5 Advantages of Working with Smart Contracts
In the last couple of months at BeeReal we had the opportunity to get trainee clases on different topics, varying from IoT, Machine Learning, Smart Speakers & Blockchain. In this article, I’m going to talk about the last one. More specifically: 5 different examples in which Smart Contracts could be used effectively.
What Is Blockchain?
The most basic definition of Blockchain is that of a giant ledger of economic transactions. This ledger can be used to record any kind of transaction that has some value. Most common cases of use could be economic transactions, saving certificates, storing medical records, and any kind of information. All of these transactions are signed digitally and are available to all users to read them.
Blockchain is composed of a growing list of records that saves all the transactions made — they are called blocks. Each block is linked to the previous one using cryptography. Since it is a growing list of blocks, Blockchain is resistant to data modification and usually users are against, but the data can be changed only when the consensus of the network majority agrees to do it.
A popular misconception is that Blockchain and Bitcoin are the same thing but in reality Bitcoin is the first application done using a Blockchain.
What is a Smart Contract?
A Smart Contract is a self-executing, self-enforcing contract with the terms of the agreement between parties (for example: buyer and seller) being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible. These virtual agreements facilitate the exchange of money, shares, data or anything of value between parties.
Smart Contracts allow trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism.
One of the most popular uses of Smart Contracts is Ethereum, which is the second largest cryptocurrency platform currently. In Ethereum, Smart Contracts are usually written in Solidity — a programming language used by blockchain developers.
What are the Advantages of Smart Contracts?
Smart Contracts have multiple advantages over traditional contracts, and it is likely that over the course of time these advantages will increase with the advance of technology.
1. Accuracy
One of the requirements of a smart contract is to explicitly detail all the terms and conditions in the contract, meaning that it is super clear what happens in all cases.
2. Transparency
Since every contract is publicly available to all parties, and is not possible to alter after it was created. It facilitates the transaction of the contract in a very clear way for all involved participants.
3. Security
Smart contracts use the same level of encryption that cryptocurrencies, which is one of the highest levels of encryption available. This makes Smart Contracts one of the most secure things on the internet.
4. Speed
These contracts are uploaded to the Blockchain, available to anyone that knows them worldwide, and can execute transactions super fast. This makes them reliable when you need to make a large amount of transactions in a short amount of time.
5. Efficiency
Taking into account that Smart Contracts are more secure and faster that normal contracts, this makes them more efficient, which means that you can generate more transactions in the same amount of time than using normal contracts.
Other Advantages worth Mentioning
The following points are also good to know. All of them are equally important and mostly consequences of what was previously said.
- No Miscommunication
Since the Smart Contracts are accurate and need to be explicitly all in detail, there is no room for misinterpretation or miscommunication between parties. - Paperless
One point worth mentioning is that Smart Contracts generates 0 paper since they live in the virtual world. A good thing for companies or users that want to go “green friendly”, saving the environment in the process. - Savings
Using smart contracts eliminates a large amount of middlemen between parties, starting from banks, lawyers, and other intermediaries.
Final Thoughts
As discussed before, Smart Contracts seem to be good to use but they also have some disadvantages. One of the most common is that users do not trust them, since it is a new technology and they don’t understand yet. Another one is the lack to make changes to an existing contract or that the Smart Contract needs to be perfect from the beginning making them super hard for newcomers to adapt to them.
Taking into account all the advantages and critiques of Smart Contracts, from a technical point of view, they are a new piece of technology which is changing a lot of things. For example: This technology is transforming some industries to be faster and more efficient, and there’s no doubt that will largely be used when they become more popular or more easily accessible to the normal users.
