Smart contracts are undoubtedly one of the best aspects of blockchain technology. Built of computer protocols or software codes, smart contracts serve as digital contracts. These contracts are based on the technology of “condition programming”, and work to control, verify, as well as automatically execute a transaction/agreement when certain “conditions” are fulfilled. As smart contracts are developed on blockchain, they derive their benefits from the fundamental advantages of the revolutionary blockchain technology. The benefits of smart contracts are not limited to the crypto sphere but they also extend to other industries as well, such as logistics, healthcare, insurance, and more.
Smart contracts have started revolutionizing the way businesses operate and interact, and for better. Among the many reasons behind the rising popularity of smart contracts, one of the major reasons is that these digital contracts are always more economical compared to traditional counterparts. With the rising adoption of blockchain, smart contracts too have started gaining legal status. Some of the American States like Arizona now allow creation of legal agreements through smart contracts. Another good example is California. The Golden State currently permits issuance of marriage licenses through blockchain smart contracts.
Here is a brief on the key benefits of smart contracts operating on blockchain technology.
Potential benefits of smart contracts
As mentioned previously, benefits of smart contracts share the fundamental benefits of blockchain technology. One of the major benefits of blockchain that have served as leverage for these digital contracts is the decentralized factor. Smart contracts also operate under a decentralized environment that helps them to perform autonomously- without the unwanted involvement of intermediaries or brokers. This is certainly one of the major benefits of smart contracts that help digital contracts to score over conventional centralized paper contracts.
1. Blazingly fast transactions
One of the key benefits of smart contracts is that these digital agreements allow much faster transactions compared to traditional transactions. The credit, largely, goes to the “decentralized” environment of smart contracts.
Traditional transactions are usually centralized and have to go through multiple channels from the start to completion. But, smart contracts follow a direct P2P process where the transaction process involves only the signatory parties. As no middlemen are involved here, no unnecessary time is lost in passing the transaction process across multiple parties.
The “automated” aspect of smart contracts also facilitates these benefits of smart contracts. As mentioned previously, these contracts automatically execute transactions the moment the conditions are met.
2. Economical transactions
Traditional centralized transactions are not only time-consuming but they also incur a lot of fees. With conventional transactions, you always have to pay the broker or intermediary fees that add much to the overall transaction cost. But, as smart contracts follow a decentralized and direct structure, there is no question of paying any kind of fees to the middlemen. Bottom line, one of the chief benefits of smart contracts is that these digital contracts-based transactions are always more economical than traditional counterparts.
3. State-of-the-art security
Smart contracts champions have always stressed on “advanced security” as one of the prime benefits of smart contracts.
There are two primary factors that make smart contracts more secured and safer than regular options. We have already discussed that the “decentralization” aspect is one of the key benefits of smart contracts. The other factor is advanced encryption guard. All smart contract transactions are protected by highly advanced encryption that makes them almost impossible to hack. Moreover, the blockchain technology stands out with its “immutability” advantage. It means any data that gets recorded into blockchain cannot be manipulated or tampered with. Likewise, smart contracts are also tamper-proof and cannot be manipulated.
Let’s get back to how the decentralized aspect of smart contracts can prevent manipulation. A decentralized environment negates involvement of any 3rd party which inevitably reduces risk of manipulation as well as data breach.
4. Absolute accuracy
This is certainly one of the best benefits of smart contracts.
Agreements, terms, as well as conditions embedded into smart contracts have to be absolutely accurate. These contracts record every single detail in the most explicit manner as a single wrong input or unwanted omission could lead to severe transaction errors.
5. Transparency and easy communication
Thanks to their blockchain framework, smart contracts assure complete transparency of all terms, clauses, and conditions of the embedded agreements. Every party involved in the agreement will have explicit knowledge of every single detail of the contract.
The transparency quotient is one of the leading benefits of smart contracts as it leverages clear communication between all the parties involved. This way, smart contracts are able to prevent miscommunication and disputes among the involved signatories. Alongside, transparency of the contracts reduces risks of efficiency gaps that might otherwise be created by lack of proper communication.
6. Increased level of trust
The benefits of smart contracts mentioned above inevitably leverage the “trust” quotient of these digital contracts.
One of the key benefits of smart contracts is that these digital contracts assure advanced cryptographic security. Then, the smart contracts-based agreements are always immutable. Additionally, smart contracts guarantee complete transparency as well as automatic execution of transactions. All these benefits of smart contracts cumulatively level up the “trust” factor of these cutting-edge contracts.
7. Versatile use cases
The benefits of smart contracts have already been acknowledged by several industries.
For example, the benefits of smart contracts are helpful for the insurance industry. The contract might state that claims would be processed if the client encounters certain damages or incidents. And, if these conditions match, then the contract would release the funds (stored in the contract’s escrow wallet) automatically and immediately to address the claims.
Here is a list of industries that benefit from the benefits of smart contracts:
● Cryptocurrency
● Healthcare
● Supply-chain
● Mortgage
● EV recharge service providers
● Intellectual rights
● Law
● Voting
● And more
The Oracle factor
So, you have quite a list of benefits of smart contracts.
But any discussion about benefits of smart contracts would be impossible without the mention of oracles.
Smart contracts are definitely bustling with amazing potential and functionality. But it is impossible to explore the entire gamut of benefits of smart contracts without external data. And now, you have a catch- blockchains are restricted to access external off-chain data independently due to certain inherent rules. The same goes for smart contracts as they operate on blockchain platforms. And without their access to external data feeds, smart contracts cannot explore their wide range of functionalities.
This is where you need oracles. Oracles serve as the much-desired bridge that connects the blockchain with external data. It’s the oracle that helps smart contracts to access off-chain data to realize their functionalities and offer us the multiple benefits of smart contracts.
