Smart Contracts making Blockchain Technology Smarter
One of the biggest advantages of Blockchain as a technology is that it is a decentralized system and eliminates the need for an intermediary, and the costs and conflicts associated with it. This combined with the speed, low cost and security makes Blockchain a preferred choice of Governments, Banks and Organizations when compared to traditional systems.
Work of scholars dating back to as early as the mid nineties made it possible for the Smart Contracts or Crypto Contracts to be used with the decentralized ledger. A Smart Contract is a computer program/code deployed and supervised by nodes on a Blockchain. Smart Contracts directly controls the transfer of digital currencies or assets between parties according to pre-set conditions.
Practically, Smart Contracts allow exchange of money, shares, assets or any other entity of value in a transparent, conflict-free way, without the need of an intermediary. Just like a traditional contract, a smart contract defines the rules and penalties around an agreement. What makes it more convenient is the fact that Smart Contracts can also automatically enforce those obligations. These Smart Contracts stored on blockchains mean they are highly secure and immutable.
Smart Contracts are so powerful that they can be used to automate tasks for which people currently pay intermediaries like lawyers or banks. Smart Contracts built on top of Virtual Currencies can trigger automated payments. Let’s, for example, discuss how Smart Contracts can help users in real estate. Say, you have an apartment that you wish to rent out. Normally, you would pay an agent or post an advertisement for it. Additionally, once the apartment is rented out you have to manually ensure that the rent has been paid. If, however, you were to use a virtual currency, like Bitcoin and encode you Smart Contract into the blockchain, you could easily automate fulfillment to all the associated beneficiaries.