With debate over the potential of blockchain technology continuing to rage, there is another technology closely associated with blockchain that is equally generating great excitement amongst the tech community. This technology is called ‘smart contract.’ If you happen to be a blockchain fan or regularly perform crytopcurrency transactions then you must be certainly familiar with the term smart contracts.
In case, if the term smart contracts is coming across as too alien for most of the readers here then we would like to define it as something as:
A computer coded or digital contract that is self-executing or self-enforcing that clearly lays out the terms and conditions between buyers and sellers. This contract is authenticated by virtue of the fact that it exits across a distributed, decentralized blockchain network.
Smart contracts can be so sophisticated that it can update or change the terms and conditions on its own after taking into confidence all the stakeholders within the blockchain network. This not only saves time, but also operational costs. More importantly, unlike traditional contracts, smart contracts offer superior protection against fraudulent practices.
Simply put, Smart contracts is so smart that it outsmarts traditional contracts in every possible area.
Can Smart Contracts be boon for businesses?
If one considers tones of advantages that smart contracts hold over traditional contracts then the answer is resounding yes. Since contract is central to any business, smart contracts with its technological prowess can change the way most businesses are done forever. Here change obviously implies positive changes; no lengthy paper works, no middle man, no fraudulent activities and no disputes.
Although contracts are central to most businesses, there are certain sectors and industries that are overwhelmingly dependent on contracts. In coming years or decades, Smart contracts can very well play a pivotal role across these industries.
Below we have enlisted some of the sectors where we feel smart contracts have a huge scope to play a critical role.
- Insurance
- Real estate
- Banking
- Logistics
- Healthcare
- Law practices
Are factors conducive enough to propel Smart contracts’ growth?
Indian governments push towards digital India may augur well for smart contracts’ growth in the long run. But it would unrealistic to expect that digital India campaign alone will make smart contracts a mainstream phenomenon.
Actually smart contract’s future is closely linked with the prospects of blockchain technology itself. Since blockchain with all its hype is still in nascent stage, so is smart contracts. Both these inter-linked technologies still have several gaps to fill-in before becoming thoroughly perfect. No one needs rocket science brain to arrive at this conclusion. Anyone who follows blockchain technology pretty closely is very well aware about this uncertain reality.
Besides, smart contracts are most likely to face legal hurdles as and when it becomes a mainstream phenomenon. Today most of the contracts in India are governed by Indian Contract Act, 1872 and Information & Technology act 2000 (IT act).
The present IT act clearly states that any contract done through legally permitted electronic means is enforceable and permissible across the country. However, the current IT act may not have all the provisions to deal with the complex nitty-gritties involved in a blockchain based technology.
This indirectly means that in future Indian government may have to amend the current IT act or enact altogether a new act to legalize smart contracts. This is something probably that government won’t do unless there is a collective pressure from the corporate sector. Of course, this pressure will emanate only when blockchain in future truly becomes a technology to reckon with.
Conclusion
Despite the current limitations and uncertainties, there is no denying that smart contracts have all the potential to greatly simplify business activities in coming decades. It will offer a huge leg up to ease of doing business and can therefore play a vital role in propelling the economy forward.