A detailed explanation of Smart Contracts

Smart contracts have become the most commonly used application of blockchain technology in recent times. It is a self-executing program based on certain predefined rules that eliminate the role of third parties. It pips traditional contracts by reducing the amount of paperwork and decreasing transaction costs significantly. The most popular platform for establishing smart contracts is Ethereum. The different industries where smart contracts can be used include E-commerce, real estate, asset management, and smart homes. The main characteristics of smart contracts are it is self-verifiable and highly tamper-proof.

The process by which Smart contracts function

  • It works on a condition-based principle.
  • The involved parties can access the progress made on a real-time basis.
  • Since there is ample trust between the parties, there is no need for an intermediary.
  • All the functions to be executed can be coded into the smart contract, saving time and money.

The advantages of using Smart contracts

  • It ensures a high level of transparency as the parties involved in an agreement can check the terms and conditions mentioned. This reduces the chances of disputes and prevents the occurrence of miscommunication as there is open sharing of information with everyone.
  • It saves time by cutting out several intermediaries for executing a process. The speed of completing transactions through software codes is fast when compared to traditional business processes that use manual involvement.
  • There are no chances of errors as it functions based on a comprehensive agreement with detailed terms and conditions. Hence it ensures 100% accuracy and precision.
  • It makes use of end-to-end encryption to ensure safe storage of users’ data. This ensures a high level of protection and efficiency, which ensures more value.
  • It saves a lot of money by reducing the role of intermediaries and not using paper-based documents.
  • It creates more trust as it decreases the probability of manipulation and manual errors and reduces the requirements of litigation.

The different applications of Smart Contracts

  • Insurance — It streamlines the entire process of claim settlement by helping both customers and insurance companies to avoid inefficiency and unnecessary administrative costs. The amount of compensation to be paid can be decided according to the extent of loss or damage by storing it on the blockchain network. Creating a Smart Contract for a digital wallet will help to automatically trigger payments when certain conditions are met as per the client’s requirements and the company’s agreement.
  • Mortgage loans — The lengthy process and ambiguity in verifying the income level of the mortgagee, his credit score, and cash flow can be prevented by handing over the task to smart contracts that store all the details in one location accessible by both parties at all times without any restrictions.
  • Employment contracts — It can be used in agreements or bonds formulated between an employer and an employee. The terms and conditions that are set can be made clear, ensuring more fairness and transparency. This improves the relationship between an employer and an employee, reducing the chances of any conflict to take place. It can automate the task of wage processing.
  • Content creation — It can ensure the distribution of the royalties to the desired contributor of content by recording the ownership details on the secure blockchain network. This will help to clear the confusion over entitlement.
  • Supply chain management — It will help in real-time tracking of the location of the product until it reaches the end customer’s hands. It can prevent chances of adulteration, pilferage, loss, and damage to the product. This helps in saving time, ensuring transparency, and reducing overhead costs. The right products will be delivered to the right person with a fully automated system.
  • Internet of Things — It can help in the interconnectivity of different systems by connecting all the devices to the blockchain network to keep a real-time track of all the processes. The sensors involved in the system create their own nodes on the blockchain network with the help of the smart contracts.

The various use-cases of Smart Contracts

  • Smart Contract on TRON — The TRON network is used for MLM (Multi-Level Marketing) software development and for building Dapps. Its advantages lie in its speedy processing of transactions and low fees. Users will earn TRX tokens. The entry fees are very low, and there are many gifting schemes built within the TRON MLM platform.
  • Smart Contract on Ethereum — The smart contract is written in the Solidity programming language and deployed on the Ethereum Virtual Machine (EVM). The data stored is highly transparent and secure. All the transactions executed, tokens bought and sold, and the wallet addresses are stored in Etherscan, which is the Blockexplorer for the Ethereum blockchain network, where one can view the complete history of their trading activity.
  • Smart Contract for Digital Wallet — It would help in streamlining the payments. It will replace documents such as the invoice and the purchase order and automate the entire process. It reduces the chances of commercial friction. The general features are multi-signature enabled, two-factor authentication, anti-fraud protection, and rate-limited withdrawals.
  • Smart Contract for DEX — It is generally compatible with the Ethereum and RSK networks. It is used for securing assets and facilitating instant trading. Users will have full control over their assets and will sign all the transactions before their execution. Non-custodial wallets will be used for spending their funds in a peer to peer manner. Currently, DEX is used only by a niche audience, and the technology behind them is relatively nascent.
  • Smart Contract for Dapp — Dapps work on both public and private blockchain networks. It does not use a centralized database to execute its daily operations. Smart contracts help in removing the burden of administrative overheads for Dapps. Dapps can be used in asset tracking, gaming, and identity verification.

The future in store for Smart Contracts

Smart contracts carry a lot of potentials as they can be used for any business enterprise irrespective of size or type of industry. It assists in streamlining and automating the routine processes. They need to be regularly audited to prevent any compatibility issues with different operating systems for performing their directed functions correctly without any errors. Firms have to take into account certain vulnerabilities present in the smart contracts in the form of underflows, overflows, and reentrancy attacks. Hence, robust cybersecurity practices would be needed to ensure the smooth running of smart contracts without any glitches.

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Scott Macy

Scott Macy

Entrepreneur | Blockchain Consultant — http://bit.ly/2OKH74y

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