Businesses, irrespective of the industry or size get the best support from written contracts. However, the problem with these traditional contracts is that they are cumbersome to prepare. Above all, they are the source of legal and business conflict in many instances. Here, smart contracts can be an excellent replacement for traditional contracts.
What is a Smart Contract?
Smart contracts are agreements like traditional contracts. But they are different in the way that they are prepared in the form of computer programs. They are executed instantly as soon as a particular pre-programmed condition is met.
When it comes to blockchain, the objective of smart contracts is to ease trade and business. It happens both between identified and anonymous parties. Most importantly, they eliminate the need for middlemen. With a smart contract, the huge cost and formality associated with a traditional contract are eliminated. Above all, this can be done without any compromise on credibility and authenticity.
Role Played by Smart Contracts in Blockchain:
Smart contracts bring a lot of benefits to booming blockchain technology. Here are a few key roles played by smart contracts in blockchain that brings immense benefits:
Transparency:
One of the key roles of smart contracts in the blockchain is that they create an atmosphere of trust. This happens because the information and logic in the contract can be seen by all participants in the blockchain network.
Near Real-Time Execution:
In Blockchain, smart contracts take place almost at the same time for all parties. So, upon the meeting of the set criterion, the execution happens across all computers participating.
Disintermediation:
Smart contracts enable parties to get into agreements with reduced reliance on middlemen. This is one of the biggest benefits as the use of middlemen brings greater spending for any business.
Security:
In Blockchain, smart contracts are distributed ledgers. So, they are resistant to modifications and impenetrable by third parties. In turn, the parties engaged can stay assured of the security of the contract terms.
Lesser Errors:
Smart contracts use software codes for task automation. So, they are less prone to manual errors that are common in traditional contracts. Also, as real-time updates with speed and precision can be achieved with a smart contract, the chance of errors is almost nullified.
Lesser Need For Human Intervention:
Smart contracts are automated. They do not need much human management. In turn, they bring down the risks that can show up in the contract execution cycle.
Guaranteed Outcomes:
Smart contracts in the blockchain can provide the technique to reduce or totally get rid of the requirement of court litigations. The reason is that the parties agree to use self-executing contracts. They abide by the rules and the determinations of the underlying code. So, they can safeguard themselves from exposing to interpretations. Parties outside the contract cannot interpret.
Conclusion:
These are just a few examples of the role played by smart contracts in blockchain. They can do a lot. It can be stated that they are the lifeblood of blockchain to bring a lot of benefits.
