One of the key technology innovations of second-generation blockchain has been the development of smart contracts.
Smart contracts are the advanced form of real-world contracts as they are completely digital. They are computer codes that are stored on the blockchain instead of a server.
Because of being stored in blockchain, no one can alter or delete any terms in the contract which enables people to do business with strangers without the need to trust each other or a third party.
Let’s take a look at an example to understand how smart contracts work.
How Do Smart Contracts Work?
Imagine you go to a shop to buy some pens. Once you reach there, you hand in a 5-dollar bill to the shopkeeper and then ask for the pens in return for the money. After some time the shopkeeper returns with pens in his hands but asks you to pay again as he doesn’t believe the fact that you have already paid in advance.
In situations like this, you can either fight or return home without any pens or money.
This is where smart contracts come in.
A smart contract allows different parties to do business with each other without the need to know or trust each other.
It creates a program that holds all the funds until a goal is reached. Such as, you store the money in the program created in a smart contract instead of handing it straight to the shopkeeper. Once you receive the pens, the program automatically transfers the money to the shopkeeper and if the shopkeeper fails to give you the pens, the money is automatically returned to you.
Why Should You Trust Smart Contracts?
Smart contracts are stored on the blockchain which makes them immutable. This means once a smart contract is created, it can never be altered again.
Smart contracts are also distributed which means the output of the contract is validated by every single person on the network. This enables every participant to see who is tampering with the contract and block the attempt.
Top Smart Contract Use Cases
According to Market Watch, The global Smart Contracts market size is projected to reach US$ 345.4 million by 2027, from US$ 106.7 million in 2020, at a CAGR of 18.1% during 2021-2027.
Let’s take a look at some real-world uses of smart contracts.
- Real Estate Industry
According to Grand View Research, the global real estate market is expected to generate a revenue of USD 4,263.7 billion by 2025. With such a big market size, you can only imagine the amount of money spent on brokers and property lawyers. This is where smart contracts come in. Using smart contracts, both the buyer and the seller can handle the transaction completely by themselves. Thus, saving the hefty amount of money spent on property lawyers and brokers. Furthermore, these smart contracts also maintain all the records. - Insurance Industry
The insurance industry is known for the disputes that mostly take place over documentation or insurance fraud. In cases like this, smart contracts with the assistance of IoT can facilitate the policies and make sure that they have all the proper documentation. For example, in case of an accident, maintaining a record of documents like driver reports and driving records, among other things. Furthermore, smart contract execution is based on collected data which helps in avoiding insurance fraud.
- Healthcare Industry
The healthcare industry needs to maintain a large amount of data which includes patient medical records, contact details, and test results, among other things. When delivering this data to a third party like the insurance agency, the transferring line should be secured which can be done using smart contracts. - Banking industry
Smart contracts are used by the banking and financial industry to manage standard and syndicated loans. Syndicated loans involve multiple lenders who provide loans to multiple borrowers on the same loan terms. These types of loans include various steps such as syndication, diligence, underwriting, and servicing of syndicated loans. With smart contracts, all the steps can be processed much faster. - Trading Industry
With smart contracts, the trading industry can save a large amount of money by removing the middleman or broker. Furthermore, the whole process work is also automated using the smart contract which leaves no space for any human errors.
Conclusion
Smart contracts are one of the most exciting things to have come from the blockchain technology. It has completely revolutionized the data-handling process and money transactions.
With this, we have reached the end of the blog. If you are looking to avail the benefits of smart contracts, Jellyfish technologies can help you with that.
Jellyfish Technologies is one of the early adopters of Blockchain and over the years has developed good competency in developing blockchain-based solutions. We are proficient in implementing private blockchains, implementing smart contracts, API integration to Blockchain, and other custom requirements. Whether you want POC, MVP, or final product in blockchain, we can help you in a cost-effective and time-bound manner.
