In this world of increasing corruption and frauds to trust anyone in the matter of any valuable assets is a bit tricky and a tough task. To help you with this, smart contracts can be a helping hand and a trustworthy platform to deal with all the assets.
What are smart contracts?
Smart contracts are set of computer codes that run on blockchain and sets of pre-defined rules that have to be followed by both the interacting parties. If these rules are fulfilled by both the parties an output is executed by the smart contracts. In simple terms, it represents an agreement between the two parties which is exactly the same as the real world agreement. The only difference is smart contracts run on the blockchain, eliminating the need of the third party. Confused?
Consider this example for easy understanding. In the physical world buying a house can be chaotic requiring a lot of paperwork, talking with different people and a high level of risks. To avoid this, we generally hire an estate agent which helps us to lessen the burden by dealing with the paperwork, communication with the people and reduce the fraudulent risks. But this leads to complete dependency on the middlemen. However, the scenario changes in the smart contracts, there is no need for the middlemen. Because the ownership will not be passed on to you until the terms of the contract are fulfilled and the deal amount is sent to the system. As all the functions performed by the estate agent are coded into the contract. Thus reducing the commission amount, time and fraud as the money transfer can be viewed by all the participants in the network.
Features of Smart contracts
The unique features of the smart contract can change our life tremendously by applying in our everyday life. Let’s check some of them
- Cost-effective - Smart contracts eliminate the third-parties (Notaries, estate agents, and advisers, etc.) and the extortionate fees associated with them thereby making it cost-effective.
- Safe - The digital contracts are difficult to hack as they are protected by complex cryptography that stores the documents safely.
- Trustworthy - The documents can neither be stolen nor lost as they are safely encrypted and shared on a distributed ledger.
- Autonomous - Smart contracts completely eradicate the third party intermediaries which directly gives you full control over the agreement
- Fast - You can save a lot of time by implementing smart contracts and reducing the processing time due to paperwork, sending or waiting for approval, etc.
Hence, digital contracts can be used in many other areas including government and enterprises as they are automated and streamlined. Just check the code before execution and the remaining after that will be done electronically. In this way, smart contracts can be beneficial and lead to safe, secure, and quick agreements between the two parties.