The Power of Smart Contracts
Blockchain technology has been a disruptive force in the past decade, and smart contracts are one of its most innovative applications. Although the industry is still in its early stages of development, smart contracts have arguably seen the most growth.
Understanding smart contracts
Simply put: A smart contract is a digital contract that is stored on a blockchain and can be executed automatically. This means that it can enforce the terms of the contract without the need for a third party, such as a bank or government. Smart contracts have numerous potential applications, from streamlining business transactions to automating complex financial agreements. They could also be used to create new types of decentralized applications (dapps).
Zero trust agreements
Smart contracts have been heralded as a game-changing innovation, as they help to facilitate secure and trustless transactions. Trustless transactions are important because they provide security against fraud or theft; with traditional contracts, there is always the risk that one party may not uphold their end of the agreement. The smart contract itself is immutable, meaning it can neither be changed nor corrupted.
Although smart contracts are not yet widely adopted, they have the power to facilitate transactions between parties who have not previously worked together; as well as change certain industries forever.
Top 3 industries using smart contracts
Finance
Decentralized finance (DeFi) dApps are growing in popularity thanks to the trustless, immutable, and transparent characteristics of blockchain and smart contract technology. DeFi dApps provide parallel services to the banking and financial services industry — like lending, borrowing, trading, and a host of other financial services — along with new types of products and decentralized business models that can offer considerable benefit and utility for users.
Video Games
The global gaming industry values transactions in excess of one hundred billion dollars, and it continues to grow quickly. However, most of that growth is facilitated by players who pay to unlock access to in-game assets. In contrast, blockchains can enable developers to capture the utility and value of in-game purchases by actually owning their assets.
Real Estate Industry
Everyone knows the frustration of purchasing a home or other asset only to learn about the hidden costs involved in the transaction. Some investors are also unable to take part in the real estate market all together due to high barriers to entry. Blockchain technology is changing this by allowing transparent purchases, as well as offering fractional real estate ownership that can be traded at a low fee.
The Adoption Curve
Smart contracts are a new technology with much uncertainty. While it is easy to say that adoption will be driven by early adopters and successful projects built on it, the transition will likely be more complex. To see mass adoption, smart contracts will need to be understood by users, institutions, and other participants in the ecosystem.
A few things that would help smart contracts become mainstream:
An easier user interface for non-technical users. An end-user who does not have a technical background and does not invest in cryptocurrency will likely not be willing to take the time to learn Solidity to launch their project.
A more defined regulatory environment. Smart contracts will be difficult for regulators to monitor and enforce. If a regulator can figure out how to do this, it could have a very positive effect on the space in terms of public trust and adoption.
Software that can run any smart contract, even if it is in another language. This will increase the chance nodes will run a smart contract because they don’t need to install additional software to handle a smart contract. Users, developers, and enterprises will want to interact with smart contracts using languages and tools that they already know.
What this means for your business
Blockchain offers businesses new ways to increase profit margins and streamline operations. Just like how the internet changed how we do business, blockchain can do this as well. Through smart contracts, companies can automate processes, and add entirely new sources of revenue. Additionally, when companies use blockchain for transactions, the transparency it provides may help strengthen the company's supply chain. Whether you adopt this new technically now or later, there’s one thing we can confidently say; the early adopters of Web3 will benefit just as the early adopters of Web2 have in the past.
