Can Smart Contracts change the future???

Terms like Blockchain and Smart contracts are getting more and more popular. But actually what are these smart contracts? What do they do? Why people are using it?

Let’s get into the detailed insights of Smart Contracts.

What is a Smart Contract?

This term was first used in 1994 by Nick Szabo, a cryptographer. He came up with the idea of being able to record contracts in the form of computer code. This contract would be activated automatically when certain conditions are met.Smart contracts are just like real contracts.

To understand the definition of smart contracts, there are 3 key features to remember:

1. A smart contract is an agreement between two people in the form of computer code. They run on the blockchain, so they are stored on a public database and cannot be changed.

2. The transactions that happen in a smart contract processed by the blockchain, which means they can be sent automatically without a third party.

3. The transactions only happen when the conditions in the agreement are met — there is no third party, so there are no issues with trust.

How does a Smart Contract works?

Let’s take an example to understand how it works!

You probably heard about funding platforms like Kickstarter or Indiegogo. Product teams can go kickstarter, create a project, set a funding goal and start collecting funds from others who believe in the idea. So Kickstarter is basically the middle-man between product team and supporters. So if the project gets funded , then product teams expect Kickstarter to give them the money and the investors expect the money to go to the project or get a refund when it hasn’t reached it’s goals. This implies both the teams need to trust Kickstarter completely to handle their funds.

Here’s when smart contracts come handy. With Smart Contract we can build a similar system without the need of a third party.

So let’s create a Smart Contract for the above example: We can program a smart contract so that it holds all the received funds until a certain goal is reached. The supporters of a project can now transfer their funds to the smart contract. If the project gets fully funded, the contract automatically transfers the fund to the product team. And if the project fails to meet the goal, the money automatically goes back to the supporters.

And because smart contracts are stored on a blockchain, everything is completely distributed. So no one is in control of money. Pretty awesome right!

Smart contracts are automatically executed once the conditions of the agreement are met. This means there is no need for a third party, like a bank, a broker or a government.

Features:

Let’s see why someone should use smart contracts? What benefits do they provide?

1. Autonomy — there is no need to rely on any type of third party or intermediaries. So it excludes the danger of manipulation or mistakes by the third party as the execution is automatically managed by the network.

2. Immutable — being immutable means once a smart contract is created, it cannot be changed again. So no one can go behind your back and tamper with the code of the contract. Cryptography, the encryption of websites, keeps your documents safe. So, this increases the trust factor.

3. Distributed — means that the output of your contract is validated by everyone on the network. So a single person cannot force the contract to release the funds because other people on the network will spot this event and mark it as invalid.

4. Backup — Your documents are encrypted on a shared or distributed ledger. Your documents are duplicated many times over. No one can loose it ever.

5. Speed & Accuracy — Smart contract eliminates the requirement of time needed to manually process the documents and also any manual mistakes in processing. Once the conditions are met, the contract is implemented instantly, thus saving time and errors.

6. Cost-effective — It eliminates the need of a middleman, so you do not have to pay any intermediary fees, thus saves money.

Where are Smart Contracts currently used for?

1. Health Systems:

Smart contracts are being used in the medical industry with the help of application like Encrypgen. This is an application that use smart contracts to transfer patient data in a secure way, allowing no access from third parties. This way, the patients are in control of their own data. If researchers want to use patient data, they must pay for it.

Receipts of surgeries could be stored on a blockchain and automatically sent to insurance providers as proof-of-delivery. The ledger, too, could be used for general healthcare management, such as supervising drugs, regulation compliance, testing results, and managing healthcare supplies.

2. Governments :

For governments, smart contracts running on the blockchain can make voting systems completely trustless and much more secure and transparent.

Applications like FollowMyVote use smart contracts and blockchain technology to protect votes from fraud. When the voting transaction is written to the blockchain, it cannot be changed. When the voting is over, the smart contract will send a token to an address that represents the winner of the vote. This way voting system becomes fair.

3. Business Management :

Businesses can benefit massively from smart contracts. Instead of paying staff to run payrolls, they can use smart contracts.

Smart contracts can be created for payments and transactions so that every client automatically gets paid on time and no one gets underpaid and no one can do fraud with any transaction.

In 2015, the Depository Trust & Clearing Corp. (DTCC) used a blockchain ledger to process more than $1.5 quadrillion worth of securities, representing 345 million transactions.

4. Insurance Companies :

Two insurance companies, Atlas Insurance in Malta and Axa in France, tested smart contracts in 2017. They had prototypes that compensated airline customers if their flights were delayed.

This saves lots of time and money. It means that user does not have to trust that company will pay him the agreed amount if his flight is late as he knows that if it is late, the smart contract will instantly send him his compensation. And if the flight is not late the smart contract will transfer the money back to the insurance company.

Which Blockchains are supporting Smart Contracts :-

1. Ethereum : This is the biggest platform supporting Smart Contracts. It was specifically created and designed to support smart contract. They can be programmed using special programming language called Solidity. This language was specifically created for Ethereum and uses a syntax that resembles Javascript. You can code whatever you wish but would have to pay with “ETH” tokens. Ethereum provides a broader base for the creation of custom DApps.

1. NEM : Scalability is the most critical thing about NEM’s decentralized application. While ETH does a maximum of 15 transactions per second, NEM reportedly manages hundreds of transactions per second. The main difference is that ETH applies its Smart Contracts on the Blockchain, while NEM uses code off the blockchain. NEM is reportedly the faster, safer and easier technology.

1. NXT : NXT is a public blockchain platform that contains a limited selection of templates for smart contracts. You have to use what is given; you’re unable to code your own.

4. Bitcoin : Bitcoin’s protocol can also be used to create smart contracts. Bitcoin provides a programming language that allows for custom smart contracts like multisignature accounts, payment channels, escrows, and time locks. In particular, there’s a separate smart contract platform called RootStock built on Bitcoin’s blockchain.

5. EOS : EOS introduces the Asynchronous Smart Contract (ASC). This technology will allow smart contract operations and conventional blockchain transactions can take place simultaneously.

And a lot others…

Conclusion :

In this article, only a few use cases of smart contracts are listed. The list is ever increasing. More and more industries are realising the benefit of Blockchain and smart contracts and are starting to adopt these new emerging technologies.

So, as you can see, smart contracts can make the world a better place that is free of intermediaries and third-party thus cutting commissions. It can reduce fraud, delays and the overall cost of many things and increase trust and transparency.

If you need any information or help in building smart contracts and integrating Blockchain solutions for your Business, contact us at contact@plebiscite.in or visit us at https://plebiscite.in/