Today, we are going to take a deeper dive into smart contracts. We’ll go through some of the use cases, what smart contracts are, and what they can do for you. Below, we’ve listed 12 specific use cases that we know of currently for smart contracts. So without lingering on the boring intro, let’s get right into how can we use smart contracts and the best use cases for smart contracts.
Smart Contracts can be defined as a paperless digital code that offers a set of promises on predefined conditions that the parties have agreed to. So this is basically a digital contract, or an agreement, that falls into effect when a predefined condition is met by the parties involved in the contract or agreement.
Just like in real world, we can use smart contracts in a real-estate deal. We can do this by creating a smart contract by involving both the parties (buyer and seller). To automate the process, the smart contract can be pre-defined to start functioning in effect by programming it to work when the transaction is successful, which is when the buyer pays the property value to the seller.
To make all of these happen, the property first needs to be digitized on blockchain technology. When that’s clear, both the parties can carry their deal using smart contracts.
This is a very simple idea that is powerful enough to automate tasks or even the whole network, such as decentralized autonomous organizations that utilizes a set of smart contracts. Although this is a fascinating technology, the idea doesn’t always end well. The DOA event went sideways when a hacker stole $50 million. To restrain the situation, the chain was split using a hark fork.
Moving on, let’s go through some of the benefits of using smart contracts. The key benefits of using smart contracts are the following.
For starts, the biggest benefit of smart contracts is the automation that it offers. This means that they’re interruption-free and no third-party can make any changes in the agreement and decision.
Another great benefit is its security. Smart contracts are interruption-free, built with redundancy that cannot be stopped once they’re started.
Moving on, another feature about smart contracts is the absence of the need of trusting other parties. A transaction or trade here does not require trust as its integral part as a smart contract runs on a decentralized network. This ultimately means that the whole network is trustless.
Smart contracts make transaction more cost effective. They achieve this by the removal of intermediaries from the process.
This means that smart contracts do not take days to record as it lacks any heft paperwork and intermediaries. They’re capable of recording immediately, with optimal accuracy and free of errors.
The first use case we have is Digital Identity. This is one of the most obvious use cases of a smart contract. Individual identity is one of the biggest assets for an individual. This will contain reputation data and digital assets.
If used right, the digital identity is capable of bringing new opportunities to an individual. Digital identity can also help protect the identity from counterparties. They achieve this by providing the freedom to individuals to only share their identity to companies that they intend to.
Currently, the internet allows you to connect to multiple services. But the caveat here is that you are unknowingly sharing your identity with companies. So a smart contract can ultimately eliminate all this and protect you from counterparts.
The next use case we have is high security. With smart contracts, capitalization table management can be simplified and improved. This ultimately means that there are no intermediaries between parties including security custodian.
Next up is Cross-border payments. Trade finance is a financial instrument that we can use for cross-border payments. So smart contracts have the potential to be revolutionize trade finance . Trade finance can easily cross money across border with little cost and hassle.
Then we have Loan Repayments. Smart contracts can essentially offer financial services that are error-free and automated in many different aspects. This can include mortgages, loans, and many other financial services.
Another use case of smart contracts is Financial Data Recording. Recording financial data is very important for any organization and this is where the smart contracts come into play. They can provide the necessary way to record data with a more accurate and transparent financial data collection.
With smart contracts, it’s easy to manage the uniform recording of data across an organization. This ultimately results in reduced auditing and reporting costs.
The next use case we have is how smart contracts can help the government. Smart contracts is a great way to automate stuff and this is where it can coexist by even helping the government with their operations. One of the operations that smart contracts can effectively help the government is land title recording, which is what they use to do property transfers.
So once a property transfer happens, it cannot go back in time. But by bringing smart contracts into effect, they can automate the entire procedure and do further property transfer in a unified and non-interrupted way.
Then comes the Supply Chain Management. This is a great blockchain smart contract use case, where the supply chain can improve a lot. For instance, if you to track items with supply chain with full visibility and transparency, a business can use smart contract powered supply chain and improve its inventory tracking to a granular level.
Next we have Insurance. Insurance has always been one of the most used cases of smart contracts. It’s a known fact that most of the disputes happen in the insurance sector.
For instance, let’s take a look at auto insurance. Here, smart contracts can be used to settle the insurance as soon as possible. To do so, smart contracts need to utilize a lot of technology, including the Internet of Things to facilitate themselves.
Smart contracts will facilitate the policy and make sure it has all the property documentation, including driver report and driver records, with the use of technology. If the smart contract is set up with the right policy, documents, and way to capture data, it can execute itself shortly after the accident.
Also, smart contracts execution is only done based on the collected data, which ensures no fraud is done in the process.
Number 9 on the list is Clinical Trial. Clinical trials can also improve with smart contracts as they can improve cross-institution visibility. It can also automate data sharing between institutions, thanks to the automation and privacy preserving computation that it can do.
This contributes to one of the real world examples for smart contracts. Moreover, we can also use smart contracts to automate the trials and share the information across industry. To be precise, it can help identify, authorize, and authenticate the data.
Another use case of smart contracts is Escrow. Escrow is the process of storing values between the parties when the contract is still active. For this, the pair essentially takes the action to release the funds.
However, in the case of smart contract usage, it will be possible to automate the whole thing as soon as the service provider submits his work and authenticates it. The smart contract can be very useful for platforms such as Upwork or other freelancing platforms that use escrow.
The next use case that we have for smart contracts is Trading activity. Smart contract database can be used to record information and also do digitization of real world assets.
You can use a smart contract database to store the records, renew them, and release according to the setup parameters. All these can be done automatically and this is another real word example of smart contracts.
The final use case that we have today for smart contracts is Mortgage System. Smart contracts can be effectively used in the mortgage system as it enables mortgages to be automated and ease the hassle for both the owner and buyer.
To make all of these happen, smart contracts need to eb coded according to the mortgage agreement. Once done, the smart contract can be set into motion and each step in the process to be automatically executed. The whole process is fast, cheap, and easy. This contributes to another real world example of smart contracts.
Going into a conclusion, we’ve talked about a lot of different examples with smart contracts today. This ultimately leads us to a deduction that smart contracts are essential for our economy as they provide the necessary automation for decentralized platforms.
Smart contracts provide a unique way of solving problems, including escrow, clinical trials, insurance, government processes, and so on. So we’re going to make it even easier to be able to execute smart contracts as we’re actively working on a fascinating new project that’ll be announced this week.
Thank you for sticking with me to the very end. We hope this has been valuable information to your journey with smart contracts, and cryptocurrencies in general. You can follow our blog or YouTube channel to stay updated about crypto everyday. And as always, make sure to keep your kids protected with CleanRouter and CleanPhone. This lets you have the ultimate parental controls with how your kids use their phone 🙂
If you’d like to learn more about smart contracts, kindly check out the video below:
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