With so much hype around crypto and blockchain, many clients might be wondering “what is a smart contract?” Smart contracts are digital contracts that preserve essential elements of an agreement in blockchain protocols. Because these protocols automate different functions of the agreement – executing, payment, etc. – they allow businesses to bypass middlemen and other tasks in the current process, resulting in a faster, more straightforward way to do business. Of course, blockchain isn’t without its issues, but more and more people are turning to this innovative system. This is when smart contracts are essential. You still have the same fast, effective transaction, but with a layer of transparency that keeps all parties accountable.
How Smart Contracts Work
It’s important to understand the relationship between smart contracts and blockchain. Like all contracts, blockchain contracts clearly define the rules and guidelines surrounding an agreement, except here, the terms are specified digitally, and protocols are used to automate different tasks. When certain “triggered events” occur – like an expiration date – the contract will execute itself automatically. They also work to enforce penalties automatically should either party break the agreement. And while both parties can remain anonymous, the actual contract is recorded on a public ledger, allowing anyone to track or verify any step of the process. Given this relationship between blockchain and smart contracts, smart contracts can be faster, more accurate and more transparent than existing methods.
Smart Contract Applications
Blockchain contracts simplify the administration process while guaranteeing both accuracy and transparency, and though they are a relatively new innovation, there are already some interesting use cases in various industries:
- Copyrights and Intellectual Property
- Real Estate
- Tracking Delivery and Logistics
There can be a lot of back and forth when it comes to business transactions, and a smart contract can greatly reduce both confusion and potential delays. A result is a contract that deals with safeguards against typical issues and can even improve the workflow of a business.
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