what are Smart Contracts and what are they for companies?
have you heard of them? This is a trendy concept that finds its origins in the birth of Bitcoin. You may be wondering why, right?
Well, it turns out that in the last 10 years there have been many (very many) decentralised idea projects that have come onto the market. Smart Contracts or smart contracts have emerged as part of these decentralised applications with the aim of eliminating intermediaries and making processes simpler, saving time and costs.
Let's take a look at what they are.
what is a Smart Contract?
To approach this definition, let's divide this concept into two parts: the contract and the intelligence. The first is a kind of agreement between two or more parties, an element that defines what can be done and how. The rules of the game. Think of an employment contract, a rental contract or any other contract you can think of.
Traditionally, contracts have been verbal and written documents that entailed huge time and cost losses: now you have to wait for the notary's response, you have to comply with this law, you have to protect your data, etc.
Smart Contracts emerge as an alternative to this type of contract. Their intelligence means that they can be executed and enforced by themselves, automatically and without the presence of third parties or intermediaries. From the more technical side, and according to Bit2me, "they are 'scripts' (computer codes) written with programming languages, with the terms of the contract being pure sentences and commands in the code that forms it".
Differences between a smart contract and a traditional contract
Society is used to working with paper contracts, the traditional ones. So, change requires an effort, and to better understand what Smart Contracts are all about, we are going to establish the main differences between one and the other:
- SMART CONTRACT. It hardly requires our time, as they are autonomous and automatic contracts; it can be created by natural or legal persons, by machines or other programmes; it is valid and does not have to depend on authorities; the large costs and time invested in the process are eliminated; it constitutes a code that is visible to all and that cannot be changed (blockchain technology).
- TRADITIONAL CONTRACT: Requires most of our time and money; can only be done by notaries or managers; subject to various laws and territorial jurisdictions; high cost; can be changed, so there are risks.
who said that logic could not join our everyday contracts?
Benefits of Smart Contracts in business
Smart contracts open up a world of possibilities for companies, organisations, public administrations, etc., due to the advantages they provide:
- They are transparent and can be consulted by anyone.
- They are secure and cannot be edited or deleted.
- Traditional clauses are replaced by sentences and commands.
- Any risk of manipulation, mistake or breach of contract is eliminated.
- It costs less money, as there are no intermediaries (notaries, managers, etc.) who have to make or verify them.
- Automatic updates, which occur in real time, thus increasing the speed of the processes.
So far, we have seen how the financial sector, payment systems, rights and obligations have joined the smart contract scheme. However, there are no parts of society that cannot benefit from these advantages.
Voting systems themselves could also benefit from these contracts because, in this way, anyone would be able to consult all the votes.