Digital contracts blockchain technology, otherwise known as smart contracts, are being implemented into a number of industries. This is helping people overcome traditional contract problems. The complex transactions that take place in life, like buying real estate or going through the legal process all have some form of contractual agreement involved.
However, these contracts are quickly being replaced using digital contracts & blockchain technology to streamline and secure agreements between two or more parties. Smart contracts also have the ability to cut middleman fees from third-party financial institutions, or government oversight.
“For real estate, the blockchain has the potential to change the way we do business,” Mark Zilbert explained in a Forbes article. “We are developing smart contracts, which will enable real estate contracts, escrows, property records (deeds, for example) to be completed and monies distributed without title companies or attorneys.”
If you are still learning how digital contracts & blockchain technology can benefit your business, the following smart contract primer may come in handy. Let’s dive in!
What is Digital Contract Blockchain Technology Exactly?
The term digital contract blockchain technology is simply the innovative technology that supports smart contracts. It is one of many utilities blockchain technology serves up to business, both large and small, as well as institutions and governments.
Smart contracts are actually pretty simple, since they are merely code outlining guidelines of a contractual agreement parked on a blockchain, like Ethereum for example. When one action happens, another action occurs based on the code (guidelines) of the smart contract.
The business use case for digital contracts blockchain technology is that it can create a shared decentralized ledger (agreement) between parties involved and enforce the agreement without the need for third-party mediators. This makes the model more efficient and cost-effective than current traditional practices.
The Benefits of Smart Contracts
There are multiple benefits for industries using smart digital contracts & blockchain technology. If you are taking a hard look at implementing smart contracts into your business workflow, whether in-house or with clients, the following benefits are useful:
- Cutting out overseeing institutions and businesses.
One of the most compelling benefit of smart contracts is that they essentially cut out the middleman from the contractual agreement process. Since the code of the agreement is secured on the blockchain, no middleman is required, because if A is done according to the agreement, B will automatically be completed. The A-B scenario is traditionally done by an institution or business, but automation will make that step obsolete.
- Smart contracts are more efficient.
Due to the blockchain technology and automated digital nature of smart contracts, the speed at which agreements are processed is lightning fast. For example, if you agree to deliver a product by X day, and accomplish this task, you will automatically get paid since the release of funds for the product is ready to be disbursed once the agreement is fulfilled.
- There is greater confidence between parties.
The digital contracts technology is set by agreed upon guidelines, written in lines of code, on an encrypted block on the blockchain. Only the parties within the agreement have access, and nothing can be changed without one party knowing and agreeing to the changes.
- Agreements are secured.
The other benefit of using blockchain technology for contracts is the enhanced security of those contracts. Each contract is created and encrypted on a shared distributed ledger between the contract parties. No one else can hack it.
The above benefits are a clear call to action for moving contractual agreements to the blockchain, because they overcome many of the current problems associated with the traditional model. Let’s look at the industries using smart digital contracts.
Industries Currently Using Smart Contracts
Smart contracts are not a blockchain utility that is going to be used in the future. They are actually in place right now and used by several industries. The business case often encompasses solving the traditional issues with contracts, but there are a few industries using smart contracts that may surprise you.
Smart Contracts and Banking
Financial institutions use a lot of contractual agreements in their workflow, but they are often slow. This has led banks to leverage digital contracts blockchain technology to make those processes more efficient.
For example, Barclays, a financial industry staple has used smart contracts to streamline money transfers. Other banks are looking to blockchain technology to improve the efficiency and cost of international transfers between banks as well.
Blockchain Technology, Walmart, and Chinese Pigs
Walmart made a surprising move by using blockchain technology and smart contracts to track the supply chain of pigs from China to their American retailers. This led to a number of other retailers jumping on board blockchain to streamline and use better tracking in their supply chains.
How Can You Implement Digital Contracts Blockchain Technology?
The use cases for smart contracts is compelling. The benefits of these secured agreements via blockchain technology are disrupting the current way we view and use contracts in a number of industries, from banking to supply chain. If blockchain makes sense for your business, it is worth looking more into the benefits. It very well could improve your time to market, reduce overall business costs, and increase profits.
