Knowledge

Why are Smart Contracts Important?

Any form of business that involves two or more parties includes a contract among them. This contract states the details of the parties involved in the agreement, the terms and conditions of the agreement, and other details of common interest among the parties. When the agreement is coded as a program, it becomes a smart contract. But what is it about smart contracts that make them so important? Let’s discuss. 

What are Smart Contracts?

Smart contracts are basically coded programs that are stored on the blockchain. They govern the agreements among different parties who are participating in the agreement. They are responsible for executing actions when a set of predefined conditions are met. Since no third parties are involved in facilitating the agreements, smart contracts are a faster and cost-saving way of creating agreements and performing transactions within them.

Features of Smart Contracts

Smart contracts have multiple features that make them smarter, cost-effective, and quicker ways of obtaining results. Here are some of the best features of smart contracts. 

Transparent

When the smart contracts are stored on a public blockchain, anyone can see them and know about their details like participants, the agenda of the contract, the conditions and implications of the smart contract, and so on. 

Autonomous

Smart contracts are autonomous in nature, that is, they execute operations whenever the conditions for the operations are fulfilled. All you have to do is write a code for the smart contracts, include performing parties, and input the conditions. 

Secure

Smart contracts are extremely secure as they are stored over blockchains and can be accessed only by the participants of the contract. Also, they can not be altered once they are executed. If you wish to make any changes to the contract, you will need to delete it from the blockchain and upload a new one with the desired changes again. 

Real-Time Execution

Smart contracts execute real-time operations, that is when the necessary conditions required for the outcome are fulfilled across the contract, it will automatically and immediately perform the changes across all the participating computers. 

Top Uses of Smart Contracts

Here are some of the most important uses of smart contracts in the real world. 

Digital Identity

In the current world where there are innumerable cases of fake identities, the security authorities have enforced tight identity verification rules. But it is extremely inconvenient and insecure for people to carry the hard copies of their identity verification documents in hand. With the use of smart contracts, people can compile all the information related to them and store them as smart contracts over blockchains and access them anywhere they want. This ensures that your documents are totally safe and verification becomes instant. 

Supply Chain

When combined with IoT equipment, they can be employed in the supply chain to track the events from which products go through, before arriving at their final destination point. This helps to ensure transparency in the process of logistics and also automates the process, resulting in reduced human efforts and errors. 

Internet of Things

The Internet of Things is one of the most remarkable examples of how smart contracts can improve the way we think and live. In this, successive programs are automatically executed when the pre-existing conditions are met. 

Authorship

These are highly beneficial in eliminating issues like piracy and violation of copyrights. Many artists feel cheated and deprived of earning their due royalty fee because of the involvement of third parties in the transactions related to their work. But if you make a smart contract with respect to the ownership of your work, you earn a royalty fee every time your work is purchased in any form. In addition to this, no one can claim the authorship of your original work or manipulate it for their self-interest. 

Real Estate

Real estate deals can be a headache for both the owner and the buyer, especially in the case of cross-border transactions. But with the use of smart contracts to describe the agreement between the two parties, the process becomes very simple. The centralized registration of the property lets the owner sell the property within a few minutes while the buyer becomes the new owner. 

Importance of Smart Contracts

In a world that’s shifting its course every second, we can not rely on traditional paper-based contracts which take days to get executed and cost significant amounts of money while not guaranteeing the safety of our assets. They have become our only way out of this hassle. So here are four reasons why smart contracts are so important in the present-day world. 

Decentralization of Agreements

These are decentralized agreements and anyone around the world can contribute to putting them together. So you don’t have to worry about the contract being one-sided. Multiple participants work together in defining the conditions of the agreement and deploying the smart contract over the blockchain. Now, no one can change the conditions of the contract and the outcomes will happen nonetheless. 

Eliminate the Conflict of Interest

Sometimes there can be a conflict of interest between two parties, especially when there is money involved in it. For example, insurance companies keep cooking up reasons why they can not issue a claim to the insurance keeper. With the use of smart contracts, there can never be such conflicts of interest. Whenever a valid claim comes in, the insurance companies will have to roll out the claim if the agreements are made as smart contracts. 

No Delay in Enforcement 

There are multiple examples where one of the parties has to wait for the other to take action and execute the results. But if the agreements are compiled as smart contracts, there is no such delay in the enforcement of the contract. As soon as the predefined parameters are followed, the smart contract executes itself in no time. 

Transparency in transactions

In various instances, the owners do not get due royalties with respect to their work. With the involvement of several third parties, it becomes impossible for the original owner of the work to track the number of times their work was sold. Also, we are living in a time where we see more dishonest people than honest ones. Therefore, if the buying and selling of artworks are governed by a smart contract, there won’t be any cases of stealing royalties. It is because all the transactions related to the work are recorded over the smart contract and the original owner gets paid his due royalty fee whenever the work is resold. 

Conclusion

As you can see, smart contracts are an important element of digital currencies. The multiple features of these contracts makes sure that no frauds can happen with people and they reserve the rights to the ownership of their works.

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