Exploring the Advantages of Using Smart Contracts
Contracts have always been a part of human civilization, usually in professional and business spheres. The world has witnessed a great evolution of contractual documents, from a huge set of files to e-contracts, and smart contracts. While smart contracts were originally introduced in 1994, it was only after the launch of the Ethereum blockchain that the concept gained attention.
In this article, we look into the benefits of using smart contracts and their potential for future applications.
What are Smart Contracts?
Smart contracts are essentially self-executing computer programs, that include a set of agreements to be verified and executed accordingly. These work on blockchain technology, which carries out operations without the need for any intermediary. Numerous smart contracts can be executed in tandem with one another and functioning independently. Popular blockchains with smart contracts running-capability include Ethereum, Solana, Cardano, BSC, etc.
The term “smart contract” was coined by Nick Szabo, who defined it as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises.”
According to the latest projections, the global smart contracts market will generate USD 1,417 million in sales by 2032, growing at a CAGR of 22.8% from 2023 to 2032. The autonomous nature of smart contracts makes way for trustworthy protocols spanning various sectors. This justifies the rising need and demand for smart contract developers across the web3 industry.
Key Benefits of Smart Contracts
Smart contracts offer several advantages over traditional methods. Depending upon their purpose, many different types of smart contracts are created for NFTs, cryptocurrency transactions, DAOs, DApps, etc. Here’s a brief on the major advantages extended by smart contracts in all sorts of applications:
High Level of Security
As smart contract records are based on blockchain, they are cryptographically encrypted and immutable, making them almost fully resistant to manipulation. In order to modify even a single record or transaction in a distributed ledger like blockchain, a hacker would need to get access to all the nodes, thereby making smart contracts immune to security threats.
Besides, any change or addition in the blockchain happens as per the consensus mechanisms.
Enhanced Cost Effectiveness
Typically, for any business, a wide network of intermediaries (banks, attorneys, witnesses, etc.) are involved. Smart contracts can result in significant cost reduction for businesses, as they do not entail the requirement of institutional or individual middlemen for facilitating transactions or maintaining protocols. So, there are no additional costs like legal fees, bank transaction fees, and similar expenses.
Better Performance Efficiency
Traditionally, the implementation of the contracts includes heavy paperwork or administrative delays, especially in the case of lengthy and complex operations. Since smart contracts are inherently automated programs, they can execute the most complicated of transactions in a timely manner and without the involvement of multiple third-party platforms.
Further, unlike standard digital contracts, upgrading and updating smart contracts is an automatic process, resulting in more value-based, faster, and easier transactions. In other words, smart contracts improve the performance efficiency of business processes.
Complete Autonomy and Privacy
Due to the automated intermediary-free nature of smart contracts, the transacting parties are able to exercise complete control and independence. This avoids the need to give authority to any centralized or third party, thus maintaining the privacy of transactions.
Transparency of Data
Smart contracts assure a high degree of transparency by giving all parties involved continuous, real-time access to their terms and conditions as well as transaction records. All users within the blockchain network where the smart contract is implemented can see its logic. However, once the agreement is made, it is not possible to change it. This guarantees the credibility of transactions and establishes confidence among users.
Greater Accuracy of Operations
As the smart contracts execute automatically, there is no chance of errors caused by human interventions. Blockchain technology affirms the precision of operations without the need for any external validator.
The Future Prospects of Smart Contracts
Apart from their applications in cryptocurrency and related exchanges, smart contracts hold enormous potential in fields like real estate, healthcare, education, supply chain management, governance, etc. While the usage of smart contracts started with the intention of creating a decentralized financial system, it extends much beyond that.
Pushed by decentralized identities and blockchain-based economy, smart contracts have the power to bridge the gap between the privileged and underprivileged populace. Nowadays, some of the popular organizations and institutions are working to equip the upcoming generation with blockchain technology. For instance, ASB (Antier School of Blocktech) offers certified blockchain courses for people aspiring to become smart contract programmers and developers.