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How Smart Contracts Will Change the World

Think about the last time you took out a contract. Think about all the back and forth with paperwork, the waiting times for the contract to be created and initiated. Maybe you were entering into a contract to rent a car or buy a house. Or, maybe even buy some property in the Metaverse! What if I were to tell you that all these contracts (and more) can now be handled by a digital system on the blockchain called a smart contract? That’s right, smart contracts have recently undergone exponential growth in their frequency of usage, and it looks like they are about to gain mainstream acceptance. Heck, you can now even get a marriage contract issued via the blockchain!

What is a smart contract?

Smart contracts are accelerating the widespread adoption of blockchain technology and further increasing the increasing momentum of the Decentralized Finance (DeFi) industry overall. Smart contracts are core components of many blockchain ecosystems, like Ethereum. These digital contracts are programs stored on a blockchain that work in an autonomous fashion. Meaning, they are executed when certain conditions are met. Smart contracts use simple “if/when…then…” code statements to execute actions. For instance, such a contract could initiate the transference of an asset, such as an NFT, to an appropriate party if and when payment has been received from said party. In this manner, smart contracts are decentralized and do not require intervention or oversight from a third-party authority. What’s more, they are also transparent. Once they are carried out, the program updates the public blockchain register to record the newly completed transaction. For these reasons, smart contracts are the building blocks of the brand new ecosystem of Dapps, or decentralized apps. And they represent a major focal point of blockchain development at this very moment.

Why smart contracts matter

Why are so many experts enthused about the future potential a smart contract promises? Put simply: their speed, efficiency, and transparency. DeFi smart contracts represent a viable alternative to traditional banking services. Using smart contracts, DeFi Dapps can provide all the normal services a bank would — like lending, borrowing, and trading, but with the added benefits of reduced costs, zero wait times and greater accessibility. Indeed, smart contracts lower the entry bar for users around the globe to access financial services. All users need to find is a peer willing to enter into an exchange with them, draw up the smart contract, fulfil their end of the bargain, and sit back and watch the smart contract automate the execution of said contract! No more dealing with the banks and other financial institutions. And no more paying fees for the privilege of doing so! Smart contracts are paving the way forward for users to access (and create themselves) a new generation of financial services. Eschewing the need for centralized oversight and control, smart contracts are already providing much value and functionality for users. Truly, the full potential of the smart-contract-powered future is just waiting to be realized.

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