What Is Smart Contract And How Can Your Business Benefit From It?

By Maryna Cherednychenko

Today, the idea of “smart contracts” is a promising cloud technology for storing various papers. This post will clarify what smart contracts stand for, how they work, and why you need them.

What Are Smart Contracts?

With smart contracts, you can buy, sell, rent, trade without involving a go-between. If you want to get a clear understanding of the operating principle, think of the penny-in-the-slot machine. You would contact a notary or lawyer in a traditional model and then wait to receive a needed paper. In a smart version, you insert a crypto coin into a slot machine and get your film subscription or health insurance pop up.

There is no way to fool a smart contract. If one of the parties does not fulfill the obligations, it is subject to fines or other sanctions. The other side, in turn, receives full compensation.

How Do Smart Contracts Work?

If you translate the program code into spoken English, it will look something like this:

If client X receives item Aand if client X pays for item A,then send item B to this client.

Since the smart contract is self-running, you don’t need to involve third-party experts to verify and control it. Thus, you save time, money and eliminate the risk of fraud.

Note that smart contracts are reusable. Once you write a program, you can utilize it as many times as you like with other input data.

Logical Algorithm

In the first case, the buyer pays a fee for the transfer of money. If the buyer does not pick up the goods, the seller loses money for sending them back and forth.

In the second case, the buyer risks losing the deposit if the seller does not send the goods. It will also take time and costs to make a refund if the product does not meet expectations.

With a smart contract, cheating is impossible. If contract conditions are not met, each side gets back money and goods without commissions and overpayments.

Let’s see the behind the scene actions that take place in a program.

  • A clothing manufacturer and a client put value into an information repository. Once the value is placed, it cannot be quickly withdrawn.
  • The client puts money for goods.
  • The manufacturer places a tracking number.
  • The manufacturer receives payment confirmation, and the buyer gets a tracking number.
  • If the buyer picks up the package, the manufacturer receives the money.
  • If the buyer doesn’t like the product, they don’t pick it up and get money back.
  • If the buyer doesn’t come to the post, the seller gets the delivery cost there and back, and the buyer receives the rest of what they paid.
  • When both parties complete the contract terms, the contract gets automatically closed and remains in blockchain storage.
How smart contracts work

Reusable Software

Of course, such a smart contract can serve any seller of goods or services. Moreover, we can stuff it with features to fit every taste: calculate individual prices, provide discounts, implement cost-sharing, etc.

How Does Smart Contract Differ From Traditional Agreement?

Smart contract vs. traditional agreement

Smart Contract Use Cases By Industry

Banking And Finance

KYC-Chain develops contracts for individual entrepreneurs and large financial organizations all over the world. They allow audits and calculations in real-time following international legal acts. In such a manner, processing time and the likelihood of errors and delays reduce to a minimum.

Easy loan granting with smart contract

Healthcare

With smart contracts, it is simple to automate access to clinical records. The unauthorized entrance is impossible, thanks to a decentralized system of data storing. Blockchain technology establishes the direct link between the client’s identity and their medical data, which means that the risk of medical error tends to zero.

Dentacoin is an excellent example of smart contract applications in healthcare. It brings together patients and doctors and facilitates the treatment worldwide.

Smart contracts in healthcare

Legal Activities

The law-related cases of using smart contract cover

  • digital signature
  • intellectual-property
  • the cross-machine remittance
  • property priorities
  • decentralized self-ruling institutes
  • restricted liability autonomous organizations

Nottar.io shows one of the Ethereum smart contract use cases, notarising papers with the help of blockchain technology.

Smart contract use cases in legal activities

Real Estate

As soon as the tenant enters your apartment, you receive money. If you give the wrong code, the client gets money back. If the tenant does not arrive, you get paid for out-of-service time; the tenant receives their money minus the sum paid to you.

FOAM offers smart contracts blockchain explained cases that enable various operations with real property.

Smart contracts make renting simple

Environment

A smart contract can solve this problem by clearly distributing the roles of participants. Each subsequent action will take place automatically upon completion of the previous one. It is only a small part of what such contracts can do. World Economic Forum has listed 65 smart contracts explained cases that are going to contribute to world sustainability.

Better logistics contributes to environmental health

Government

As we speak, Horizon State, the Australian company, is putting such a project into practice.

Blockchain smart contracts enable online voting

Luxury Goods

As for the industrial goods, the buyer can check their organicity and track the delivery history from farm to table.

Verified Organic and Aura are smart contract applications that offer full access to the history of luxury food, clothing, and interior design items.

Smart contracts improve client experience

Smart Contracts Blockchain Prospects

Many large corporations and middle-size companies have already enjoyed the advantages of using smart contracts. Small companies keep up with them and gradually move to a decentralized blockchain system.

If you are interested in distributed technology that can boost your economic numbers, please contact us. We will advise on the best use case for your business.

This article was originally published at Softensy.

Softensy specializes in fintech development and enterprise-level apps. Our team helps companies automate business processes by developing software solutions.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store