Smart contracts and Blockchain explained
Smart doorbell, smart thermostat, smart home……smart contract WTH! Yes there is such a thing as a smart contract. Some of you have probably heard of the term if reading about Blockchain and some of you are probably wondering what the heck is it.
A smart contract is a code created within the Blockchain. It is similar to a written contract but of course done digitally. Like any other contracts certain objectives need to be met for it to be binding.
Although the term smart contract may sound new, it was actually used and attempted to be developed in the mid 90’s. Of course, Blockchain technology was not developed back then, so the smart contract never came into advancement. Now with Blockchain technology it has successfully implemented the smart contract.
Let’s break it down in a everyday scenario, so it’s easier to understand…
A smart contract is a trust-less system, so you don’t need a middle man.
For example, When you are looking to purchase a home, you need a realtor to connect you to a seller then to draft a the purchase and sales agreement (PSA), a lawyer has to over see it and sign off on the deal….and of course the bank is involved by providing the mortgage. There are so many people involved in the deal to make sure it goes smoothly.
Now If a smart contract was to do the deal, it would look something like this…
The buyer and seller would connect automatically without a realtor or any of the hassle of making an appointment. A smart contact would administer all the terms of the deal. No need for lawyers, mortgage brokers, realtors or any other professionals or organizations. There would be no human error and imagine the time it would save!
The smart contract is the core basis of Blockchain and once it’s created, it cannot be altered or changed. There is a core group on the network that has to approve every aspect of the contract, so not one person can sway the contract to perform any operation without the consent of the whole group. Hence, making the smart contract unchangeable.
To think that technology can change or even eliminate these industries maybe a hard pill to swallow. Since most of us can remember, we need these professionals when we are making these types of deals as it pertains to a great deal of money and regulations. Then to think the “norm” that we are used can change in the near future is kind of scary but also very exciting.
Now let’s look at a smart contract in another industry…
The supply chain industry is based on timely responses as one move directly dictates another. From orders, invoices, billing, transport, and delivery, it can be difficult to manage all aspects of the chain. Many times an invoice or an order needs to pass through many hands before its approved by the right person and then has to trickle down the same route for it to be processed. Smart contracts and Blockchain can automate tasks and all transactions while transparent digital versions can be sent to all the parties involved. Code can be implemented in the smart contracts to restrict actions to help against theft or fraud. Smart contracts can make this system extremely efficient and time effective.
The best part of a smart contact is, it can be implemented in any industry. Although it sounds like one of the greatest things to happen, there is a lot of work to be done. It is a fairly new technology that has the potential to change the world but like any new technology, it takes time to warm up to and understand its full potential.