Smart contracts scale up the functionality of blockchain to greater heights

While the Bitcoin blockchain is revered for pioneering the first and #1 cryptocurrency, the Ethereum blockchain takes the cake away for introducing smart contracts to the world. Cryptocurrencies are no doubt a welcome revolution but smart contracts and blockchain score more brownie points as they help to accentuate the capability of overall blockchain platforms. Now, although smart contracts were first conceptualized in 1996 by a leading computer scientist, it was Ethereum that took the onus to refine the technology and bring it to the world to ensure more efficient, faster, and manipulation-free operations. Read more about Multibank.io.

As of 2022, you have around 2.5 million+ smart contracts. Ethereum is the #1 smart contracts blockchain platform. However, the rising popularity of smart contracts have led to the development of other newer smart contracts blockchain platforms as well, such as Polygon. The smart contracts market is poised to hit a mighty volume of 1460.3 million USD by the year 2028, growing at 24% CAGR from 315.1 million USD in 2021.

How do smart contracts operate?

Defining the smart contracts

First things first, smart contracts are basically digitally-placed contracts, armed with the power of automation. Developed on smart contracts blockchain, these contracts are essentially computer protocols that operate based on condition programming. It implies the smart contracts blockchain applications will operate when certain pre-set conditions would be met.

How do they work?

The whole operation of smart contracts blockchain is based on condition programming or “if/when…then…” statements. These statements are programmed into smart contracts blockchain in the form of a code. Once these pre-determined statements are fulfilled and validated, smart contracts perform the desired operation or transaction. It could be issuance of concert tickets, execution of payment, registration of a car, processing of certain workflow, and more. Any transaction or execution processed by smart contracts cannot be altered since smart contracts blockchain platforms are based on an immutable ledger.

Here is a step-by-step guideline on how smart contracts work on a smart contracts blockchain platform-

• Businesses willing to deploy smart contracts state down the conditions for a desired outcome through smart contracts
• Based on those inputs, developers create customized smart contracts on a smart contract blockchain
• After development, the smart contracts have to pass through rigorous security testing
• Once the contracts have passed the test, they are deployed on smart contracts blockchain platform
• Developers configure the contracts to help them gather data feeds from the outside off-chain world through Oracle
• After the smart contracts receive the necessary data to ensure the pre-set conditions have been met, they automatically execute the desired function

Advantages of smart contracts

Power of automation

It has already been mentioned that smart contracts operating on a smart contract blockchain are developed to execute a predetermined action automatically. Thanks to their automated capacity, smart contracts are able to assure a faster and more efficient execution, devoid of errors that are otherwise common with manual execution.

Faster and more economical execution

A smart contracts blockchain is characterized by a completely decentralized environment. As a result, the smart contracts operate without the intervention of an intermediary- it’s always a P2P and direct transaction with smart contracts blockchain. Absence of intermediary eliminates middle-man costs and also makes the process faster.

Transparency

A smart contracts blockchain is based on a completely transparent ledger. As a result, all the clauses and steps to be followed by smart contracts are always visible to all the direct parties involved in a smart contracts-based operation. The transparency quotient of smart contracts blockchain helps to prevent risks of miscommunication and misunderstanding between the parties involved in the smart contracts-based operation.

Easy traceability

A smart contracts blockchain features a traceable ledger. The data entered into a smart contracts blockchain is always time-stamped. This way, all parties involved in the smart contracts can keep track of all kinds of data or conditions programmed into smart contracts.

Secured data storage

A smart contracts blockchain also assures optimized security for data stored on the smart contracts. It’s to note here that smart contracts blockchain ledgers are completely immutable. It means, once you enter clauses and conditions into smart contracts, they cannot be manipulated. Besides, all data that is processed into a smart contracts blockchain is always secured by end-to-end encryption.

Multiple use cases of smart contracts

We will wind up the article with a brief on the versatile use cases of smart contracts, beyond cryptocurrency.

Healthcare organizations

Healthcare organizations can take to smart contracts to ensure optimum secured storage of highly confidential patient data, thanks to the immutability and cryptographic protection aspects of smart contracts blockchain.

Besides, the healthcare clinic can program smart contracts to automatically release patient hospital bills to insurance companies for timely and faster reimbursement.

NFTs

NFTs are blockchain products with smart contracts embedded in them. The smart contracts help to facilitate NFT trades as well as automatically-processed royalties for the NFT creators every time their NFT arts are being sold.

DeFi lending platforms

DeFi lending platforms use smart contracts for automatic issuance of funds. These platforms also take to smart contracts blockchain for  faster and automatic execution of options trading.

Gaming

Gaming platforms use smart contracts for a wide variety of functions, reward claiming, selling of in-game attributes and items, and so on. Besides, smart contracts can help gaming platforms to assure transparency. This is especially beneficial for the fantasy sports platforms as they had received flak previously for scandals from poor transparency.

Insurance companies

Many insurance companies today are using smart contracts for automatic reimbursement of claims in a given situation where the client can ask for a claim. For example, a leading insurance company has programmed smart contracts to release compensation (flight-delay insurance) to passengers if their  flights get delayed.

Fundraising

A business or organization can program smart contracts for fundraising campaigns. You can program in the deadline and find the goal of the campaign into the contracts.  The contracts will automatically send money to donors’ accounts if you are not able to reach the fundraising goal within the specified deadline.

Supply chain and logistics

Smart contracts will ensure complete transparency and traceability all across a supply chain that will ensure complete visibility of data for all parties involved in the chain. Moreover, smart contracts will help the parties involved in the supply chain to track out missing products as well.