Benefits of Smart Contracts
In our recent post we understood a brief of a new powerful technology which emerged in recent years disrupting the traditional ways of managing contracts - Smart Contracts. Smart contracts are self-executing, self-enforcing contracts. The self-executing nature of these contracts provides a tremendous opportunity for use in any field that relies on data to drive transactions.
Benefits of Smart Contracts
Smart contracts are much more than digital versions of paper-based contracts. These contracts already possess multiple advantages over traditional arrangements. With the evolving technology, they will be more beneficial.
🕸️ Decentralised: The main benefit of a smart contract from its underlying technology blockchain is - Decentralisation. These are not controlled by any centralised third-party. They eliminate the need of third-parties to execute the contracts.
🔐 Security: Again, with the use of underlying blockchain technology, these contracts are encrypted. This will be the same standard of security the cryptocurrencies use. This level of protection makes them amongst the most secure items on the world wide web.
🎯 Accuracy: As smart contracts are executed automatically by the system, there will be no manual intervention in executing the contracts. This will cut down any manual errors which were occurring in executing the traditional contracts.
🪟 Transparency: Terms and conditions of the contracts are fully visible and accessible for all the parties involved in the contract. Any amendments will require agreement from all the parties and this reduces the scope of manipulation by any single individual.
🚄 Speed: As there is no manual intervention, and automation of the execution based on a set of preconditions, Smart contracts are executed quickly based on the inputs provided. This will save hours of time for the parties.
💽 Storage: Smart contracts are stored in the underlying blockchain and recovering is very easy. Due to its decentralised nature, Backup and Restore will be very easy.
🤝 Trust: With its decentralised nature, transparency in the contract terms and conditions and eliminating the manual intervention and intermediaries in the execution of contract will bring trust in the ecosystem
💰 Saving: By eliminating intermediaries, significant cost is saved in execution of the contract
Smart Contracts vs Traditional Contracts
With the above advantages, smart contracts present many advantages in comparison to traditional contracts
| Smart Contracts | Traditional Contracts |
|---|---|
| Automated Process | Manual Process |
| No need of intermediary | Need intermediary to authenticate |
| Immutable | Mutable |
| Processed quickly | Time consuming |
| Saves Cost | Expensive fees |
| Secured with encryption | Physical security required |
| Easy back and restore | Require space and. Supervision |
Smart contracts are for surely turning the hype into reality and will become a part of our everyday life. There is still a lot of road to be driven on this path. Wide adoption will take place sooner than later, and advances in scalability, latency, flexibility, and privacy will benefit them.
However, both smart contracts and traditional contracts have their respective advantages and disadvantages. Maybe the future of contracts could rely on making “hybrid” contracts, which would combine both the smart contract technology and the legality of traditional contracts.
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For further reading on the blockchain space, you use following resource
- Bitcoin: A peer-to-peer electronic cash system white-paper
- Blockchain Revolution - A useful primer on the concept of a decentralised currency based in the digital world (Affiliate link)If you’re interested in Investing / Trading in Crptocurrencies, you can use Vauld. Very easy and convenient app to buy cryptocurrencies from India.