The decade we are in has already witnessed an extraordinary revolution in the technology and computing ecosystem. Technology innovation, as well as its impact, is dependably running very high. From IoT to AI to Blockchain. Each of them has a disruptive force inside several industries, and Blockchain currently has been termed as one of the most disruptive technology.
Blockchain has the potential to transform almost every industry today. The applicability of this technology owing to its advantages as well as pervasiveness has already gained stream and seems like it will continue to do the same for a long time to come. However, blockchain isn’t a new technology, but it has gained a super moment in the past years. It’s a big leap forward in the form of things about decentralized as well as distributed applications. It’s about considering current architectural landscape and strategize to move ahead to immutable distributed databases.
Now, blockchain is set to carve its niche to the special type of aggravation which is unique to the complex transactions such as buying a car or a house. Many industry leaders have experienced the pain of these transactions and have been discovering how the use of smart contracts on blockchain can be utilized to alleviate it. It makes no difference whether you have just got to know about the concept or you are merely seeking an in-depth explanation on the matter, this is the perfect guide for you to start!
Don’t Know About Smart Contracts?
In layman term, smart contracts are lines of code stored on a blockchain and execute automatically when predetermined terms & conditions are met together. At the most common level, they are a sort of programs running as they’ve been set up to run by the individuals who developed them. The advantages of smart contracts are quite explicit in business collaborations, whereby they are generally used to enforce some agreement so that all the participants can be sure of the aftermath without an intermediary’s involvement.
A Brief Overview Of Blockchain Technology
The blockchain is a distributed ledger on which exchanges/transactions are recorded digitally and linked together, so they give the whole history or provenance of the asset. An exchange is added to the blockchain directly after it has been approved by using a consensus protocol, which guarantees it in the only version of the truth. Each record is likewise encrypted to give an additional layer of security. The blockchain is said to be “unchanging” because the records are transparent and can’t be changed because all the members to an exchange have access to the same version of the truth.
What Do Smart Contracts Do?
The simplest way to explain what a smart contract does is with the help of an example. In case you have ever purchased a car at a dealership, you better know there are many steps which make it a frustrating process. If you cannot pay for the car right away, then you will need to obtain a financing option. This will require a credit check, and you will need to fill out many forms with your credentials to confirm your identity. With all this, you will need to interact with numerous different individuals, including the lender, finance broker and salesperson. To compensate for their work, many commissions and charges are included to the base price of the car.
Now, what smart contracts on blockchain can help you with is streamlining this complex process which involves several intermediaries due to a lack of trust among participants in the transaction. With your credentials stored on a blockchain, lenders can immediately decide on the credit. After that, a smart contract would be made among the dealer, the lender and your bank so that once the funds have been released to the dealer, then the lender will get the car’s title and then repayment will be initiated depending on the agreed terms. However, the transfer of the ownership would be automatic since the transaction is recorded on a blockchain, shared among the members and can be checked at any point in time.
How Do Smart Contracts Work ?
Smart contracts work by following a simple statement of “if/when…then…” that are written into the code on a blockchain. A network of computers does the action when predetermined situations have been verified. Then, the blockchain is updated when the transaction is considered as successful. Let’s see how this works out in a supply chain example.
Buyer B wishes to buy something from Seller A, so he puts the money in an escrow account. Seller A will utilise Shipper C for the shipment of the product to Buyer B. At the point when Buyer B receives the product, money in escrow will be sent to Seller A, and Shipper C. In Case Buyer B doesn’t receive the product by Date Z, then the money in escrow will be returned. When this transaction takes place, Manufacturer G is notified for creating another of the products which were sold to enhance the supply. Everything is done automatically on the blockchain.
The Advantages Of Smart Contracts, You Should Know
Speed With Accuracy – Smart Contracts are automated and digital, so you don’t have to waste your time on those time-consuming paperwork and correcting the errors which are usually written on documents which have been manually filled out.
Trust – Smart Contracts execute the transactions by following predetermined rules, and the encrypted data of records of those transactions which are shared across the members. This way, nobody needs to question whether the information has been teased for the self-advantage.
Safety & Security – The records of blockchain transactions are encrypted. This is what makes them almost impossible to hack. Since every record is linked to previous and subsequent records on the public ledger, the entire chain would have to be altered to make a single change on the record.
Savings – Smart contracts eliminate the need for middlemen as members can trust the visible data as well as the technology to execute the transaction correctly. There is no requirement for an extra individual to verify the terms of the agreement since it’s built into the code.
Since now you have better comprehension of smart contracts as well as their advantages, it’s time for you to utilize them in your organization.