Smart contracts are based on the famous blockchain technology. A decentralised blockchain that has multiple advantages. It is a technology that can be used in any field, it does not have an exclusive one. This fact is one of the reasons why its expansion is greater. Thus, smart contracts have positioned themselves as one of the best options for banking transactions. Don't you know why? We explain it to you.
3 reasons why smart contracts shield interbank processes
The purpose of using smart contract technology is to optimise business processes, regardless of the company's sector. They can be used to carry out processes such as sending remittances, or even paying transactions to other people in another part of the world. There are also three reasons why smart contracts are useful for interbank processes, and they are as follows:
- they allow for automatic adjustment
Smart contracts automatically update functions as required. If specific conditions have been negotiated, all parties involved agree and nothing is changed, the action is carried out automatically.
- continuous process monitoring
A comprehensive process of the process being carried out is carried out. It is possible to know at what stage or phase of the procedure you are in. At the same time, all movements are recorded, which allows subsequent visualisation. They are stored securely in the blockchain.
- enable full control of information
In addition, they not only allow full control of all process information, but also absolute confidentiality. Everything is stored and controlled, but also confidential, which generates greater confidence in users and even increases the prestige of smart contracts.
Functionalities of smart contracts
Smart contracts are increasingly being developed in the business sector, especially in the financial world. Banks are beginning to opt for conducting business transactions using blockchain, as is the case with one of the most popular banks in Spain, Banco Santander.
The bank's chairwoman, Ana Botín, stated last summer that the Santander Group completed a first transaction thanks to blockchain technology. The smart contract that was carried out was formed by this banking entity and Nordea Banck AB, from Sweden.
Apart from serving banks, smart contracts are also used to perform other types of actions. Some examples are:
- Drafting wills: Smart contracts make it possible to automatically draft as well as modify wills. This type of document that is developed is called a "digital will". The inheritance of the deceased person is divided by means of a smart, digital process, and without the need for a signature of a person acting as a representative to validate the process.
- Changing the ownership of assets: Smart contracts allow the change of ownership in a simple and quick way. The change of ownership is carried out in a matter of seconds, it is an immediate process. Only the signature of the person is needed to validate the procedure, no further requirements are requested, which saves a great deal of time.
- Taking out any type of insurance: By using blockchain technology, the process of taking out insurance can be accelerated. This technology is used in any type of insurance: home, health or car insurance. The identity of the person taking out the insurance is verified more quickly, their details are recorded and all this is stored with absolute confidentiality, where there is no room for any possibility of manipulation.
- Carrying out buying and selling actions: These actions are supervised through smart contracts. In other words, blockchain technology monitors and controls the buying and selling actions that take place between the seller and the buyer. It also confirms that the products or services of the exchange that has taken place have reached the buying party. How do they check this? Thanks to the existence of different computer programmes.
These are just some of the functionalities that smart contracts allow, but there are more. The ones we have just explained are the main and most common ones. However, being aware of the ones listed here is a great step to start understanding the world of smart contracts.
what are the advantages of using blockchain technology?
Implementing blockchain has many advantages and benefits, do you know them? We offer you a list with some of them:
- Security: The blockchain technology ensures security for all the information, as well as for all the documents that your company has. This great feature generates a greater confidence to users and is one of the most important aspects of this new technology.
- Simplicity: It is aneasy to use blockchain, it is not complex and this feature is also one of its great advantages to implement it.
- Lower cost: The operations or transactions are carried out at a lower cost. This is also very important because it allows you to save money and what you save you can invest in something else that is of interest to you.
- It does not allow modifications: The procedure that has been carried out cannot be changed or deleted. It is necessary to be consistent with the process that is carried out so as not to regret it later. In addition, among the information that is recorded are the personal and professional data of each person who has carried out the procedure.
- Control by users: Individuals maintain full control over the information stored in this technology, which gives them a certain amount of power and increases the use of blockchain technology.
As you may have noticed, the financial sector is one of the sectors that benefits the most from the use of smart contracts, but that does not mean that others do not benefit, as they do. Do you use smart contracts in your company? Did you know about their functionalities? Ask us all your questions.