It was in 2009 when Satoshi Nakamoto invented the very popular decentralized currency called Bitcoin. It was based on blockchain technology, which enabled transactions among people without the involvement of a third party.

Nobody would have thought, in a matter of decades this technology will create more such revolutionary applications. Now cut to today, smart contracts are the next big thing in this fast-evolving blockchain era.

Is a smart contract something that you should be eyeing? Let’s try unveiling all the curtains of the doubt for you.

What is a smart contract?

A smart contract is a blockchain-based application that facilitates the execution and verification of an agreement. Once the terms and conditions of the agreement are met, it will take care of the settlement. The entire idea behind the concept of a smart contract is to automate the process of pre-determined actions for a hassle-free experience.

Let’s take an example to understand it. Suppose a buyer wants to purchase 100 widgets from a seller; in the very beginning, a smart contract will issue a token to the buyer, which will later be used for the buyer’s identity verification. The order will be placed, and once it has been delivered, the payment will be released to the supplier.

But how does the smart contract manage to do so much cool stuff? Let’s dive deep into it.

How do smart contracts work?

For a small smart contract, the developer needs to write the program in a language called Solidity. Solidity is an object-oriented programming language that is similar to JavaScript for implementing contracts in blockchain technology.

Once the contract gets uploaded to the blockchain, anyone with an internet connection can access it. The parties also need to put their digital signatures on it as confirmation that they have accepted all the policies. The contract is securely stored in the decentralized network and will be tamper-proof. The transactions that take place in the blockchain are secured by cryptography and are verifiable by every user on the network.

Why businesses are adopting smart contracts?

The above segment must have made it very clear to you how smart contracts are doing wonders for businesses. Conventional methods of handling all the paperwork seem to be on the verge of extinction.

Here are some of the key advantages of shifting your enterprise deals to smart contracts over traditional contracts.

1. Security: The encrypted cryptography approach in smart contract save the documents from infiltration and data breaches. Since it is stored in a blockchain, the controlling body is decentralized and the data are backed on the nodes of the network. The possibility of data loss is negligible in such cases.
2. Immutable: Smart contract does not encourage any changes once all the parties are done with their accepting digital signature. This way the agreement attains more stability which is a proven profitable way of running a business. No one will be able to manipulate the contract for individual gain.
3. Higher efficiency: One of the most appealing factors of a smart contract is based on the speed and efficient solution it provides. In the absence of all the traditional paperwork, the involvement of the third party is negligible. There is no requirement for banks or any such entity for verification purposes.
4. Transparent approach: As already mentioned, anyone with internet connectivity can have the access to the smart contract. Such transparency in the process builds trustworthy relationships among the parties.
5. Automated Invoicing: The billing process has been traditionally one of the most complex things to tackle for a business. With smart contract’s automated invoicing feature, billing is now a hassle-free process.

In the early 1990s when Nick Szabo came out with the idea of smart contracts nobody thought it will have such a great impact on modern-day business practices. Now specialized platform like Ethereum is one of the leading smart contract tools used in industries.

Specified sectors like healthcare, real estate, banking, and many more have experienced a positive impact from smart contracts. It has automated processes, cost-efficient techniques, and whatnot. If you feel your business could also get benefited from it, then definitely it’s worth exploring further.