In today’s society, we are already accustomed to the rigid formality of everyday transactions that are prone to human error and many flaws. However, due to crypto, there has been a rise in a new form of transactional method that we’re going to be talking about. What is a smart contract? This refers to the computer-generated code in the blockchain that operates in an if-this-then-that manner, creating a cause and effect relationship. With this simple concept, it can create transfer payments, registrations, and more. They are written in the Ethereum Network and are basically made to have endless possibilities. Now, how can this positively change the nature of transactions?
One of the best things about these smart contracts is the fact that once they are on the blockchain, they will be there forever. It is impossible to be reversed, and due to that, its legitimacy is definite, and its safety ensured. If you wish to modify it, it is only possible if you create a new one and inform people not to use the old version.
Another thing about this is that since all of these codes are computer-generated, it is impossible for them to contain any errors. Therefore, with this in mind, there will be no inequalities and conflicts pertaining to the processes and execution of the contracts; this includes the need for intermediaries and enforcement. In fact, it is impossible to hire intermediaries even if you want to due to the automated nature of this.
Where these contracts win in which traditional methods don’t is how fast-paced and practical it is. For example, there is a phenomenon called the flash loan, where clients can borrow money with basically nothing in their account under the condition that they must pay it back. Therefore, this can be sold in order to pay back that loan, creating a fast-paced way that cannot be executed with traditional banks.
Another example that can back this up is how fast it can be to code an insurance company with these types of contracts, eliminating any qualitative, subjective ways that normal institutions can give. Not to mention, the usage of these contracts would eventually reduce paper use, making the earth more sustainable and encouraging eco-friendly lifestyles.
When these contracts are used, it can be assured that all future activities are secure as they utilize encryptions in their codes. Furthermore, because it is made up of codes, it removes any possible manipulation, biases, errors, and many more faults. Not to mention, there will be no fear of personal information being tampered with as well as everything in this is automated and runs based on preset codes. That way, transparency and autonomy are ensured, differentiating them from traditional contracts.
Now knowing all the advantages of smart contracts, let’s observe the advantageous uses it has for different sectors.
Through these contracts, we are able to secure the patients’ private information. With the blockchain being put into use, this can easily transfer clients’ information into a safe and secure place, letting only individuals and parties that are officially entitled to that information, including insurance companies and the hospital. This can also be put to use when it comes to other medical activities that require documents and legalities.
The most prominent way these technological contracts have changed society is through the finance industry. This automated new system that strictly uses fixed codes and whitepapers can effectively eliminate breaches and infiltration of personal information that is prone to happen when third parties, intermediaries, and accountants are involved. For those worried that they won’t have the same analytical human skills necessary to make the tasks work, making it prone to errors, there’s no need to worry. These contracts are embedded with codes that allow them to possess critical skills that enable their abilities to protect information. Not only that, but they may also encourage transparency.
This is also effectively used in the education sector. It can single-handedly eliminate errors in the grading system, reducing conflicts in relation to the misgrading of students. There are also plenty of other uses, including the designing of innovative ways to teach students, exams, quizzes, and systems to prevent cheating and academic misconduct, making the contracts effectively regulate student activity.
Students’ scores can also be permanently stored in the blockchain, securing it for future uses, eliminating the need to actively search for previous records, and letting teachers efficiently allocate time for other forms of work or academic endeavors.
As expected, these contracts can also be used by the government by utilizing it to make sure the voting system isn’t manipulated to favor a certain party. It can also be used to organize the tax collection system, creating codes that can classify tax data, income transactions, and social security deductions, and perform accurate calculations. With all of these in mind, think about all the benefits that can be created due to this invention being used to the fullest potential, especially when it comes to a sector that is influential in many people’s lives.
Other less known industries these contracts influence include real estate, where face-to-face meetings aren’t needed because everything on the blockchain is already digitized. This can also ease the process of mortgage, maintenance, conditioning, etc. With simple if-this-or-that programming, commands can easily be followed on time in accordance with deadlines. Another place this can work is with the trading sector. You can easily create codes that can sell or buy certain stocks if they meet your criteria or if they are undervalued or overvalued in order to effectively utilize them to make a profit. This way, individuals and institutions wouldn’t have to bother themselves by actively searching and checking for progress when they have a programmed contract to automatically do as it is told.
This usage of smart contracts can foster a cultural shift from traditional financial institutions toward a more digitized approach that can eliminate all the errors and faults that are present in regular sources. Even though it may contain disadvantages, if these faults are worked through, it can foster a better change in society than what previous inventions can provide.