The Power Of Smart Contracts On The Blockchain: How can businesses get the advantage?
If you are following blockchain & bitcoin news closely, you must have noticed that Bitcoin and other altcoins had broken all the records in 2017. Bitcoin has heeded a tremendous increase in price and as most of the other cryptocurrencies are connected with Bitcoin, they also witnessed a thrilling spring in the price. Other cryptocurrencies like Ethereum and LiteCoin were among the coins whose value have skyrocketed in late 2017. It has become difficult for the people to avoid the buzz around crypto, and it seems the chaos around the rollercoaster price of Bitcoin is now a part of the mainstream news cycle. Even businesses cannot go away from blockchain revolution. Many billion dollar companies, as well as Fortune 500 enterprises, have officially jumped onto the blockchain bandwagon and are working around the technology.
Smart Contract — Introduction
Many wonder what is this blockchain & why so much buzz? How it works, is it secure, how it can help them etc. Blockchain technology is based on few traits. Smart contracts are an important part of the blockchain technology. These are self-executing contracts between a buyer and a seller written into lines of code. The code and the agreement included therein exist across a shared, decentralized blockchain network. The transaction carried out among anonymous parties without a central body, legal authority, or an external enforcement mechanism is because of these smart contracts. Smart contracts allow trusted transactions which are traceable, transparent and immutable. In short, smart contracts help you exchange money or anything of value in a transparent, and hassle-free way avoiding a middleman.
To put things together, smart contracts are programs that execute exactly the way they are set up. In 1996, computer scientist and cryptographer Nick Szabo originated the idea of smart contracts. He explained how users could input data, and receive an item from a machine. He gave an example of a vending machine & how people can input a value and get a snack or soft drink from it. In another example, Ethereum users can send a specific amount to their friend on a certain date using smart contract. Ethereum is a platform which is built particularly for creating smart contracts.
3 Important Features
i) Decentralized
Smart contracts don’t require intermediaries to conduct transactions due to its decentralized system. They are being stored in the distributed registry as a code, which is written once. No need to write the code again because a secure network controls the entire system. No one can change any value.
ii) Autonomous
Autonomy signifies that once a smart contract starts, the initiator doesn’t need to involve anymore in the process. Smart contracts are not focused on any central server but are distributed by several network points so they can be referred to being decentralized.
iii) Self-Execution
Smart contracts are authorized to receive money, accomplish transactions, allocate resources, issues and spend funds to enable larger capacity of storage and computation power. They can execute everything automatically.
How smart contracts work?
Bitcoin was the first crypto to support basic smart contracts in a way that the network can transfer value from one person to another person. The network of nodes will only validate and approve the transaction if all the terms are met. Ethereum went one step ahead by allowing developers to write their own programs, which was not possible in case of Bitcoin. Ethereum allowed developers to code their own smart contracts, or ‘autonomous agents’. The language is called ‘Turing-complete’, which means it supports a wider range of computational instructions.
Smart contracts are simple code run by simplistic “if-then” and “if-then-else” statements. They are being developed with code that is created inside a blockchain. The blockchain records data on their smart contracts and saves the history of the smart contracts. Smart contracts have an internal memory including their code. When predetermined stipulations are met, the code gets executed. These limitations could be either internal or external to the smart contract.
Rule Behind Smart Contract
Smart contracts are built to respond to various triggers which allow them to perform certain tasks depending on the requirements. One of the best things about the smart contract is that they are precise and do not allow any room for risk and ambiguity — everything is transparent.
A smart contract is created and shared to multiple systems or users through a protocol which enables various users and systems to communicate to each other in real-time. Network validates the entire process and after that execute them. In order to give birth to a new block of data, the network merges different kinds of elements like data, transactions, records, or crypto currencies. All these kind of data cannot be modified, however, it can be analysed from time to time. Then it can execute the tasks it has assigned. Smart contracts are usually reactive, and will only react when an external event is initiated outside of the smart contract.
Who can apply Smart Contract Technology?
