Contracts are essential for any basic agreement. From the smallest things of buying a phone to the biggest real-estate deals, contracts are integral. Currently, there are a lot of intermediaries that make these contracts happen by acting as a middleman between two or more involved parties. These intermediaries obviously charge for the services they provide and typically consume extra time to make the contract as it involves physical documentation etc. So is there a better way we can do this? What if all the contracts are digitalised? Well, there are computerised contracts in the market right now, which has the potential to eliminate most of the intermediaries in the market. They are known as Smart Contracts, and they are one of the many revolutionary innovations Blockchain has bought to us. To know more about how Smart Contracts are, follow the corresponding article.
Real Life Applications Of Smart Contracts
Smart Contracts are very simple yet revolutionary technology. They can potentially replace a lot of physical contracts which are manually done by lawyers and other intermediaries. Smart Contracts do this by automating the entire process with a code that can automatically execute and approve the contract when the given conditions are met. For instance, Centralized authorities and banking institutions can use Smart Contracts to sanction loans and allow automatic payments if the applicant meets all the required conditions. Insurance companies could use them to process specific claims. Postal companies can use them to receive their payments on delivery etc.
Let’s see the application of these Smart Contracts in different industries.
Any industry or company that creates content usually copyright their stuff. From artists & musicians to logo designers, use copyright services to protect their intellectual property. This helps them in receiving a royalty for the content they created. With the current system, the biggest challenge is the managerial costs. The price that companies need to pay in order to keep track of who own the rights and who is using them is extremely high. This entire system can be replaced by Smart Contracts alone. Individual codes can be created inside a blockchain with information regarding who owns the content and who is using it. The payments for the content that is being used can be automatically disbursed to the content owner accurately. This will not only help the creators in receiving their fair share of payments on time but will also help them in protecting their intellectual property.
Smart Contracts can be potentially applied in the area of insurance. Typically, insurance companies spend a lot of time and money in analysing the damages occurred and to estimate the amount of money that needs to be reimbursed. This entire process is done manually, and it takes a lot of money, time and effort. Smart Contracts can automate this entire process. Let’s see how.
In case of a car accident, the insurance company can make a Smart Contract that has all the conditions that need to be met in order to get the reimbursement. The conditions and assessment of the insurance holder’s policy can be coded on to a Smart Contract, and the money can be automatically released if those conditions are met.
In case of a natural disaster like Earthquake or Floods, all the factors that are measured can be coded into a blockchain. The claims can automatically get executed once these measurable factors cross the threshold. This is a win-win situation for both insurance companies as well as the policyholders. The insurance companies can save time & money, and the policyholders can receive their claims without any hassle. The best part about all of this is the transparency that can be achieved throughout this process with the help of Blockchain.
The entire process of individuals or institutions lending loans by mortgaging a physical property is hugely complex. The physical contract of mortgage agreement involves a lot of factors like annual income of the mortgagee, his/her credit score, life expectancy, existing loans, general expenditures, etc. Typically all of these background checks are done by third-party services, which could cost a lot for the lenders. Also, these checks are, which will ultimately delay the loan that the mortgagee is supposed to receive.
Along with that, not to forget, the number of frauds that can happen during the assessment. There are chances where these third parties can be bribed and produce fake approvals. This will ultimately hamper the lender. But with Smart Contracts, all these middlemen can be eliminated, and the borrower and lender can deal with each other directly. A Smart Contract can be created inside a decentralised blockchain, with all the relevant conditions that need to be met in order to get the loan. If and only if the conditions are met, the contract gets executed, and the funds will be directly deposited to the borrower’s account.
Human Resource Management
We see a lot of frauds that happen in the corporate companies concerning employee contracts. Employees are recruited by different human resource agencies with a specific contract, but these terms of contract get changed once the employee joins the actual company. This involves the duration of the contract, worker’s rights and also salaries. There is no transparency during this entire process. But if this whole contract is recorded in a blockchain, there would be 100% transparency. And because of the immutable property of a Smart Contract, no one can tamper the contract once it is created and executed.
Health Care Industry
A lot of valuable information is generated while the researchers in health care industry conduct medical research and clinical trials. This is an expensive process, and the information can be used by various other diagnoses. Smart Contracts can be used to potentially transfer this information while protecting the privacy of the patients. Transfer of funds will also be easier with the code as simple as ‘If ‘Pfizer’ agrees to pay $20k amount for certain data, then release the corresponding information.’
The Bottom Line
These are only a few among the numerous applications of Smart Contracts. However, there are certain limitations to this smart contracts as well. Since the entire contract depends on the code, the entire code should be free of bugs. Else, serious consequences must be faced. Imagine a scenario where payments are not executed on time or transferred to someone else? Since the contracts cannot even be tampered, it will be a serious problem. Hence it is advisable that the writers of Smart Contracts be extremely cautious, slow and right all the time.