What are smart contracts on blockchain?
Smart contracts are digital contracts stored on a blockchain that are automatically executed when predetermined terms and conditions are met.
Smart contracts are digital contracts stored on a blockchain that are automatically executed when predetermined terms and conditions are met.
Smart contracts are defined.
Smart contracts are programs stored in a blockchain and triggered when certain conditions are met. They are typically used to automate the execution of an agreement to notify participants of the outcome without the need for an intermediary or loss of time. They can also automate workflow by triggering the next action after conditions are met.
How smart contracts work.
Smart contracts work by the instruction "if/when ... then ..." which is written in code on a blockchain. If certain conditions have been met and verified, a network of computers performs actions. These actions may include transferring money to parties, registering a vehicle, sending notifications, or issuing a ticket. The blockchain is then updated when the transaction is completed. The transaction cannot be changed, and only the parties who received permission can see the results.
There can be as many conditions as necessary within a smart contract to ensure that participants are confident that the task will be completed successfully. To set conditions, participants must define how transactions and their data are represented on the blockchain, agree on "if/when...then..." rules that govern those transactions, explore all potential exceptions, and determine a framework for dispute resolution.
The smart contract can then be programmed by the developer - though organizations are increasingly providing templates, web-based interfaces and other online tools to simplify the smart contract structuring.
Smart Contracts Benefits.
Speed, efficiency and accuracy.
The moment a condition is met, the contract is immediately executed. Since smart contracts are digital and automated, there is no need to handle paperwork and time spent correcting errors that occur.
Trust and transparency.
Because no third party is involved, and encrypted transaction records are available to all participants, there is no question of whether information has been altered for personal gain.
Security.
Transaction records in the blockchain are encrypted, so they are difficult to hack. Because each record is linked to the previous and subsequent records in the distributed ledger, one would have to change the entire chain to change a single record.
Savings.
Smart contracts are also good because you don't need an intermediary to process transactions and the associated time delays and fees.
Smart contracts applications.
Learn how businesses benefit from smart contracts in active blockchain solutions
Securing Drugs.
Sonoco and IBM are working to reduce problems in the transportation of life-saving medicines by increasing supply chain transparency. Pharma Portal, based on IBM Blockchain Transparent Supply, is a blockchain-based platform that tracks temperature-controlled pharmaceuticals throughout the supply chain, providing reliable and accurate data to parties.
Increasing trust in the relationship between retailer and supplier.
The Home Depot uses blockchain-based smart contracts to quickly resolve disputes with suppliers. Real-time communication and increased supply chain visibility builds stronger relationships with suppliers.
International trade is accelerated and more efficient.
By joining we.trade, the trade finance network created by IBM Blockchain, enterprises are creating an ecosystem of trust for global trade. Because we.trade is a blockchain-based platform, it uses standardized rules and simplified trading options to reduce friction and risk, as well as facilitate the trading process and expand trading opportunities for companies and banks.
