What Is Smart Contracts Blockchain And Its Use Cases in Business

In the management of a relationship or as part of an agreement, business and all parties involved often put a contract in place. The contract defines the terms and conditions that apply in the partnership or relationship like Purchaser/merchant, tenant/Owner, subscriber/service provider.

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List of The Contents

• What are smart contracts
• Understanding blockchain
• From blockchain to smart contracts
• Use cases for smart contracts
• Smart contracts implementation examples
• In conclusion

A traditional contract, the one that is still broadly used to date, is a written document that frameworks cooperation, it includes the terms and conditions of a partnership or service agreement. The contract is written in human language and may be subject to interpretation. Since the written contract is not void of ambiguity, both parties can have a different interpretation of the contract. It requires a third party to enforce the law and to decide during a dispute for instance, but it is common that a third party is often involved even though there is no dispute.

The execution of a traditional contract requires a human validation, to check the terms and conditions and decide for the next steps according to the written agreement. Therefore a traditional contract can be:

• Time-consuming: checking the contract, validation, and approval, enabling the next steps, etc.
• Resource consuming: execution of a traditional contract may require human intervention.
• Costly: it may involve a third party, this is even true during a dispute

The more complex the contract is, involving, for example, several execution steps that enable specific actions or that give rise to certain privileges, the more it requires control and the more there is a risk of disputes.

There is another way to deal with a contract in a way that it overcomes the challenges and limitations as mentioned earlier. As technology evolves, the way we deal with the contract evolves, and the smart contract is born. However, what is precisely a smart contract?

WHAT ARE SMART CONTRACTS

Smart contracts are translations of an agreement including terms and conditions into a computational code (script). Blockchain developers write the script in a programming language like Java, C++, etc. in a way that it is void of ambiguity and does not lead to interpretation. The code translates a set of rules that are automatically executed and validated. A straightforward example is a translation of: “if X provides the service, Y pays for it.”

Smart contracts codes are uploaded into the blockchain to check the validity of a contract and enable the required steps. From its initialization, a smart contract is automatically executed. The main difference between a smart contract and a traditional contract is that a smart contract doesn’t rely on a third party; cryptographic code enforces it.

We can consider that the vending machine is implementing a smart contract mechanically. It verifies the following properties:

• There is no third party involved in the transaction
• When you put your coin in the machine and select your product, it delivers the product directly to you as long as you meet the terms and conditions which are: your coin has the same or higher value than the product you want to purchase.

Now that we have more understanding of what smart contracts are let’s see how does smart contract work?

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Existek is a custom software development company helping our customers to solve their business challenges with best in its class software. Contact us to get an instant and free expert consultation about your project.