Though the smart contract is there in the technological panorama over a decade, it got all attention back after the emergence of blockchain technology. But, as it is still in the primary stage of business implementation, only well-versed programmers are capable of leveraging this technology right now. This is because the system is itself inherent and naturally complicated as it needs in-depth expertise in computer programming. There are simplified solutions which can help us from the hassle of going through certain processes. The process consists of managing different servers, synchronizing the Blockchain, and using command lines to execute.
But, if we see the current scenario, blockchain is not limited to elite programmers. Smart contracts have made the usually complicated process accessible for everyone. The process has been simplified and ensured security, cost reduction, enhanced speed, and impeccable scalability. A business can get all these features even without going deep into the complexity of writing codes and crafting programs of their own. Smart contract helps you to automate systems for simplification rather than performing manually. As a result, this gives business owners a comprehensive view and control over their business. They can have a glimpse of different transactions and business processes. Smart contracts have near limitless potential in the business world.
Smart Contract Use Cases
Blockchain can be applied in all those industries where transparent and stable records are being used. Financial service industries are widely using blockchain technology to ensure verified and secure financial transactions. With the introduction of smart contracts, various other verticals such as healthcare, e-commerce, supply chain, crowd funding and advertisement are finding applications for the technology. With the help of smart contracts, they can keep a record of terms of agreements and automate the steps towards each term’s goal.
A smart contract can also create crypto currencies. Crypto currencies can be used for payments in the e-commerce business. This will eliminate the cost related to using payment processors and third-party vendor services. B2B transactions can be beneficial by the use of smart contracts. This is much more secure. E-commerce giant Alibaba is even using blockchain technology to identify duplicate products on its platform.
Supply chain industry has various layers in their business process. Warehouse, logistics, carriers, inventory, packaging, shippers and more. The interactions and overall shipping process could be optimized to be more efficient with the use of smart contracts. The industry will grow with much more transparency. Blockchain will allow users to verify their orders and monitor the entire process. With the application of smart contracts, there would be better validation on the successful fulfilment of delivered goods.
Healthcare industry requires more security when it comes to storing and sharing data. Blockchain will help them achieve this goal. Healthcare service providers can develop a stronger trust with their patients. Blockchain technology will help hospitals to create a secure and accurate health report which can be shared across the organization. Start-ups usually rely on raising fund through crowd funding. But, the main constraint is the high fee that all the platforms charge. But smart contracts can eliminate these middlemen and act as a trust factor between investors and start up owners. Similarly, the real-estate industry is struggling against transparency, fraud, and wrong public records since years. By decentralizing the process and using smart contracts, we can take out the requirement for expensive transaction fees, reduce closing costs.
The main advantages of Smart Contracts
By now, you must have understood what smart contracts can bring to any business. We can list many advantages of implementing smart contracts. Let’s discuss few.
Due to its decentralized character, smart contracts are eliminating the human error factor. There are minor risks of data manipulation, as this is not been controlled by any individual body. As smart contracts are automated with computer code, there is no need for manual processing. This fires up the agility and speed of the working process. Another major advantage of smart contracts is, it doesn’t depend on any third-party intermediary. This reduces the cost. There are various industries, who use smart contracts to develop a completely new business model. Using smart contracts, businesses can implement automated access to storage units, logistics, or any other thing that has a physical lock on it. With the use of smart contracts, customers can make online payments in a hassle-free way. Cost reduction & embedding trust are two of the most important benefits of smart contract.
Conclusion
To implement a smart contract you must deploy it on the blockchain. Once a smart contract is deployed, it will start functioning. Whenever any event is triggered by the smart contract, it will be executed automatically. The transaction will be added to the blockchain as per the code. When you think how your business can benefit from taking out all the intermediaries, and how smart contracts can improve your business efficiency, you must use it once. Smart contracts decrease the possibility of data manipulation and duplicity, diminish delays linked with litigation, help get rid of auditing costs, and so on. The blockchain application development services provided by BangBit Technologies will allow you to jump into the world of smart contacts and optimize your business profitability. Contact us today.
