Smart contracts are a method used to automate the execution of a program based on certain test conditions. When the specified condition is met, the code is automatically executed and certain actions take place. This could be used for various applications including sending notifications, online purchases, and also manage online funding campaigns. Terms of the contract need to laid down by verifying all the possible test conditions, analyzing all the test conditions and understand how the transactions and data will be represented on the blockchain network. The great part about smart contracts is their independent nature and the ability to be clubbed with other contracts as well.
Owing to the ease of usage that they bring to the table Smart contracts have a large number of use cases-
1. Voting systems- voting based on a blockchain network already adds a tremendous amount of security to the process. Ledger-protected voting systems would add a sense of trust to the voting system. Using smart contracts could help better this process and also increase the number of voters that show up.
2. Financial services- automating loans, insurance claims, and other financial transactions like online banking, etc can help the finance industry greatly and automating the process also has a lot of other benefits.
3. Supply chain- traditionally this is one space that requires a lot of paperwork to go from one step to the next. Automating this could ease the process and save a considerable amount of time as well.
4. NFT- Listing of NFTs, fractional ownership usually involves a ton of tedious paperwork. Smart contracts can eliminate this entirely.
5. Healthcare- Health records of patients can be stored online using blockchain tech on a secured network which can be unlocked by using certain keys only. This can be integrated with insurance companies to make insurance claims more seamless. This sort of concept can also be used to monitor the health parameters of certain patients easily and manage healthcare supplies and other essentials. An overall health care system that functions based on smart contracts can help build an automated, secure and easy-to-access medical solution to improve the quality of healthcare that we receive.
6. Real estate- traditionally real estate transactions involve a middle man to carry out advertisements, contracting and other tasks. Using smart contracts based on blockchain can make this process both quicker and a lot more efficient and cost-effective for both the house owners as well as those wanting to rent it.
Why smart contracts are good?
Traditionally, the sale of goods involves 3rd party involvement which adds a lot of questions to the picture, including trust, unwanted charges, increased chances of errors due to human involvement. Here’s how these problems can be solved using smart contracts-
• Autonomy and trust — Smart contracts don’t require a middle man, so the entire control lies in the hand of the party that lists the contract. This eliminates the risk of the contract being manipulated by 3rd party contractors. Thus, making it more secure and trustworthy as well.
• Trust- Blockchain technology, at its core is a super-secure piece of tech since the entire history of transactions are available at all times and transactions need to be validated by all members of the chain making it extremely tough for hackers to get in. Smart contracts use blockchain-based tech, therefore making them more trustworthy than the previously used contracting system.
• Savings- involving a middle man in a contract involves a lot of issues like the risk of scams and manipulation and also it also works out to be more expensive due to the charges associated with the intermediaries for handling transactions.
• Speed- eliminating the intermediaries also makes the task quicker and more efficient. It removes an entire layer of human work and replaces it with automated secure tech making it faster and more secure, protected and cost-effective.
However smart contracts do come with a certain number of flaws as well. Some of them are:
Management- Deploying and managing smart contracts can be a daunting task. These contracts need to be worked on with utmost perfection before being deployed online. They are, to a great degree, immutable, which essentially means that once the contract is ready, changing or modifying is close to impossible.
Security- although blockchains are famous for their security which comes from the fact that the whole network is transparent and everyone can see the transactions that take place in a particular network. This transparency can cause certain issues as well. Being transparent, everyone also has access to the bugs that may be associated with a certain contract, which can then be exploited leading to awfully large financial losses. Decentralized autonomous organization (DAO) which is based on Ethereum had lost 50 million dollars worth of digital currency owing to certain flaws in this system.
Currently, the most popular blockchain to base smart contracts on is Ethereum. It uses a Turing-complete language on its blockchain. Some other notable blockchains that make use of the amazing concept of smart contracts are- Bitcoin (Turing-incomplete language), Cardano, and Tezos.
Hence it is safe to say that smart contracts come with a wide range of benefits and are most likely to be the face of contracts in many spaces. Smart contracts are being actively adopted by existing NFT players and marketplaces. Cardano has seen an all-time high value owing to the adoption of smart contracts within their framework. This sort of positive response from the implementation of smart contracts only increases the likelihood of smart contracts being universally used.