Smart contracts consist of computer code which is a set of rules agreed upon by the parties concerned. When these specified rules or conditions are met, smart contracts execute themselves and provide output.
Usually, when implementing agreements involving various stakeholders, third parties examine and verify all information that makes it a complex and time-consuming process. Smart contracts simplify this by eliminating third parties and automating the process, enabling stakeholders to transact directly with each other.
Smart contracts provide freedom and convenience to conduct transactions with interested parties from all over the world without worrying about reliable gauges or intermediaries. The inherent encryption mechanism present in smart contracts ensures security, trustworthiness and evidence-proofing processes.
This has the potential to disrupt industries such as banking, insurance, e-governance, telecommunications, health, education, entertainment, and more.
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Let's see how smart contracts can impact the industry through a few examples:
Government; One way smart contracts can radically change governance is by introducing transparency in the taxation process. At present, salaried employees send taxes through their supervisors who act as intermediaries to collect and coordinate information. Using smart contracts, the process can be fully automated where employees enter their income details directly into a government tax portal built on smart contract technology. It can calculate taxes to be collected based on input data and automatically cut them off from employee accounts so that it completely eliminates intermediaries, resulting in a payroll tax process that is transparent, simple, timely and cost-effective.
Health ; Health is a sector damaged by data destruction, data exploitation, and intermediaries. By introducing smart contracts in patients' health records, this problem can be reduced in large part. Patient records are important in two ways: they are very important in diagnosing and preventing the wrong administration of drugs, and they contain sensitive data that can be misused for marketing or malicious purposes. With the help of smart contracts, patient records can be digitized and encrypted with limited access to authorized individuals, ensuring that data will not fall into the wrong hands.
Education: There are many ways in which smart contracts can change the educational landscape. Digitizing student records, certificates and badges with only official access is one way to increase trust and transparency. Another potential use of smart contracts is to track and validate the presence of students and faculty to impose sanctions on student courses and faculty salaries according to the hours recorded in the system. This will ensure transparency in the system and also reduce documents. Smart contracts can also be used to distribute student scholarships by coding the criteria needed in the system and releasing scholarships when all requirements are met by students.
Supply Chain: Smart contracts can revolutionize the supply chain by providing one version of the truth for all stakeholders in a system that is resistant to fraud and resilience. They can be used to manage workflow approvals and authorize material transfers automatically on completion of the necessary formalities coded in the contract. Companies can bypass conventional ways to create trust, saving time and money; and also reduce documents and intermediaries.
Financial Sector: The financial sector is one of the domains that will be greatly influenced by the introduction of smart contracts. Trust is the most important in financial transactions and the industry is full of intermediaries and processes that exploit these inherent characteristics. Many examples can be given to describe this, one example is: Banks have strict requirements for lending and most small sector businesses fail to fulfill them, making it difficult for them to raise funds.
This is where micro loans from alternative sources emerge. This allows borrowers to receive loans from individuals by placing their assets as collateral. The parties can sign a smart contract with clear code instructions to liquidate collateral to repay the loan in the event of a default. This platform can also monitor the value of collateral and remain safe to prevent borrowers from using it to collect funds from other places.