What are Smart Contracts?
Smart contracts are one of the most important and functional uses of blockchain technology.
Contracts which previously required a middleman to execute can be fully automated via predefined, coded terms on the chosen blockchain platform. When these terms are fulfilled, for example a payment is received, the contract executes itself to the benefit of both parties. Participants in the smart contract may update the database, verify changes, and implement new terms.
However, smart contracts are no new concept. The term was coined in 1994, by legendary computer scientist Nick Szabo; to bring highly complex contract law to an online platform, free from third parties. More recently, with the advent of blockchain technology, smart contracts can finally be implemented in a secure and efficient manner.
Believers in smart contract technology insist that with properly executed smart contracts, the previous roles filled by professions such as lawyers and solicitors, for instance selling a house and transferring the deeds, can be done in a completely peer-to-peer manner, saving time and money.
A Real Smart Contract Example:
RefToken, the first affiliate marketing platform on the blockchain, implements smart contract technology to ensure fairness between affiliates and merchants. Previously merchants relied heavily on intermediaries, who identified quality affiliates and monitored them to ensure they fulfilled the merchants requirements. This process was expensive, time consuming and often inaccurate.
Instead, RefToken are implementing a platform where merchants and affiliates can connect with each other directly via a smart contract on the Ethereum blockchain, tracking affiliate activity and paying rewards when the smart contract has been satisfied by both parties. BlockScope worked closely with the RefToken team to ensure that their proprietary smart contract technology fitted their exact specifications.
What is Special about Smart Contract Technology?
Instead of traditional contracts which are heavy with legal jargon, smart contracts can provide each individual with clear terms, written in code. A copy of the contract is stored on the blockchain, providing not only immutability, but likewise ensuring the contract is only amended following verification by all blockchain participants in accordance with consensus algorithms.
Additionally, involved parties can track the progress of the contract, or view certain parts of the contract which have been fulfilled.
The best bit of smart contracts? They fulfil automatically when certain conditions are met. This means you don’t have to be present to fulfil or sign off on a contract, as long as the terms are written in to the code, you can rest-assured your smart contract will work for you.
The other huge advantage of smart contract technology is its transparency. Because the information within the smart contract is held on the blockchain, you, your clients, and anyone you transact with, can access the smart contract and ensure it was carried out in an honest and fair manner, dramatically reducing the chances of fraudulent behaviour.
Example Smart Contract Use Cases
Developers are already thinking about innovative and novel ways to implement smart contracts in real world, every day situations. Here’s some ways which smart contracts can be deployed, and how they benefit over traditional models:
Governance – Smart contracts can be deployed in voting systems where the utmost security and integrity is required. This can be applied not just to national and regional political voting, but also to democratic decisions within your company. The advantages of using smart contracts for casting votes includes increased security – votes are held in a decentralized ledger; but also the ability to have a much larger turn out, with participants able to vote online.
Supply Chain – Any business will recognise the importance of secure and fast supply chain management. Currently, paper based supply chains require a great deal of time, to track, sign and approve invoices, delivery notes, inventory reports etc. With smart contracts, this process is digitised in a fully secure manner, allowing your supply chain to automatically update and execute tasks on completion of pre-set requirements, and prevent tampering by decentralised hosting.
Property – The buying and selling of property, and exchanging of deeds, can be fulfilled via a smart contract. Once payment has been received for a property, the deeds can change hands electronically. Likewise, rental contracts can be drawn on the smart contract and roll on each month, creating an easy, traceable and transparent contract between landlords and tenants.
Smart Contract Development at BlockScope
At BlockScope, we can provide both consultation on your smart contract requirements and design specifications; right through to code creation and full working implementation of your tailored smart contract. In addition, we can audit and review existing smart contracts for flaws or inefficiencies in the code, allowing you to deploy a fully optimised smart contract.
Our smart contract developers in Gibraltar and Malta have a wealth of experience to design and deploy the right smart contract for your business needs.
Now that’s a smart move.