When Bitcoin was introduced, we all heard about how it will disrupt banks, but the underlying technology, blockchain, proved that it could disrupt any industry. As a result, an increase in research and development went into using “smart contracts,” a term coined by Nick Szabo, a cryptographer, in 1994 to describe software programs that record contracts in the form of computer code. This contract “sits” on top of the blockchain and takes actions on the blockchain based on certain conditions that are met.

Smart contracts are computer programs that facilitate, verify, execute, and enforce a contract with full transparency, completely cutting out the middleman who ensures that all pre-decided promises are met before distributing what the contract entails. With smart contracts, a person can place his or her trust in a contract instead of a third-party like a bank or lawyer.

According to an article titled “A Guide to Smart Contracts and Their Implementation”, there are two key traits to smart contracts that make them reliable; immutability and distribution. Because they are on the blockchain, the code is near impossible to tamper with. Once the smart contract is created, it cannot be changed, and because the output is validated by everyone on the network, no single person can force changes to the contract because others will notice the attempt and mark it as invalid. It enables both parties to instil their trust in a contract that will meet every expectation promised.

Benefits of Using Smart Contracts

Autonomy — Smart contracts eliminate the need for an intermediary of facilitator, giving you full control of the agreement.

Trust — Your documents are encrypted and safely stored on a secured, shared ledger. You do not have to trust people you’re dealing with or expect them to trust you, as the unbiased system of smart contracts replaces trust.

Savings — Notaries, agents, lawyers, banks, and many other intermediaries are not needed. And, in addition, you would not have to pay the exorbitant fees associated with their services.

Safety — If implemented correctly, smart contracts are difficult to hack because they are protected with complex cryptography, which will keep your documents safe.

Efficiency — With smart contracts, you will be able to save a lot of time, which is normally wasted on manually processing piles of paper documents, sending them to specific locations, and so on.

Example of Using Smart Contracts

While the stance of governments, financial regulators and banks worldwide on cryptocurrencies has been ranging from extremely cautious to carefully accepting, the technology behind them, blockchain, has been widely accepted as revolutionary and it is being implemented across all levels.

Finterra’s WAQFChain platform is an example of a blockchain-based FinTech organisation, which enables users to contribute to available causes using smart contracts. The smart contract used holds information such as a donor’s transaction details, providing a new level of transparency for donors and NGOs alike with receipts that allows them to view the smart contracts. With each transaction, WAQFChain platform generates a unique hash for the transaction using which users are able to track their contributions to the last mile through platforms such as Hubble Scan Block Explorer.

Although, smart contracts are still mostly being implemented into the world of finance and banking, they are also used by governments to make the voting system more accessible and transparent, and even supply chains to monitor the goods, and automate all the tasks and payments involved. Real estate, healthcare, taxes, insurance and countless other areas can benefit from the implementation of smart contracts and the benefits they have to offer, as mentioned in the example above. Undoubtedly, smart contracts are about to become the integral part of our society.

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