As the world is adopting new commercial possibilities enabled by technology, the scope as well as vulnerabilities of businesses are increasing with it. Enterprises are declining the use of traditional paper contracts where the chances of them getting fraudulently doctored are at their highest. In such gullible times of the business owners come smart contracts into the picture.
Smart contracts, as the name suggests is the complete opposite of the legal paper documents that are written in a legal language incomprehensible by a layman. A legal physical contract requires a third party for the enforcement of the contract and can appear to be very ambiguous for someone not familiar with judicial jargons whereas smart contracts are maintained only between the signing parties and require no third party for the enforcement of them.
The language smart contracts are written in are kept distinct for each contract. These are written using programming code language and are entirely digital in nature. It’s the coded language that describes the terms and conditions for every contract. These codes as soon as formed are implemented by distributed ledger system in a less expensive and secure way than the legal physical document. Smart contracts are also signed by both sides that are party to the contract.
What Makes Smart Contracts “Smart”?
The blockchain is a useful yet a complex concept. Many of its users get perplexed in the intricacy of the system and remain confused about its utility. Therefore, we are explaining the idea of smart contracts to our readers and how the system works in a common man’s language.
Smart contracts are a set of rules checked by an automated system in which all parties to the contracts come to have a consensus on the policies and rules of the contract. In simple words, smart contracts can be explained as the digital version of English paper contracts.
Smart contracts provide rules for verification of all the systems involved in the blockchain. These rules define same policies for everyone that is part of the network without any discrimination or threat of hacking. This is an active and apt computerized version of the real court system. The blockchain in these circumstances ensures the proper implementation of every term and clause of the contract and with blockchain enabling of it.
While smart contracts are taking over the world by storm, there are many that are still concerned with the identity issues it can cause and management of it. The world is in dire need for answers to questions it has been asking regarding the security and identity. It is required and also proposed that the IT industry look into the matter and ensure identity management of individuals, businesses and institutions. The answer can also be found in the shape of Blockchain technology.
Smart Contracts- A game changer.
Smart contracts are going to revolutionize the technology sector. They can be widely used not just in redefining the principles for businesses but in areas beyond that too.
There are some reasons that have enabled us to envisage the future of smart contracts in the coming years.
- Virtual identity.
Smart contracts on exclusive levels provide users the chance to customize their digital identity and manage factors like reputation, digital information and data associated with it. Smart contracts can also be used for designating personal data which is mandatory to be maintained for the security purpose but isn’t shared with businesses. This is also known as a “user-centered internet for individuals.”
Smart contracts hold personal data in their control without the need for companies to take special care of them. They remain secure with the system.
Automated implementation of compliance rules as the contract will annul after this date is not a necessity with smart contracts. The blockchain technology uses smart contracts in a way that they are composed exclusively for every deal with specified terms and conditions. As it’s a new technology, it doesn’t work on the precedent like the legal physical document but is specially designed per the needs of every order.
Smart contracts are also believed to digitize Uniform Commercial Code (UCC). This with the help of blockchain technology enables automated filing and recording of the renewal and release. This also assures lenders and buyers of security of the contract and that all terms were set with the mutual agreement of both parties. Besides all the possibilities its proposing, users demand the system should be made capable of storing data records on the distributed ledger while maintaining the agility and privacy.
Smart contracts can save their clients from high counsel’s fees and also guarantee error-free documentation of records.
Finance with its growth is incorporating technology in it. Smart contracts can be used for automatic payments, liability and stock split management for private enterprises. This technology is forecast to be taking the private market by storm.
- Trade Finance
Smart contracts enable trading of international commodities with higher asset liquidity. Use of smart contracts and blockchain technology build a more genuine, efficient and a confident contact between the buyer and supplier or even financial institutions.
This system can enable the faster exchange of trade, payment approvals and defines rules for contract agreements.
Mortgage happens to be a confusing procedure. Smart contracts automatically monitor every aspect of the transaction taking place under the mortgage, from the payment process to property verification, smart contracts give rules for all the aspects of the agreement. This system cannot work without being supported by blockchain technology-based digital identity. Incorporation of smart contracts into the mortgage business make the storage and verification of property data a secured process.
- Clinical Needs.
Clinical needs and other information used for research purpose can be both so sensitive and private that require the consent of patient and doctor both on some matters. Smart contracts can work as a mechanism for inter-departmental visibility and inherent privacy-focused rules that enable data sharing between departments an easy thing to do, going in proper congruence with the agreement of the patient. This system can simultaneously keep data sharing, patient’s privacy and correspondence within various departments along with the consent of the patient.
A contract is something that is made between two parties to define terms and conditions of the deal and signing it ensures that none of the participants that are party to the contract can bail out leaving the other in the doldrums. In current times of scientific innovation when the legal and judicial scene is transforming, the nature of the contract is changing too. Its only in these times that smart contracts along with blockchain technology, are coming up as the new force in the picture that is believed to trigger a revolution in every walk of life.