Smart Contract technology has come a long way over the years. However, many people remain unaware of this technology or have heard of it, yet fail to understand what it can accomplish through the use of computers. What are smart contracts? How do they benefit individuals and organizations? What is the future of this technology? These are only three of the many questions one may have when they hear the term Smart Contract, and there are numerous others.
What Are Smart Contracts?
Wouldn’t it be nice to eliminate the middleman when conducting a wide variety of transactions? Smart Contract technology allows users to do exactly this. With this type of contract, assets can be exchanged with no need for a middleman, and the transaction is completely transparent and conflict free. They are similar to other legal agreements in that they establish the rules and penalties relating to the arrangement, but they also enforce these obligations.
How does this differ from a traditional agreement? Smart Contract technology allows the terms of the agreement to be written into computer code, and the code and agreements are maintained in a distributed, decentralized blockchain network. Originally created for bitcoin, the technology is now used for a variety of other purposes. Any transaction a person wishes to complete without the help of the legal system, some type of external enforcement mechanism or central authority, may be carried out with the help of this technological advance.
The Depository Trust and Clearing Corporation opted in 2017 to make use of Smart Contract technology to process in excess of $1.5 quadrillion in securities. Doing so helped to save the organization money by reducing communication problems and improving workflow. Independent processing discrepancies were eliminated, thus minimizing the risk of expensive lawsuits and delays in settlements.
In the past, financial institutions invested a great deal of time and manpower in handling customer accounts. Smart Contract technology helps to reduce the burden by taking on certain tasks, such as transferring payments to other financial institutions when they arrive at a bank and logging any change of ownership. Barclays Corporate Bank is now making use of this technology to carry out these processes and saves time and money by doing so.
The Future Of Smart Contract Technology
Individuals will find this technology being employed more frequently as individuals and organizations learn more about the benefits of using it. Experts predict it will take on routine tasks, such as risk assessments and real-time auditing, for credit companies, certified public accountants, and merchant acquirers, among others. Lawyers benefit from Smart Contract technology and will be able to make use of templates to produce contracts as opposed to writing them. Healthcare, the automotive industry, and real estate are other industries that may be impacted by smart contracts. It’s only a matter of seeing how far the technology can go and in what time frame.
The cost savings an organization can achieve by making use of the technology will benefit other industries too. No third party is needed in this situation, thus the risk of manipulation is eliminated. Documents are encrypted on a ledger shared by all parties in the transaction, which ensures no contracts are lost and less time is spent manually processing documents. Furthermore, human error becomes less of an issue as the contracts are all automated.
Smart Contract is a term every individual should know thanks to the anticipated expansion of this technology in the future. A person may find the way they conduct business changes as a result of this technology, for example. Although the process behind the creation of these smart contracts may confuse many, the benefits are easily seen. Individuals need to keep this in mind and embrace these changes. The technology is not going away any time in the foreseeable future and may never do so.