Blockchain has brought us many new advancements – and the brightest one is represented by smart contracts. This solution proves that the technology behind it not only can add to making finances more flexible but also can improve many other industries. While you may have already heard of it, we’ll explain how smart contracts work, how they are being used, and what benefits can they bring.
What Are Smart Contracts?
A smart contract is a digital program with predefined conditions that have a direct control of the transferal money, data, products or services between involved parties.
What a smart contract can do:
- Facilitate transfers
- Define the conditions and regulations
- Enforce them to ensure a smooth transfer
This type of contract can eliminate the need for third-party interference (from lawyers and accountants). Two parties – for instance, the car insurance provider and the customer – can complete a transaction without any assistance. The insurance deal and payment would pass only between those two participants – there would be no need to involve a payment processor or a creditor.
The blockchain technology with its distributed ledger principle and public visibility was the innovation that enabled the creation of smart contracts. The idea was introduced by Ethereum’s creator – and now it is spread among a lot of other projects, each offering something new. As we can see, blockchain which is mostly known for cryptocurrencies has a lot more to offer.
Industries Currently Benefiting From Using Smart Contracts
Let’s look at current smart contract applications. This technology is already experiencing a varied adoption by different industries – the below are just a few examples:
AXA Airlines – Flight Insurance
AXA is a major French airline which provides flights around the world and has a fantastic reputation. It streamlines and automates the process for late departure compensation. If your AXA flight is late by more than two hours, you will receive a notification with a compensation information. You can simply select a preferable option, and the payment will be performed automatically.
The feature is powered by Ethereum and has three main functions: adding the insurance policy, updating the status, and canceling the policy. This is a revolutionary method that AXA is looking to implement across all of their flight routes.
Propy – Real Estate
Owners can list properties, and then prospective buyers can join in to initiate a sale. This smart contract takes care of every stage, including escrow and even legal paperwork. This makes the selling process much easier and also removes traditional location-based barriers. All documents protected by encryption can be viewed and signed by all participants of the deal. Even though we can hardly name other companies that do the same, experts claim that smart contracts will become dominant in the industry just in two years.
Populous – Invoice Payments
Invoicing is a rapidly growing field that provides commercial documents which specify the terms of the deal. Populous is a company that has implemented smart contracts, removing middlemen and allowing both seller and buyer to facilitate the invoice transferral in a seamless manner. Such direct interactions enabled by smart contracts solve a general problem of modern finances, by removing high fees set by institutions and ruining barriers to entry.
Share and Charge – Electric Vehicle Charging Station Rental
We are seeing more and more electric car models as manufacturers realize that petrol and diesel are commodities of the past. The platform Share & Charge provides a smart contract using the Slock. It allows users to rent electric vehicle charging stations without any interference of third parties. Three smart contracts are engaged in the process: to hold references, to enforce regulations, and to register stations.
Other potential Uses
Smart contracts have potentials in numerous other industries. The following are some interesting ways that smart contracts could be used:
- UCC filing: filing processes and other aspects of the UCC system such as renewals and document release can benefit from automation
- Supply chain management: both suppliers and manufacturers would benefit from transparency and improved automation for things such as stock levels.
Useful Tips For Using Smart Contracts
If you are considering using smart contracts in your new enterprise, think how they can add value to your product or service. This solution should facilitate specific operation your business is dealing with – it’s better to identify what are the processes that need improvement. Moreover, you must consider what parties would be involved in the contract, what information has to be contained within the contract, and how would the involved parties access it.
After deciding on the application areas, you will need to find a suitable smart contract technology. As the demand is growing, there are already various options: you can deal with a specific company or create a smart contract using online courses and tutorials.