Contracts have remained largely unchanged for hundreds of years, but smart contracts using blockchain technology are here to bring contracts into the 21st-century, helping business respond faster and serve its customers better.
So why use blockchain for smart contracts? The main advantage of using Blockchain is that it’s a decentralized ledger, removing the need for a middle-man, therefore, reducing time and conflict. Smart Contracts (or self-executing contracts) are computer programs built on the blockchain (generally on the Ethereum blockchain).
Smart contracts were first conceived by renowned cryptographer and legal scholar, Nick Szabo, back in the 1990’s. His research showed that a decentralized ledger could be used for smart contracts; although the technology (Blockchain) wasn’t around back then.
Smart contracts are converted to computer code, stored, and replicated on the system; supervised by the network of computers that run the blockchain. A smart contract works by enforcing agreement terms with a cryptographic code, it is different from cryptocurrency in that instead of just logging a value at a particular address, it takes the confirmation information and performs a series of actions e.g. sending a password, firing a web service call or creating a PDF document.
Although smart contracts are in their infancy, they have the potential to be used in multiple industries for all sorts of situations, ranging from healthcare, financial services, legal processes, crowdfunding agreements, breach contracts, property law, and even credit enforcement.
Examples of industries that could benefit from smart contracts include the healthcare industry, where personalised health records are secured on a digital ledger, making records easier to find and always up to date with only one in circulation. The real estate industry can also benefit, where a lot of time could be saved by digitising the costly contract writing and deal closing processes.
If you think smart contracts can help your business, and you want to take steps to integrate blockchain and smart contract technology, you will need to either hire an outside developer or provide training in-house for programming staff that know Java. Remember developers in this new industry are in short supply and can charge anywhere from $80 – $200+ per hour, so you need to make sure the savings you gain from having a smart contract outweighs the cost hiring or training staff to create the contract in the first place.
With increased interest in blockchain applications across the United States, Arizona’s Governor signed the latest blockchain bill into law. According to Coindesk the bill “…amends the Arizona Revised Statutes to recognize data written and stored on systems using the technology”. With such strong interest in the application of blockchain technology it only a matter of time before adoption becomes more widespread.
If you want to know more about smart contract platforms here is a list of smart contract solutions, reviewed by BBHQ Media.