracts can emerge in the virtual world.
In which fields smart contracts can be used?
In an old article, we mentioned some use cases of blockchain technology in the healthcare sector, and smart contracts are one of them. Encoded health records of patients can be stored, and research in the sector can be conducted in a safe way with the help of smart contracts.
As you can predict, smart contracts can be used in finance. Traditional financial services can be developed by smart contracts. Insurance claims, error checking, transferring payments, and routing can be done with smart contracts in a good way.
In voting systems all over the world, there can be difficult situations; for example, a lot of people do not vote because they should go to the voting place, show their ID cards, and fill out some forms. Furthermore, people can encounter safety problems in the voting systems of different countries. As we mentioned above, smart contracts are very secure, so these contracts can be used in voting systems for creating ledger-protected voting. Also, smart contracts can annihilate concrete processes, such as going to the voting place and showing identity, so the number of people who vote can be increased.
We can increase the fields in which smart contracts can be utilized for cheaper, faster, and more secure processes.
Advantages of smart contracts
Now, it is time to explain the benefits of smart contracts!
As we emphasized above, smart contracts can provide users with security because they are encrypted, and infiltration is not possible when there is a smart contract. In other words, cryptocurrencies are using the highest level of data encryption, and the same level of data encryption is also valid for smart contracts, so the contracts present safe processes in various fields.
Smart contracts are transparent, and relevant parties can access the terms and conditions of the contracts easily. Thanks to the property, there is no need for knowing each other for parties of a smart contract. Also, breaches of conditions and mistakes in the management of smart contracts are avoided by transparency.
Traditional contracts are generally based on paper, so the number of waste paper is very high all over the world. The circumstance supports the climate crisis, and also the price of paper can sometimes affect businesses. On the other hand, smart contracts are found in a virtual world, so they do not depend on the existence of enough paper. Hence, these contracts support the environment and prevent the production of waste paper.
When people utilize traditional contracts, they have to deal with documents manually. Smart contracts avoid manual processing, and they speed up transactions. In other words, these computer protocols deal with tasks in a good way, and businesses get rid of spending a lot of time on necessary transactions.
As we mentioned above, smart contracts do not require intermediaries, and the situation supports decentralization and independence. With the circumstance, there is no need for confirmation from any intermediary. Thanks to smart contracts, third parties cannot affect agreements negatively. In addition, the absence of intermediaries supports cost savings.
We can increase the number of advantages of smart contracts. For instance, they can be automatically updated, and they are the most efficient version of contracts for businesses. Moreover, clear communication can be the subject, and accuracy can be considered with the help of smart contracts.
We mentioned and explained the benefits of smart contracts, but, like everything, smart contracts have some limitations. For example, eliminating third parties cannot always be easy, and changing smart contracts is a difficult process. Therefore, you should think about both the advantages and disadvantages of smart contracts for your business.