As the world shifts towards digital and automated processes, traditionally manual tasks are being overhauled to incorporate modern technologies. This includes contracts, which may eventually be replaced by smart contracts that utilize blockchain technology.
In general, a contract is a written and signed agreement between two parties on a set of conditions. A smart contract is a digital contract written as a computer program to be executed once preconditions are met. They are helpful in various transactions, such as dispensing a bottle in a vending machine, to more complex cases like real estate or supply chain.
Smart contracts are digital contracts that are defined and programmed in computer code. Additionally, they self-execute when the conditions of a contract are met, removing the need for manual involvement. Recently, smart contracts have gained popularity because of blockchain technology, which provides unprecedented levels of security and immutability. Smart contracts utilize the blockchain’s distributed and decentralized network to store and execute the code written in smart contracts.
Fully-programmed smart contracts are called in-code contracts. Conversely, ancillary contracts complement text-based agreements and automate parts of its transaction.
Programmers code smart contracts with necessary data inputs and security measures on a smart contract platform. Afterward, they are deployed and encrypted on a smart contract blockchain like Ethereum. The contract is then ready and waiting for specific conditions to be met. Once conditions are met, the smart contract will take action (execute) according to the contract’s directions.
Contracts can also invoke other contracts if stipulated, and all transactions are recorded on the blockchain. These contract transactions are immutable and cannot be modified once recorded on a network, which provides a high level of security.
Examples of smart contract use-cases include, helping identify payments, fulfilling orders, settling insurance claims, and defining financial market actions.
Ethereum is a public, permissionless blockchain network that launched in 2015. It became notable with its cryptocurrency token, Ether. The Ethereum network is now the go-to blockchain network for smart contract deployment, partly due to its huge community of developers. Additionally, Ethereum’s network is fast, with speeds beating BItcoin’s network. Ethereum-based smart contracts are written in the programming language, solidity.
Smart contracts can be leveraged for numerous transaction-based scenarios in any industry. Cryptocurrencies use a preliminary form of smart contracts for transactions. Some notable use-cases for smart contracts are:
Smart contracts are playing an increasingly significant role in business. Though we are still in the early days of blockchain-based smart contract adoption, companies recognize the multitude of use-cases for the technology and the benefits they provide. The greater efficiency, security, reduced costs, decentralization, and more make smart contracts highly desirable to businesses willing to adopt the emerging technology. As the blockchain continues to gain traction, smart contracts will likely become more prevalent in everyday business operations, and new use-cases will emerge.