📝 How it Works: Smart Contracts
Today's Highlights
- Automating menial tasks on the blockchain
- Today's Infographic
- In Other News - a few interesting developments we're tracking.
Automating menial tasks on the blockchain
With the growing popularity of cryptocurrency, blockchain technology has never been more popular. However, the financial sector is not the only space blockchain is used in. It is starting to be used in several industries such as retail, real estate, etc. One of the major reasons why these industries have adopted blockchain technology is smart contracts.
Smart contracts are digital programs that run on a blockchain when predetermined conditions are met. They are mainly used to automate processes that would usually take a long time, such as an execution of an agreement between multiple parties or automating workflows.
To put the idea of smart contracts in the real world, let's say that someone is buying a house. There are typically hidden costs included with buying the house such as a closing fee, broker fee, title transfers, etc., but with smart contracts those costs can be eliminated or, at least, reduced. When the piece of property is bought, smart contracts can automatically do the record keeping which saves time and money. The need for legal services and the risk of fraud becomes less immediate.
Smart contracts work by following “if/when … then” statements that are written in code for a blockchain by a developer. A network of computers perform the actions when preconditions are met. After the action is completed, the blockchain is updated in order for the action to be recorded. The action cannot be tampered with as a result.
Home Depot uses blockchain and smart contracts to quickly resolve any issues with their vendors. Sonaco and IBM are applying this technology for reducing transportation and supply chain issues for life-saving medications.
Blockchain and smart contracts have the potential to increase the efficiency, transparency, and security for many industries, and the companies that haven’t paid attention to this technology will surely start doing so.