INTRODUCTION
Technology has always found a way to automate many manual tasks by humans, and smart contracts are no exception because they attempt to automate contract execution without human intervention.
The definition, uses, benefits, and restrictions of intelligent contracts are all covered in more detail in this article.
WHAT ARE SMART CONTRACTS?
Smart contracts are automated agreements between the contract creator and the recipient written in code to execute automatically control, or document events and actions between them.
It's the digital interpretation of the standard paper contract that automatically verifies, enforces, and performs the terms of the contract.
APPLICATIONS OF SMART CONTRACT
PROPERTY OWNERSHIP: Smart contracts could be used to record the ownership of all types of properties like building lands, gadgets, and so on. It can also remove the need for expensive services such as services provided by lawyers.
VOTING: Smart contracts could be used to validate voters' identities and record their votes. In this case manipulation of records will be impossible because the block within a blockchain is impossible to change once they have been recorded.
STOCK TAKING: Smart contracts can be used to reduce or eliminate theft as managers will be able to track the supply of goods and if any product goes missing during delivery, it will be able to track the product down to when it went missing i.e the time and place. For supply that takes place in several distant locations, a smart contract could initiate automatic payment for orders already received.
MEDICAL RESEARCH: In the medical or health care industry, smart contracts can be used to ensure that sensitive information such as patient records are encrypted via blockchain technology before they are transferred between research or department, it also provides the safety of patient test results and new drug formulas.
RECORDS: Blockchain allows the use of private keys which ensures the safety of records as only authorized persons will be allowed access to such records examples of records that can be stored includes; receipts, test results, general stock records etc.
ADVANTAGES OF SMART CONTRACT
TRANSPARENCY: The terms and conditions of this contract are clearly stated and accessible to all the parties involved, improving the level of transparency.
SECURITY: Smart or automated contracts are very secure because they use the highest level of data encryption available which makes it almost impossible for hackers to penetrate.
SAVINGS: It is possible to reduce or eliminate some kind of expenses when using automated contracts such as the money paid to middlemen as there will be no need for lawyers, guarantors, witnesses, etc.
Speed: As long as there is active internet connection transactions are executed very quickly and timely because this contract runs on software code and it cuts off the hours of many traditional processes.
STORAGE AND BACKUP: Smart contract ensures the record of necessary details during a transaction in case of future references and in the event of data loss these attributes are retrievable.
HOW DO SMART CONTRACTS WORK?
The contract's terms should be decided upon and finalized by the parties who are enjoined before being converted into programming code. The code will typically contain many conditional statements explaining various circumstances for a potential future transaction.
When the code is written, it is duplicated throughout the blockchain participants and stored in the networks.
All of the computers in the network then run and carry out the code. If the terms of the contract are met and verified by all users of the blockchain network, the appropriate transaction is ultimately carried out.
When purchasing a property, such as land, a smart contract's usual use case is demonstrated. Let's imagine Mary wants to purchase land from Daniel. Daniel is the seller, and Mary is the buyer. In its simplest form, the agreement (which, once written, cannot be altered) will read, "When Mary pays 500 Ethereum, Mary will obtain the land ownership." Daniel and Mary have avoided paying third parties like attorneys, real estate brokers, or the government by using smart contracts, which are also quick and less stressful.
A pictorial representation of how smart contract works.
LIMITATIONS OF SMART CONTRACTS
Immutable: Smart contracts are immutable, which means that it is difficult or impossible to fix if the contract has a problem.
LEGAL ENFORCEMENT: Smart contract is built to eliminate third parties which is perfect if there are no misunderstandings but in a case where disputes arise during the course of the contract it will be challenging to take the case to court because smart contracts are not legally enforced in all countries.
NO REGULATION: There is absolutely no form of international regulation governing this contract which makes this technology difficult to oversee.
DIFFICULT TO IMPLEMENT: Smart contracts are very difficult to implement because it's still relatively new and research is still ongoing to understand their concepts and implications.
CONCLUSION
Smart contracts have proven to be very useful in this current time where people want a contract system that has the flexibility to adapt to any changes in the contract, that has automated processes, and where security is topnotch. Execution is done speedily plus money and time are saved. People across the world are excited about the prospects smart contracts provide us to ease transactional processes therefore it should be embraced by individuals and the world at large.