The blockchain revolution has enabled the way deals are negotiated, executed, and enforced. When the typical person thinks about contracts usually things that come to mind are stacks of paper, hundreds of signatures, negotiations, loopholes, and smirking legal eyes. Except for the person who wrote it, this is a time-consuming, inefficient, and error-prone process that no one understands. And they’d be correct. Before the rise of smart contracts, things functioned like this.
What are smart contracts?
Smart Contracts are blockchain solutions that are in place to let two parties or organizations execute transactions on predetermined terms and conditions. They help automate the execution of business contracts.
It assists parties indirectly in regulating trades without the use of arbitrators. It automatically starts the next process after meeting the conditions.
Let’s discuss the major advantages of providing solutions to the business with the help of smart contracts.
1. Capital Markets: Smart Contracts Driving Blockchain Revolution
The total amount of assets held in smart contracts has been increasing at an exponential rate. According to data from DeBank and The Block, Ethereum-based smart contracts presently hold more than $75 billion. A year ago, the total value of all smart contracts was less than $10 billion.
One of the aspects that distinguishes a cryptocurrency system like Ethereum from Bitcoin is the ability to run a smart contract. At the same time bitcoin’s primary goal is to serve as a peer-to-peer electronic cash system. To begin with, one of the advantages of smart contracts is that everything is transparent.
Smart contracts eliminate the need for a financial intermediary by connecting counterparties directly on the blockchain, distributing fees to liquidity providers directly, and scaling at a low cost.
2. Digital Identity: Smart Contracts Protects Individual Identities in Digital Assets.
Digital Identity is one of the most obvious smart contract use cases. One of an individual’s most valuable possessions is their identity. It contains information about a person’s reputation, data, and digital assets. If used correctly, a person’s digital identity can open up new doors for them.
Furthermore, digital identification can assist in safeguarding an individual’s identity from third parties while yet allowing him to share it with the companies with which the individual wishes to do business.
For the time being, the internet allows you to connect to many services while also unintentionally sharing your identity with the companies and having your identity mapped.
3. Governance: Smart Contracts Aiding the Government in the Blockchain Revolution
Smart contracts aid in the automation of processes. That’s where it can support the government’s operations management. Also, land title recording is one of many activities, which the government can utilize to conduct property transfers.
Land title recording necessitates the efficient and transparent transfer of property between parties. Smart contracts can assist with this. It will also cut auditing expenses and increase transparency throughout the system if it is used.
Another government application is electronic elections, as well as digital identity and electronic record filing.
Governments can look at more smart contract use cases depending on their needs.
4. Real-estate: Smart Contracts in Mortgage System
The blockchain revolution is highly useful in the mortgage industry by implementing smart contracts. It allows for the automation of mortgages, which benefits both the owner and the buyer. Smart contracts must be coded by the mortgage agreement for all of this to happen.
The smart contracts can then be put into action, with each stage of the process being carried out automatically. The entire procedure is quick, inexpensive, and simple. This is an example of a smart contract in the real world
If you’ve decided to move ahead with the smart contracts let’s discuss the limitations associated with this incredible technology:
- Contracts include provisions for products that are fully operational on a digital platform. Blockchain is now a decentralized system that is unregulated by any authority. You should keep issues that require involvement outside of the digital world out of these contracts.
- Smart contracts follow a set of established rules that they use to execute contracts.
- Contracts may occasionally require change, but smart contracts’ execution is conditional and follows the if-then, if-else format. This restricts the input of any further contract-specific variants.
Smart contracts can have an impact on any business, from banking to supply chain management. It has not yet been widely in the picture, but it will have a significant impact on business in the future.