A smart contract is a self-executing code that acts as a core component in various Decentralised applications. They have a variety of features however the “trustless” element provided by these smart contracts is the major reason why they are being used across a variety of industries. This article dives deep into real-life use cases of smart contracts.
What is a smart contract?
The “smart contract” is a primary component utilized in various blockchain-based platforms and application-focused blockchain networks. The primary features of these smart contracts are they are trustless, decentralized, and transparent. Apart from that in most cases “smart contracts” are irreversible as well as unmodifiable once they are deployed.
A smart contract eliminates the necessity of a middle agent or intermediary in any transaction. The code running through the smart contract determines the various features of the transaction and ensures that the mechanisms of the transaction are followed thus turning into a primary arbiter in various transactions.
These features have resulted in smart contracts turning into the building blocks for an entire blockchain-based ecosystem of applications called Decentralised applications (dApps).
- Smart contracts in finance – Decentralized finance applications have turned out to be the perfect alternative as well as a replacement for the traditional banking system. The primary characteristic of blockchain ie. Transparent has resulted in various real applications of smart contracts as well as emergence of a new finance sector.
The Defi applications provide users with borrowing, lending, and various other financial services with better features available than a traditional set-up. These applications have started building various new prototypes of financial services as well as providing better utility and benefits to traditional users. Decentralized applications have significantly decreased the barriers required to enter the financial services sector while providing better utility services such as 24/7 functionality etc.
There are billion-dollar investments in decentralized applications across the globe. The new model wherein the central intermediary is eliminated has gained global traction.
- Smart contracts in the legal industry – Smart contracts are turning out to be a new solution for clients to initiate legal contracts. After the advent of digitization, e-signatures became a turning point in the legal industry. However smart contracts can soon turn out to be binding legal agreements between two parties. This can significantly reduce the potential costs of an agreement because it will directly eliminate the need for lawyers.
Smart contracts will prove to be a perfect solution for clients across various sectors while decreasing the potential costs and increasing the overall cost of a transaction. Smart contracts have already started making their mark across the legal sector with various state governments across the United States accepting smart contracts as binding legal agreements.
The list of real-life use cases of smart contracts across various sectors is in exhaustible. Although blockchain technology is primarily used for its security and transparency features, smart contracts can be further integrated with blockchain thus expanding the scope of its real-life use cases.
Disclaimer: The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Please do your own research.