Smart contracts are digital contracts that can be used in place of all the standard legal contacts such as leases, shares, property sales or anything else required by contracting parties.
A smart contract is a self executing contract that behaves exactly according to the manner in which it has been written. They are less expensive that traditional contracts as there is no need to hire a middleman to write the contract and they cannot be lost or ignored as they have been duplicated across the network.
Ethereum contracts are secure and un-hackable. Ethereum was designed specifically for smart contracts and is the most popular platform due to its flexibility. For more information on what smart contracts are and how smart contract blockchains are explained, visit https://www.coindesk.com/information/ethereum-smart-contracts-work/.
Smart Contract Applications
The application of smart contracts in the ever growing digital world is limitless. Here are a couple of smart contract examples to demonstrate why they are growing in popularity in all industries:
Smart Contracts: Insurance
A challenge with traditional insurance policies is the amount of time needed to process the claim and the intense administration requirements. By converting the insurance policy into a smart contract, once an incident occurs that should begin the claim process, such as a car accident, the contract can be triggered. The pre-agreed limitations and circumstances surrounding the claim would have been written into the contract and the claim can be processed or denied based on the information. Administrative costs are reduced, subjectivity taken out of the decision making process and settlement happens faster.
Smart Contracts: Entertainment
One of the contracts that could be simplified by writing them in Ethereum instead of managing on paper, would be the payment of royalties to artists. With the multitude of songs available, tracking and managing who is the valid artist due a royalty payment is complex and susceptible to error. Should all these contracts be recorded digitally and available for view to multiple parties, tracking the rightful owner and initialising the royalty payment would faster and more efficient and as changes cannot be made to the contact without the permission of all the parties involved, the artists are assured of receiving their due.
Smart Contracts: Banking
The banking world is surrounded in paperwork and contracts and the administration and management of these contracts, combined with the huge amount of documents that accompany these contracts, cost the banks millions in salaries and storage space. Many of the contracts could be moved into the smart contract space and large mounts of money saved. An example of this could be the mortgage contracts over properties. The smart contract would specifically state the terms of repayment, the actions when a client defaults and once the mortgage has been settled, the transfer of the property from the banks name to the new owners. Other applications that are being investigated in the banking environment are those of bonds, interbank clearings and settlements, coupon payments, and overdrafts and loans.
If you’re looking for applicable areas for smart contracts banking is certainly an attractive option.
Smart contracts are also being considered in area’s of government as well to see how they can be used to streamline voting, identify management and simple contracts between state and citizen such as rates and taxes. The list above is just a small indication of the possibilities and we have not even looked at the opportunities in Technology and Energy.
For some more ethereum contact examples and more smart contract use cases, please visit the following sites: