What are Smart Contracts?
Smart contracts are one of the most powerful tools that are associated with the blockchain and can power transactions across the entire blockchain. From bitcoin transfers, to enabling transfers of supplies and goods across the world, to selling property, smart contracts have limitless potential and are a key feature of blockchain technology today.
A smart contract is a self-enforcing contract embedded in computer code managed by a blockchain. The code contains a set of rules under which the parties of that smart contract agree to interact with each other. If the pre-determined rules are met, the agreement is automatically enforced by the blockchain. Through having all the pre-determined conditions in a smart contract, you essentially remove any middleman reducing overheads, errors and clarity.
Imagine you wish to purchase a car. The one party must provide the money to purchase the car, whilst the other must provide ownership papers to the car. Through utilizing a smart contract, both parties need only provide their side of the deal. Once the smart contract recognizes that the funds are in place from the buyer and the ownership papers have been uploaded, it then executes automatically. No middlemen needed and no errors can possibly take place as it is all done transparently and simultaneously across the blockchain.
Who uses Them?
Blockchain technology has made its way into mainstream adoption over last few years with the likes of Amazon, IBM and most recently Facebook looking to implement the technology into its platform through its Cryptocurrency Libra. Smart contracts are reported to be the next key feature that companies will be looking to utilize and exploit their capabilities.
Google: Search engine giant Google looks to get a step on their blue-collar rivals with the recent announcement that they will be integrating a new smart contract tool onto their platform through their partnership with Chainlink.
AXA: Insurance firm AXA announced this year that their blockchain based smart contract application Fizzy looks to completely automate flight delay and cancellation insurance. AXA wanted to completely automate a traditionally slow claims process that saw multiple parties involved. Through Fizzy and smart contracts, AXA aim to simplify and speed up the claims process.
“If you subscribed a policy and your flight is cancelled or lands with 2 hours of delay (depending on your product choice), you’ll receive your compensation directly on your bank account. No claims, no paperwork, no hassle! fizzy takes care of monitoring your flight and the Smart Contract will decide whether you are eligible to compensation or not.”
PumaPay: Crypto solutions provider PumaPay, uses its innovative PullPayment Protocol to further enhance smart contract capabilities. The unique protocol created by PumaPay gives the smart contract the ability to pull funds directly from the users account as opposed to the users having to send funds directly.
The reason this feature is so significant, is that it allows the users and merchants to establish subscription-based payments, thus allowing users to seamlessly pay monthly fees without the need to manually send funds every month. PumaPay has created billing models that not only give users access to subscriptions payments but allows for trial periods before paying for subscription pay.
Sources: forbes.com, google.com , blockchainhub.com , computerworld.com, cointelegraph.com, chain.link, hypeanalysis.com