Challenges and Opportunities in Decentralized Smart Contract Industry
Out of the most popular fintech solutions, smart contract development for blockchain networks has changed the whole digital economy. Startups and big enterprises can leverage the potential of smart contracts to grow their business.
Blockchain technology is in trend due to its immutability, anonymity, transparency, security, and many other things that can bring a transformative shift in a business. The increase in demand and popularity of smart contracts in different sectors can not be overlooked.
This blog will make you aware of the interesting facts about smart contracts and the challenges and opportunities associated with blockchain technology & smart contract development and adoption.
Opportunity & Challenges in Smart Contracts Explained
A smart contract is an automatic and self-governing contract between two parties. It includes the terms/conditions to meet before agreeing to the contract. Smart contracts are written to make transactions secure, transparent, auditable, and fast. When smart contracts on the blockchain network are present, no third party is required to execute transactions.
After knowing what smart contracts are, you must think about how these can help your business. Smart contracts work based on the decentralized process where rules are predefined and automatic execution happens.
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Let’s Understand The Working of Smart Contracts
Without making things difficult, let’s understand the smart contract in the simplest way possible & for that, let’s take an example:
Suppose a man wants to sell his property to a woman, and for that, they decide on the amount of USD 25000. They can easily move to the smart contract on the Ethereum platform blockchain.
The lady can directly pay the amount through the blockchain without fear that the man can increase the demanding price or improvise in the property transfer paper once made on the blockchain platform the contract is immutable and next to impossible to hack. So the woman can easily make a deal with the man and feel safe from any fraud.
Moreover, there are more benefits of using smart contracts. If the contract happens on the blockchain platform, it excludes the third-party commission. The blockchain provides end-to-end transactions on the platform.
With the help of the smart contract, one can save a good amount of commission to banks for transferring money, cost of advocate for consulting, paper works, etc.
What Benefits Do Smart Contracts Provide?
DeFi Smart Contracts are much more than advanced adaptations of paper-based contracts. Smart contracts can be useful for the business & enhance the contract cycle. Here are numerous of the most significant advantages of smart contracts in 2021:
The smart contract provides the ultimate security by using data encryption, which is tough to hack. The high-quality development of the blockchain assures everybody that their crucial documents are safe with the blockchain platform. Due to its high-level security features, many governments globally use the blockchain.
Smart contracts guarantee higher straightforwardness and, subsequently, a lower execution chance. Any revision of the smart contract will require the joint approval of the parties included, and any of the changes can cost you little as it’s quite impossible to change the contract. If needed, you can only do that from the developer’s end.
Free From Third Party
The smart contract based on the blockchain provides an undue advantage to both the parties who join the platform for exchanging their property. Usually, when two people make the deal and move further for the payment, they have to pay the commission to the bank the smart contract is the perfect solution for not paying the commission to the banks.
Apart from just commission to banks, it also excludes other such commissions so that one can save a lot of money.
Smart Contracts Uses
Smart contracts are discovering new opportunities every day. The natural low-cost characteristics of smart contracts are that the contracts are limited, objective, and technical. Agreement clauses are direct and have described outcomes.
Well-known legal use cases are as follows:
1. Intellectual Possessions Rights
With expanded digitalization, mental property robberies have expanded, affecting the employment of creators, specialists, and creators. Smart contracts based on blockchain use non-fungible tokens (NFTs), tokens that prove that one has the full rights of the particular project.
It permits people to make a transfer and enlist their work with time stamps on an open record to make undeniable confirmation of proprietorship.
2. Property Rights
The real estate sector is quite less organized than any other business sector. Sometimes people trust the real estate owners so perfectly to invest in their property. In such a case, the proprietor can utilize the blockchain plan to bypass these brokers and list their properties on an open record. Furthermore, they can offer their properties straightforwardly and permanently to spare on value-based costs.
3. Chain of Custody
Amid this time outline, numerous individuals take care of the proof and can effortlessly be altered. Leveraging blockchain innovation permits clients to screen the proof in real-time by producing and following a one-of-a-kind proof token for each piece of information collected and put away. This makes a level of straightforwardness and information astuteness.
4. Signatures and Notarization
Electronic marks speed up the endorsement handle. Blockchain-based smart contracts reduce the signature toll to a division of the toll initiative. Authentication preparation is more reliable by verifying the report and confirming the signature with timestamp and hash.
