What are Smart Contracts their Working Along with Advantages and Disadvantages
The blockchain-stored programs known as “smart contracts” launch when certain criteria are satisfied. Smart contracts are frequently used to automate agreements so that all parties are informed of and confident in the result. Without the need for any middlemen, smart contracts are carried out in a decentralized environment. Additionally, they streamline the process and start the next step when requirements are satisfied.
How smart contract works
A smart contract is a special kind of program that runs on a specialized virtual machine that is integrated into a blockchain or other digital currency and encodes business rules. A computer network carries out the activities when predetermined criteria are satisfied and approved. These procedures mean sending alerts, writing tickets, and allocating money to the right people. The blockchain is refreshed once a transaction is finished. The transaction cannot be changed as a consequence, and only those who have been given access to view the outcomes can do so. The best blockchain platform for creating smart contracts is Ethereum. However, the other best and most effective blockchain platforms for developing smart contracts are Stellar, Hyperledger Fabric, EOS, NEM, Solana, Cardano, and Polygon. The smart contract can be developed by a smart contract development company.
Uses of smart contracts
Several industries, including healthcare, supply chains, and financial services, can benefit from the usage of smart contracts. Here are a few examples
1. Voting procedure
Smart contracts create a secure environment that makes it harder to manipulate the voting process. Ledger-protected votes would be used with smart contracts, and they would be very hard to break. Additionally, it is predicted that the implementation of smart contracts in the voting system will raise voter participation and eliminate the restrictions of the ineffective, outdated voting system that forced voters to wait in lines, confirm their identities, and fill out forms.
2. Healthcare industry
With the use of a private key, blockchain can store patients’ encoded medical records. Because of privacy considerations, only particular people would be allowed access to the documents. Similarly, the use of smart contracts enables safe and private research. The blockchain may be used to keep all patient hospital invoices and automatically share them with insurance providers as evidence of treatment. The ledger may also be used for a variety of tasks, including managing supplies, monitoring medications, and adhering to regulations
3. Financial services
An easy method for managing business operations is introduced by smart contracts. It is a contract that is carried out by the automatic execution of computer programs when the pre-specified criteria are satisfied. Numerous advantages are provided by smart contracts, including high security, immediate execution, and transparency. Smart contracts have the ability to bring about dramatic change and allow for faster transactions, less paperwork, and more cost-effective operations in international business and trade.
Advantages of smart contracts
1. Transparency
Since everyone is aware of the same facts at once, there is less chance that the contract’s terms will be manipulated. Since smart contracts are built on the blockchain, they ensure the security and trust of data, enabling the creation of contracts and agreements without the need for prior interpersonal contact and preventing any conditional breaches or errors in the administration and execution of the contract. This openness gives the participants security and confidence since they can access the contract’s data and information at any time, and because transactions are duplicated so that everyone involved has a record.
2. Cost efficient
This benefit is also related to the removal of middlemen. The related expenses are decreased by not needing a third party to confirm the contract’s terms and give the required trust. In this sort of contract, broker costs are removed.
3. Speedy work
When a condition is satisfied, the contract is instantly put into effect. There is no paperwork to deal with because smart contracts are digital and automated, and no time was wasted fixing mistakes that can happen when filling out papers by hand.
4. Automatic Updation
The contract’s terms are automatically modified and updated as a result of its technical and independent character, eliminating the need for both new procedures that carry out these modifications as well as the involvement of middlemen.
Limitation of smart contracts
1. Flexibility
For legal firms, reasoning execution is frequently a problem. The process of creating a contract involves subjectivity, and words like “fair,” and “best efforts” are used deliberately to provide space for interpretation. When the parties desire to form a relational contract rather than a transactional one, this kind of contract is necessary. Smart contracts are useless in these circumstances.
2. Delay transaction
In certain situations, technology turns out to be a burden rather than a help. One such scenario is when transaction delays brought on by network problems on a blockchain might eventually cause transactional costs to exceed those of regular contracts.
3. Third-party involvement
Even while smart contracts aim to eliminate third parties, it is impossible to do so. In contrast to the functions they play in regular contracts, third parties take on new responsibilities. For instance, doctors won’t be required to write individual contracts, but developers will still need them to understand the conditions when writing the programs for smart contracts.
(Bonus material- Top 15 Programming Languages For Blockchain App Development)
