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In business, you deal with contracts and agreements defining terms and conditions of business relationships with partners, suppliers, service providers, and many others. However, since the contracts are in the human language, you may have an entirely different interpretation from the other party’s. This gives room for disagreements and disputes.
This results in the need to involve a third party to interpret, mediate, or decide in case of a dispute. The more people are involved, the higher the cost and time spent for a contract to complete. Fortunately, technology advancement has birthed a new way where less time and money are used to conclude a contract; smart contracts.
What Are Smart Contracts
This is a computer code that automatically monitors, executes, and enforces contracts through pre-determined rules. Smart contracts allow automation and enforcement of contract terms. The clauses of an agreement and functions are written in code on the blockchain that controls execution. Most smart contracts are on the Ethereum platform, and also Stellar, Waves, Nem, and Bitcoin contract.
Blockchain technology allows transactions to be carried out by anonymous, disparate parties without the need for an intermediary.
Benefits of Smart Contracts in Business
Blockchain developers write the smart contract codes in a transparent script that doesn’t need interpretation. The terms and conditions are all laid out in the code. The code contains and interprets the rules that, when agreed upon, they automatically execute and validated. The process is quicker, cheaper, and offers better security than conventional contracts.
The contracts follow if, when, then prompts to determine the action that follows. Blockchain developers write and carry out smart contract audit. Look at more reasons why adopting smart contracts is beneficial to your business.
- Absolute Transparency
Since there are no third parties involved, the parties to the contract are assured that the contract is entirely unbiased and neutral. The risk of manipulation, fraud, or unauthorized interference and modifications is eliminated.
Smart contracts are encrypted and on a shared ledger, making them practically impossible to manipulate or interfere with. Besides, the transparency makes them trustless, such that you don’t need to know the other party personally to transact. If one party fails to comply with the terms, the contract automatically halts execution and payments.
- Enhanced Security
The fact that no one can manipulate the codes or the execution process makes them highly secure. With smart contracts, you can track the contract activities to see that nothing goes wrong throughout the contract duration.
- Cost and Time Reduction
Usually, you have to spend a lot of time and money reviewing and processing paper contracts. With smart contracts, that laborious process is eliminated, and the execution is automated using code, therefore, cutting numerous hours and other business processes. You’ll save costs of hiring and retaining intermediaries such as legal services, escrow, or banks.
With smart contracts, you easily handle record keeping, payments, and execution in one platform. This consolidation of functions helps to streamline business operations, effectively boosting efficiency.
Smart Contract Use Cases Across Various Industries
Many industries have already adopted the use of smart contracts. Here are a few of the case uses and especially Ethereum smart contract use cases.
- Payment services: Payment scams are among any industry’s significant challenges. Smart contracts allow payers and payees to transact in a secure environment where payments automatically stop if one party fails to comply with the terms agreed upon.
- Supply chain: The supply chain suffers many challenges and risks before a package or product reaches its desired destination. A smart contract allows real-time tracking and its source. It’s also being used to detect counterfeits saving the industry from losses.
- Real Estate: Real estate transactions are known to take time, especially in cross-border transactions. There’s now no need for legal negotiations and a review of massive paperwork in the transfer of property ownership rights. It’s all in a code.
Looking into a Smart FutureLooking at the above benefits, it’s not hard to see why smart contracts are gaining traction in many industries. Businesses can save substantial amounts using blockchain smart contracts by reducing the time and costs of a contract. The discussed points above are only the main benefits, but there are much more. However, the technology has its share of imperfections as a developer writes the code, making it prone to human error. But all in all, the future looks smart.