What is a Smart Contract?
Simply put, a Smart Contract is a program, that’s always stored on a blockchain. It runs when predetermined conditions are met.
- Smart Contracts typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without an intermediary’s involvement or time loss.
- They can also automate a workflow, triggering the next action when conditions are met.
How do Smart Contracts Work?
Smart contracts work by following simple “if/when…then…” statements that are written into code on a blockchain.
- A network of computers executes the actions when predetermined conditions have been met and verified.
- These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket.
- The blockchain is then updated when the transaction is completed.
- This means the transaction cannot be changed, and only parties who have been granted permission can see the results.
Benefits of Smart Contracts:
Smart Contracts are digital and automated programs. In other words, they are the brains of blockchains. There are many benefits to summarize a few:
- Speed: Because it is digital, so transactions are fully automated without paperwork.
- Efficiency: Automated process avoids reconciliation of errors.
- Accuracy: Execution is based on predefined conditions only.
- Trust & Transparency: Transaction Records are encrypted. No third party is involved. You cannot alter a smart contract for personal benefits.
- Security: Each transaction record is connected to the previous and subsequent records on a distributed ledger. Hackers would have to alter the entire chain to change a single record which makes smart contracts the most secured.
- Savings & ROI: Think about transactions without the involvement of 3rd party support, assistance, and fees.
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