Blockchain and cryptocurrencies are flourishing with enormous business opportunities in the digital era. Many countries are on the mission of decentralizing their governance with blockchain solutions, and some have dived into the coining of their cryptocurrency to enter the marketplace. Major industries are trying to leverage customized smart contract application development to automate legal contracts, quality inspection, and other repetitive tasks. However, it is evident from the financial news updates that crypto and blockchain are hitting our lives with ergonomic use cases and making lives simpler, transparent, and secure in the digital space!
In this blog post, let’s start with some vanilla flavors about smart contracts and then traverse through how it works and their varieties based on application!
Smart Contracts-Vanilla Flavors!
Let’s start with its basic definition as per the experts!
A smart contract is a computer protocol that executes a task based on pre-defined conditions. These smart contracts are intended to verify, enforce a particular transaction in the process. Smart contracts are built on top of the blockchain framework, and hence, they are traceable, transparent, immutable, and digitized. The high-value transactions can be secured with smart contracts to ensure appropriateness in the legal terms between the entities. Smart contracts are adored for their feature of P2P transactions, which avoids the intervention of intermediaries in the transaction.
To get a deeper understanding, let’s have a look at the working principle of smart contracts!
Working principle of smart contracts- A glimpse!
Smart contracts can be easily understood with the instance of property transfer. Now, let’s assume that Afrin buys a property from Buna!
If Afrin pays Buna as per the deal in the normal transaction, Buna signs off the property ownership through registration. On the contrary, if Afrin pays less amount and argues with Buna to sign the contract or Buna receives payment and asks for more, they need a third-party or court to resolve the issue.
This is not the way a smart contract performs the transaction! It’s simple and automated!
In the smart contract transaction, Afrin transfers the money or cryptocurrency to buy the property from Buna as per the agreed terms; the smart contract automatically transfers the property title to Afrin without any intermediary or registration process. In case if Afrin does not pay in the specified time frame or pays less, then the property would remain in the ownership of Buna. If Buna receives the payment and does not sign the contract, Afrin would be refunded the paid money or cryptocurrency automatically. This is how smart contracts completely avoid third-party intervention and fraudulent activities.
Once deployed, the smart contract can never be modified by either party without others’ consent, as it’s transparent. The smart contract would be automatically canceled if the conditions are not met within the specified timeframe.
Let’s explore the types of smart contracts based on application!
Types of smart contracts-based on their application!
Smart Contracts can be categorized based on their application.
Legal smart contracts
Legal smart contracts are digitized legal contracts that execute a transaction automatically with the piece of code without any third parties. Many countries are developing smart contracts for real estate transactions to avoid fraudulent acts in taxation and other legal compliances. Soon, once the smart contracts are accepted as a mainstream transaction, we could transfer high-value assets without any disputes in the near future.
Decentralized Autonomous Organizations(DAOs)
Decentralized Autonomous Organizations(DAOs) are the communities operating on the blockchain framework. These community members brainstorm and agree on certain specific rules to be followed and implement them as smart contract protocols. On deploying the smart contracts, the community members must abide by the regulations. Deviations from smart contract protocols may cause consequences to the community member as per the smart contract code guidelines.
Application Logic Contracts(ALC)
Application Logic Contracts(ALC) are widely used with the combination of IoT and blockchain technology. These types of smart contracts are specifically designed for applications. For instance, supply chain product quality inspection. Smart contracts are smart contract code guidelines designed to communicate with the devices or products and validate the collected information from them.
Smart contracts are still a great deal for common people who don’t have knowledge of the blockchain framework. The evolution of these smart contracts to hit the real-time use cases is in progress, and many countries are experimenting with their tech expert crew. Soon, we may expect smart contract transactions in our real-time applications!
Smart contracts and blockchain technology revolutionize how we deal with business and customers in this modern digitized world. Most enterprises hire a smart contract development company to access smart contracts to simplify the digital business deals with higher efficiency. In this blog, we will see smart contracts, the advantages of smart contracts, and how it impacts business.
