Why smart contracts are the future
I truly love the world of blockchain and crypto. We are living in one of the most exciting periods of technological innovation, and I am in constant awe of what people are doing with blockchain.
Which leads me to the technology I want to talk about today: smart contracts.
Smart contracts are programs that are stored on a blockchain. They are activated once predetermined conditions are met.
In a TED talk, Olga Mack provides a great analogy for what smart contracts are and how they work, so I will share it with you.
Olga talks about three things that smart contracts do
- Store rules
- Verify rules
- Self-execute rules
She goes on to describe smart contracts as being similar to vending machines:
Every vending machine stores a rule that if you insert a dollar, you may get a snack of choice. When you go and insert a dollar, the vending machine verifies that you have inserted the right amount and then, you get a snack.
And that is how smart contracts work. Except instead of releasing a snack, smart contracts are typically doing things like releasing funds to the appropriate parties.
Smart contracts are revolutionising the way agreements are formed, and here’s why:
- They eliminate the need for any intermediaries, which significantly reduces the cost of making and implementing a deal
- By stating the terms and conditions of an agreement, smart contracts provide complete transparency and accuracy
- With the whole process taking place online, smart contracts are quick and efficient
- People can receive the best protection since smart contracts employ the highest level of data encryption
- Smart contracts record each and every transaction in a decentralized server, making it easier for the participants to refer back to previous activities
With all the benefits, there is a definite possibility that smart contracts will be tomorrow’s primary form of creating and executing agreements. And there are a number of potential use cases for them:
Financial Services – Smart contracts are helping with insurance claims by checking for errors and transferring payments once conditions have been met. They also provide security for accounting records that need to be kept private.
Elections – Smart contracts can make voting systems less susceptible to manipulation – as votes can be kept secure on a blockchain.
Healthcare – Blockchain and smart contracts can be used to ensure a patient’s medical records remain private and secure.
Supply Chain – Smart contracts make inventory easier to manage and can automate payments at the right time.
Smart contracts are just one example of blockchain innovation. What blockchain technology are you most excited about?