Smart Contracts are one of the biggest promises of cryptocurrencies. They depend on the use of cryptos and technological platforms that facilitate their creation.
This concept was studied for more than twenty years, and now it begins to become a reality for the global market.
What is the Smart Contract?
The Smart Contract or Intelligent Contract is a code written with a programming language. These contracts can be stored and multiplied within a Blockchain system.
That is, they are capable of enforcing and executing each of their functions automatically without the need for third parties.
What is the Blockchain or chain of blocks?
The chain of blocks (Blockchain) is a technological structure that aims to control and safely handle all the programming codes necessary to carry out any negotiation or agreement within the Internet.
The Blockchain is the technological structure that allows Smart Contracts to decentralize all the management of the negotiations. In addition to this, it improves the storage, transmission, and confirmation of data from both the company and the counterpart.
What is the Supply Chain?
The supply chain is a key factor for the profitability and success of your business.
Why? Because it is responsible for the preparation and distribution of the product or service.
The Supply Chain Manager is responsible for the material and information flows of the company to maintain a continuous and safe process from the creation of the product to delivery to the customer.
The concept of Smart Contract was born in 1997 by cryptographer Nick Szabo, but it had not been put into practice because the technology required for its creation did not exist.
How do Smart Contracts work?
A contract is defined as an agreement between two or more people, in which rules are stipulated to be followed in the development of a process, business, or arrangement. These agreements serve to clarify the hows and whys of any transaction involving two or more people.
At present, most contracts are written documents that are governed by specific jurisdictions depending on the place where they are made and sometimes require notaries, which ends up in larger expenses and more time to prepare.
With technological evolution, the term smart contract has gained more and more visibility. This is understood as any type of agreement between two or more parties, which is capable of being automatically executed and enforced by itself.
Although it is difficult to calculate how many smart contracts exist today, the decentralized application firm, State of the dApps, points out that there are more than 1,000 based on Ethereum, the most popular Blockchain for the development of decentralized applications.
The advantages of the contracts being Smart are:
1)They simplify things
The technological base of the contract itself makes the speed of the processes increase rapidly. Besides, you can check the status of the contract before, during, and at the end of the agreement.
On the one hand, it avoids the hiring of people who previously did repetitive tasks, as well as the waiting time involved in the bureaucratic process of a contract with the relevant authority.
Contracts done with Blockchain represent an advance for companies since when they are drawn up traditionally, they have a legal problem, they have to enter into litigation and do not have all the information. It is because everything was between emails or files on paper, which makes it very difficult to integrate everything into one file.
With the implementation of AI in your contracts, the errors in the transactions will be null. The execution process is decentralized and cannot be changed, so there is less risk of non-compliance or manipulation of the management of the said contract.
With website encryption, your documents are kept safe. No hacker can infiltrate their design and alter it, so the information is always kept safe.
3) Fewer intermediaries and lower cost
With this type of agreement, the intervention of third parties, such as banks or notaries who attest to the contract is directly eliminated. As there are no intermediaries to verify or carry out the contract, transaction costs are reduced automatically.
For example, if two people must contribute an amount of five thousand dollars a month to reach a figure of 100 thousand, the smart contract will block those funds until the conditions of the contract are met. On the contrary, if a smart contract was not used, it would require the intervention of a notary to validate the agreement and pay an intermediary or lawyers in the case of default.
How does a Smart Contract ensure and improve the profitability of businesses?
One of the main advantages of Smart Contracts is profitability and security in any exchange of value that is carried out with clients or business partners.
By their connection with the Blockchain, smart contracts can take care of your business funds by ensuring that none of those involved in the negotiations can be deprived of their rights.
Your business will not need third parties to generate a contract or ensure compliance with each clause reflected in it. It will improve your profitability as you will save money and time. The Smart Contract is faster, cheaper, and safer than traditional systems.
The use of Smart Contracts is increasing in sectors where security, trust, and honesty are the key to the development of the negotiations.
Sectors that can use Smart Contracts
The blockchain and smart contracts are novel instruments, but we are sure that in the future they will be applied to numerous market sectors.
Here is a list of the sectors that can use smart contracts to carry out their negotiations.
Energy services sector: the use of recharging stations would be more practical since the contract would affect the deposit and authorization of the service.
Companies in the financial sector: will be able to use the Smart Contract for loans, settlements, microinsurance, payment of bonds, property registration, donations, and inheritances.
Public sector services: betting, voting of all kinds, and smart property would be managed through smart contracts.
Administration of intellectual property: the payment of royalties can be calculated and distributed to writers, singers, artists, or any type of person who wishes to register an idea or project.
Health service companies: they will simplify medical records, the monitoring of the patient's personal health through the Internet, and access to health data of the population.
Smart Contracting technologies and protocols
Some platforms and protocols help the development of smart contracts more simply to make them a fundamental part of the market.
Some of these protocols are:
Ethereum: known as the largest Smart Contract platform. It has its language for drafting contracts (Solidity) and allows you to easily integrate any type of contract.
Cardano: it is a kind of "sister platform" to Ethereum, as it was created by the same person.
To make the smart contract work perfectly, you need a process that guarantees the security, quality, and trust of the system to carry out the negotiation.
Most are created on platforms like Ethereum, Lisk, or Cardano that work with DApp technology (decentralized applications).
You may be wondering: What is the process for creating a secure Smart Contract? Here are the steps to create it:
- Design and plan the Smart Contract. You must decide what you want the contract to facilitate.
- Choose the DApp platform you want to use.
- Build the Smart Contract, that is, the programming language used by the selected platform.
Main functions of the Smart Contract software
These contracts have numerous functions to facilitate the negotiation process and achieve a profitable long-term business.
Some of the main functions that these software offers are:
- Electronically sign agreements through the chosen system.
- Integration of third-party electronic signature.
- Transform traditional contracts into a set of computer data that allow controlling the content of the agreement.
- Streamline agreements and approvals by implementing rules according to the corresponding laws.
- External work with counterparts to obtain results in agreements more quickly.
- Promote the standardization and control of efforts to ensure efficient work.
Moreover, Smart Contracts help you to exchange money, properties, or any value agreement without paying for the service of an intermediary.
Smart Contract Example
Smart contracts are protected by programming codes, they can only be seen by the signatories.
However, it is possible to give them a written version of how a Smart Contract reacts if the established clauses are not met.
For example, if you decide to move and want to rent an apartment, you can use the blockchain to pay with cryptocurrencies. After this, you will receive a receipt, which is automatically saved within the smart contract.
Later, you will receive an entry key, if it does not arrive on the agreed delivery date, the Smart Contract will generate a refund.
Smart Contracts are the future of negotiations, and cryptocurrencies have made them a reality.
Very soon, all companies will choose smart contracts as the key to profitable deals or negotiations, simplifying a task that took hours to do and replacing it with a few clicks.