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A Comprehensive Guide to Smart Contracts – Usage, Application Area and Benefits Explained!
In:Knowledge Center

A Comprehensive Guide to Smart Contracts – Usage, Application Area and Benefits Explained!

Chetan Patel July 9, 2022 0

What are Smart Contracts?

A smart contract, similar to any other contract, refers to the term of a deal or agreement. But there’s a catch! Unlike traditional contracts, smart contracts are programs that run and are executed through code on the Blockchain, such as Ethereum.

Its primary job is to securely automate and decentralize the digital agreement process, reducing intermediary involvement, cost and time.

Moreover, the integral components of a smart contract consist of three virtual objects: The signatories – Which refers to individuals involved in smart contracts’ digital signature processings, using digital signatures for contract approval and disapproval terms; the topic of agreement or arrangement; and the fixed terms.

How do Smart Contracts Work?

Smart contracts can be programmed by a blockchain developer by the following statements if/when and then. A computer network executes the action once the predetermined conditions are met and verified.

These actions include releasing funds to relevant parties, vehicle registration, sending notifications, and issuing tokens/tickets. Once this transaction completes, the Blockchain then gets updated. As a final result, the transaction can’t be changed, and only those with access can see the final results.

At present, Ethereum is the most used and popular smart contracts platform. Here, each smart contract’s code is stored in Blockchain that allows interested individuals to run an inspection on the contract’s code and ongoing state to check it and verify the proper functionality.

To your knowledge, to execute a smart contract on the Ethereum network, you must pay a fee called “gas”. And once you finish deploying onto Blockchain, no one can alter smart contracts, not even the creators in the first place.

Note – Many other cryptocurrency blockchains such as EOS, Tezos, Tron, Algorand, etc can efficiently use smart contracts.

Uses of Smart Contracts!

The uses of smart contracts are broad, starting from government sectors to healthcare to financial services and the supply chain.

Government Voting System

In a vast democratic country like India, voting is celebrated as the most significant human rights festival. To make it a fair contest for every candidate of all parties, many governments have started implementing smart contracts into their voting systems to create a secure voting environment for all.

And why not? Smart contracts are ledger protected, which makes them difficult to decode for voting manipulation.

Most importantly, Smart contracts help increase the vote percentage through their integrated system and make the lining up, identification procedure and form fill-ups quick and reliable.

Healthcare Sector

Blockchain and healthcare have maintained a healthy relationship for quite some time now. The most significant benefit it has added to healthcare is that medical facilities and patients can now store their health records using a blockchain-encoded private key.

Only specific individuals for both sides and no third party would be granted access for privacy concerns during the time of need.

Moreover, you can store all hospital receipts using blockchain technology and activate the automatically shared option with health insurance companies as proof of service.

You can also use this technology to manage your healthcare kits and other supplies and regulate compliance.

Finance Sector

The inclusion of smart contracts in financial services has meticulously changed its approach toward customer assistance and issue-solving nature.

For example, insurance-providing companies are now efficiently performing error checking, routing, and payment transfer in a more stable and accurate manner.

Smart contracts help enable vital tools for bookkeeping and erase the possibility of infiltration of accounting records. Shareholders can take part in the decision-making process using smart contracts.

Supply Chain

Earlier, the supply chain process used to suffer because of the traditional pen-and-paper format, which caused a longer approval process through multiple channels.

As a result, the fraud and cheating ratio used to stay high all the time.

However, the inclusion of Blockchain in the supply chain system has nullified the entire fraud and risk proportion by delivering an easy-to-access and secure digital version to the supply chain working communities.

Later, smart contracts have made it easy to manage inventory, payment processing, and tasks.

Key Benefits of Smart Contracts

Speed, Accuracy, and efficiency – Smart contracts are digital and highly depend on conditional preferences. Once the conditions are met, it automates the entire process and executes it immediately.

Autonomy and Savings – Smar contracts erase the risk of third-party and intermediaries manipulation, resulting in error-less agreement confirmation. This process saves both cost and time for the individuals precisely.

Trust and Transparency –  Due to the non-involvement of brokers and intermediaries and encryption of records shared amongst participants, there’s no question over personal benefits information altercation.

Security – When it comes to data security, the blockchain system assures that all the data transaction records meet the highest encryption method, making it almost impossible to hack under any circumstances.

In Blockchain, each document is connected to previous records on a distributed ledger. It means hackers will find it extremely difficult to alter any records, and if they come close, they need to modify the entire chain to make changes in a single code.

Smart Contract Limitations

Difficult to change the process – You will find difficulties in changing the smart contracts process. It’s nearly impossible as a single error in the coding will take enormous time and effort and cost you a hunk to resume the correctness.

Loopholes – As per the good faith concept, parties or groups involved in the contract will have to deal fairly but won’t benefit much. Meanwhile, it isn’t easy to match the term according to the agreement.

Third-Party – The third-party involvement doesn’t entirely vanish as it assumes different roles from those involved in traditional contracts. For instance, you don’t need lawyers’ help to prepare individual contracts, whereas developers can do it through smart coding.

Indefinite Terms – Contracts used terms are difficult to handle and understand. That’s why smart contracts avoid vague terms.

This is some essential information about Smart Contracts that we would like to share with you. Blockchain is indeed an exciting segment to learn and explore as it is a futuristic approach and has been used continuously in different technology categories in recent times.

To know more about Smart Contracts and its related topics, visit us at Metizsoft Solutions Private Limited

How smart contract work? What is smart contracts?
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AboutChetan Patel
Director at Metizsoft Solutions, Chetan Sheladiya today stands at the top of a leading Mobile Application Development company, which further specializes in Online Business Marketing, Social Media Marketing, and Web Development, amongst other areas. A tech-lover at heart, Chetan has had more than a decade's worth of experience, dealing with hundreds of projects, and creating a bunch of unique IT solutions along the way. His other interest lies in sharing his ideas and opinions with people as passionate about technology, as he is. You can find his thoughts expressed on LinkedIn, Twitter, and Facebook.
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