Contracts form an important part of any sort of official agreements, yet they can be extremely time-consuming, confusing, and complex, and can often end up costing an industry a lot of money.
As we are living in a digital age, it seems only sensible to turn to the digital world to solve this issue and find a new way to make a reliable business agreement. That is where the smart contract comes in.
A smart contract a contract that has been turned into computer code, which are the terms set out by the two parties involved in the contract. The agreement exists in the blockchain which is a distributed and decentralised network.
Many different industries are taking advantage of the “permanency” of information in the blockchain – medicine, cyber-security, and BitFortune.net even presents some interesting information that says it can be used to improve the voting system.
The fact that the agreement sits in the blockchain means that trusted transactions are able to take place without the need for a central authority or any enforcement mechanism. All transactions that take place using this smart contract method are transparent and irreversible.
Already there are businesses and industries all over the globe that are starting to make use of this kind of technology, but what actually can it be used for?
- Employment contracts – By using a smart contract in the employee-employer relationship, it can be made extremely clear what is expected of the employee. By recording interactions using a smart contract, it would provide a great way of improving fairness in wages or conditions. It can also help regulate the use of temporary labour, as the labourers would be able to ensure that their contract’s terms would not be altered.
- Mortgage loans – The process of getting a mortgage today can be lengthy, time-consuming, and not always fair. Using a smart contract can mean cutting out the middleman as the two parties will be able to deal directly with each other. The simpler the process, the less time it will take, and the cheaper it will be for everyone.
- Insurance – It can take a long time for an insurance claim to be processed and paid, leading to increased admin costs and overall inefficiency. Using a smart contact, the insurance claim process can be streamlined and simplified.
A claim may be automatically triggered when a certain event occurs. Specific details about the event could be recorded on the blockchain.
- Supply chain management – Businesses in the supply chain management industry will be able to use smart contracts to record ownership rights as various products move through the supply chain. In this way, there can be no question as to who owns a product at any given time.
The product can be verified at every stage of the delivery process all the way to the point where it reaches the final destination, which is usually the customer. In this way, if the item gets lost, then the customer or delivery team can check the smart contract to find out where it should be at that given time.
- Copyrighted content – In terms of copyrighted material, for example, in the music industry, a smart contract can be used to ensure that the royalties of content go to the intended recipient rather than all the middlemen in between. The ownership rights of content can be recorded on the decentralized blockchain, extending its potential way past the reach of the music industry.
These are just a few of the many industries that will be affected by the blockchain technology in the near future, in particular through the use of smart contracts. It is likely that in the next few years we will start to see many other businesses starting to integrate this technology into their business strategy.