What is a smart contract?
A smart contract is a program or set of code that helps to regulate digital agreements, transactions over digital currencies, and assets between parties. Smart contracts would execute contracts automatically when some proposed conditions were met. If something goes wrong, the process execution gets revoked. It seamlessly ensures the security and integrity of execution.
Smart contracts with blockchain technology
Smart contracts are developed using blockchain technology. It is a decentralized system that enables smart contracts transparent to everyone on the blockchain. Also, smart contracts can be secured, efficient, immutable, accurate, trustable.
How smart contracts work?
Smart contracts can only be applied to something that is accomplished in the digital world. Smart contracts are executed by fact-based if-else conditions. They rely on objective facts and not on the subjective judgments of parties.
The smart contracts development process
Plan your smart contract needs and understand what exactly your smart contracts want to do.
Choose blockchain platform
Find blockchain development experts
Choose the best developer who has excellent knowledge of blockchain development.
Once you have created smart contracts, it is necessary to do testing to check all the requirements and conditions are implemented in smart contracts.
Advantages of Smart contracts
Smart contracts are executed automatically, avoids third-party intervention to verify the transaction. It could save time and costs
Smart contracts are executed when the conditions are met. Thus, provides error-free, accurate result.
Smart contracts transparent to all members of blockchain and ensures security.
Smart contracts cannot be changed once it launched.
Smart contract execution gets revoked if anything goes wrong. Thus, it prevents losses.
Smart contracts benefit business
Smart contracts offer a wide range of benefits to improve the overall efficiency of the business. The most significant benefits are,
Supply chain organizations can use Blockchain to solve many industry obstacles, such as record-keeping and product tracking. The decentralized technology will soon replace the centralized administration of databases. Besides record-keeping and monitoring, several areas exist in which the Blockchain aids the effective enhancement of a supply chain.
Even company with an advanced workforce lose track of transactions due to the high degree of transactions in the supply chains. These inefficiencies draw extra overhead costs, loss of customer data, and cost the loss of a long-time customer connection. N2 Group delivering the Blockchain supply chain management provides provenance tracking and record-keeping, making the information obtaining very simple with embedded sensors and RFID tags. Retailers can trace the product history right from the origin to the present situation at any point in time. Customers can also utilize such accuracy in provenance tracking to detect and prevent frauds even in complex supply chains.
Digital Supply Chain Institute (DSCI) reveals that more than one-third of the industry believes that cost-reduction is the most significant upgrade for any Supply Chain. Supply chain logistics bodies can eliminate the excess spending via Blockchain deployment. Supply Chain Logistics teams can eliminate expenses on security, staffing, intermediaries, and other resources by integrating Blockchain.
Supply chains are complex networks with several entities and parties working in various cycles of product manufacturing, management, and shipment, to name a few. When multiple participants are at play, one must ensure smooth functioning to avoid any mishaps in the operations. Business owners can maintain the integrity of the records via blockchain deployment. Distributed ledgers combined with blockchain nodes can validate every piece of information that flows into the supply chain’s blockchain database. Thus every participant can rely on the data furnished by any blockchain member, without any doubt.
Blockchain technology renders data interoperable, meaning manufacturers, retailers, vendors, and contractors can share data in simplified processes among themselves. Users can eliminate delays and tertiary disputes due to the transparency offered in data sharing.
Other typical advantages include,
Lessen or eliminate fraud and errors
Advanced inventory management
Reduce courier costs
Minimize delays in paperwork
Identify any issue faster.
Build consumer and participant trust
Blockchain possesses the potential to mold the supply chain industry for its welfare. Blockchain has the best use in supply chain management and is expected to overgrow in the upcoming decades. The proper implementation and supply chain operations keep transactions transparent, and connectivity is ensured end-to-end.