Which Works Can Be Easily Done With The Smart Contract
The smart contract can resolve multiple issues in various sectors. Some of the sectors which can easily use smart contracts are:
- Voting system
- Supply chain
- Financial services
Let’s see how smart contracts can enhance the features of these sectors.
1. Government voting system
Smart contracts provide a secure environment by making the voting system less susceptible to manipulation. Votes using smart contracts would be protected by the ledger, which is extremely difficult to crack.
Additionally, smart contracts could increase voter turnover, which is historically low due to the inefficient system that forces voters to line up, show their IDs and fill out forms. If transferred online via smart contracts, voting can increase the number of participants in a voting system.
The smart contract can also be helpful for the healthcare industry. It can keep the patient’s records safe and secure with private keys and only the person with access. Apart from that, one can research using the data but confidentiality.
Moreover, the smart contract will also help provide proof of service to the insurance companies & even the same ledger can be useful in managing the medical supplies of the patients and supervising drugs.
3. Supply chain
Usually, the supply chains have to go through the suffering of a paper works system where each work has to pass through multiple pipelines. The paperwork process can be the reason for human errors and increases the risk of fraud or loss of documents. Blockchain has 100% capability to reduce the risk of fraud or any human error.
Most industries adopted the blockchain industry because of its feature of ultimate protection for each crucial document and can only be accessible by those who have the allowance.
Smart contracts can be used for inventory management and automating payments and tasks.
4. Financial services
Smart contracts allow for changing traditional financial services in numerous ways. The insurance claims section executes error checking, routing, and transfer costs to the user if everything is found appropriate and suitable as per the norms.
Smart contracts contain crucial tools for bookkeeping and exclude the probability of infiltration of accounting journals. It also allows shareholders to participate in decision-making transparently and more actively. Also, they assist in business clearing, where stores are exchanged once the sums of exchange settlements are calculated.
A well-publicized advantage of smart contracts is that payments can be automated without the need for reminders or other collection costs and without going to court to get a payment decision.
This is true for simple use cases, but it can be less accurate for complex business relationships. In reality, the parties are constantly shifting funds around their business rather than “holding” the total amount to be paid for long-term contracts in anticipation of future payment requirements.
Similarly, the person receiving the loan rarely holds the full amount of the loan in a particular wallet linked to a smart contract.
Rather, the borrower uses these funds to fund the required repayments. If the party is encouraged by the Smart Convention, the Wallet is not in time an intelligent contract is to transfer from this wallet to this wallet.
The problem will not be solved by implementing another layer in the process and withdrawing from other wallets or with a smart contract to draw “self” from other wallets.
Lady. Parties can strive to work on this issue with text-based requirements with minimal amounts associated with smart control. Still, this solution is simply the legal discussion when a conflict is slightly determined.
It does not completely provide the smart treaty payment operation. Because the intellectual contract to pay is much more efficient, it may not have to protect against payment confusion.
Major Concern Of The Smart Contract
For any blockchain software development company, the major concern or challenge is to make the deal or exchange safe from hackers. Blockchain technology is safe from such threats, but still, hackers try to break the walls and always try new tricks. Technology is improving every day, so security is also getting advanced.
An oracle (a gushing information source that sends occasion overhauls) must watch against occasion spoofing programmers that trigger savvy contracts to execute when they shouldn’t. It must be modified to survey occasions precisely, which can be troublesome for complex scenarios.
Smart contracts can speed up forms, including numerous parties. But this capability can increase the harm when times get out of control, particularly when there’s no way to halt or rectify unintended behavior. Gartner is famous for making versatility and reasonability issues for keen contracts that must be completely addressed.
Smart contracts are complex to actualize and oversee. They are regularly set up to be troublesome or inconceivable to alter. While this may be considered a security advantage, parties can’t change a savvy contract assertion or incorporate unused points of interest without drawing up a modern contract.
Building smart contracts based on the blockchain can be a quite complicated task as many people know least about the fact that it also needs a lawyer to execute the smart contract. The lawyer is not needed for the development of the contract, but they are needed for the legal advice of the smart contract.
A smart contract is created quickly on the best blockchains, yet a few challenges are still to be tended to.
Most of the current investigation points on smart contracts center on programming dialect, security, and security issues, whereas the expansion of blockchain and smart contract applications postures modern challenges.
Like other computer program devices, smart contracts inadvertently contain a few bugs. Be that as it may, identifying and distinguishing these bugs will require broad endeavors in program building and information analytics perspectives.