Contracts are right there at the foundation of every growing business. Enterprises use contracts as a means to facilitate, negotiate and enforce big and small decisions and changes. So far, paper contracts have been the norm. But this scenario is changing for the better, because now the paper-intensive, time-consuming and expensive processes associated with the conventional paper contracts are not considered smart enough.
Now is the age for smart contracts, which are contracts in the form of computer code that’s stored into, published to, and supervised by a public blockchain network. These contracts are digital and self-executing, which means that agreements between any negotiating parties can be facilitated, executed and enforced in an automated manner.
Not only are the contracts kept secure from any tampering by blockchain technology, but contracts can be finalized with mutual understanding without the need for any interference from any third party.
Learn more about smart contracts with these examples.
Data storage in blockchain technology is decentralized. This means that all the nodes participating in the blockchain network will each have an identical version of the data as well as the order of data storage with them.
This is a key factor that plays an important role in keeping the contracts tampering-free.
Because when published to a public blockchain, all computer nodes will have an identical copy of the smart contract. It will not be possible for anyone (the primary contract stakeholders included) to make any changes in the contract and get away with it without notifying the complete blockchain network about the changes done.
Ethereum is a highly capable, decentralized, open-source, and blockchain based platform that’s perfect for running smart contract applications. Ethereum platform’s blockchain offers the right security, functionality and trust that are needed for implementing smart contracts....
An advanced implementation of smart contracts, decentralized autonomous organization is an organization that isn’t governed by any single leader, but is rather governed according to the rules computer coded as smart contracts. Ideal for keeping the organization control democratic....
There are many feasible implementation examples and application areas for smart contracts, some of which have been discussed here.
The decentralization capability offered by Ethereum is one of its major highlights, one that makes it uniquely suitable for building all kinds of smart contracts and decentralized applications.
The applications built using Ethereum run on a blockchain that’s distributed across a global-scale network of computers. The smart contracts offer a digital, secure and private method of creating and managing business contracts.
When you build applications and smart contracts using Ethereum, you get the security benefits that a distributed and decentralized blockchain network offers. The risks of application downtime, data tampering and hacking, and service failure go down significantly.
It is built using a language that’s Turing-complete, meaning that with Ethereum it’s possible to build programs and smart contracts that can work out solutions for any reasonable computational problem. Ethereum gives the developers the liberty to implement advanced logic of as much complexity as they like, for the most part.
DAO stands for “Decentralized Autonomous Organization.” In simple terms, DAOs are organizations that exist entirely on a blockchain and are governed by its protocols. This allows for two or more entities in a DAO to interact with each other in a fully decentralized and automated fashion. Some uses for DAOs including sharing data, raising funds for investing, and voting — and there are certainly more.
Ethereum DAOs operate similarly to the way crowdfunding works: when they are launched, their creators issue tokens to the public, and anybody who is interested can buy them as a shareholding investment. Those holding tokens can then suggest projects and ideas that other members can vote on as potential investments. They can also vote for ideas proposed by other token holders.
Being decentralized, DAOs have no digital or physical headquarters: no single server or office building serves as their hub. Instead, DAOs comprise a global network of nodes and members that all work together.
A country holds an election & wants to prevent voter fraud
A DAO should be created to safeguard transparency & liminate vote rigging
This is ensured by enbedding predefined conditions into code
Voting tokens are issued to everybody eligible to vote
People start voting
Every vote is recored & processed on the Ethereum blockchain which ensures transparency while allowing everything to run by inself & decentralized
Because they’re decentralized, Ethereum DAOs operate in a fully democratic, non-hierarchical fashion. No single member makes decisions on their own, and responsibilities are distributed across the entire system. Decentralization also means that there’s no single point of failure. Accordingly, the DAO network is very resistant to attacks.
Every member of a blockchain can see its current transactions, as well as its history, making DAOs inherently transparent. This helps to ensure that the features and operations specified for each DAO are implemented as they should be. For example, if the majority of token holders vote to fund a specific initiative, transparency helps to ensure that the project gets funded. Because every vote is publicly accounted for, attempts to manipulate or obfuscate the voting process are easily traceable.
Terms and conditions of the agreement have been decided and agreed upon by all parties. Being hard-coded in the smart contracts, these can’t be changed without the knowledge of all parties.
An event occurrence triggers the execution of the insurance contract.
Since the terms of the insurance are pre-defined, the smart contract policy will get automatically executed.
Compensation or any other type of settlement will be done efficiently.
The biggest issue that hampers the insurance sector today is that of excessive time delay that happens in the completion of the insurance claims process. Much of the process is still manual meaning human intervention is required in various places to get the process going. And because the process is so time- and cost-intensive, it is the insurance customers who ultimately end up paying the price in the form of high premiums.
By using smart contracts, insurance companies can automate the process to a great extent. The policies can be hard-coded into the smart contracts, and when the trigger event of the insurance occurs, for example an accident, the input conditions of the smart contract will change thus triggering the insurance claims process.
The specifics of the trigger event can also be recorded into the blockchain. Depending on how complex the smart contract has been designed to act, the claims process will be activated and financial compensation process can be carried out automatically.
Smart contracts not only reduce time inefficiencies and administrative costs, but also enhance trust and transparency of the entire claims payout process, resulting in convenience for everyone involved.
There is a lot of unique content out there in any creative sector. It’s important for the creator or the publisher of this content to protect the use of their unique contents through the means of copyrighting. Copyright privileges ensure that every time their content gets used for commercial purpose, the copyright holder receives a royalty fee.
So how can smart contracts improve upon the current copyrights management system? Smart contracts can help in efficiently keeping track of ownership rights and ensuring that everyone who is legally obliged to get royalty fees gets so indeed.
Built on blockchain, smart contracts make sure that all the parties have agreed upon the true ownership of the content. Not only are the royalty fees paid out promptly, the payment transaction is available for everyone to see on the blockchain.
Smart contracts are a great way to streamline and bring transparency into the royalty payment process.
Blockchain holds ownership information as given by copyrights holder.
Usage policies for the copyrighted content is defined into the smart contracts which help in automatically specifying usage rights.
Using information from blockchain on stakeholder ownership, royalty payments will be done automatically with transparency.
Possibilities for implementing various business models and applications.
Internet of Things, or IoT, is about the ability to connect the devices that we commonly use in our everyday lives with the Internet. And by connecting the devices to the Internet, they can also be connected to the blockchain systems. Let’s look at an example of IoT, blockchain and smart contracts, in terms of something as regular as parcel delivery and how can they prevent your parcels from getting lost. Because in an IoT connected world, a fully automated system with sensors along the entire way will be there to ensure safe delivery of the parcel.
Each sensor can be viewed as having own node on the blockchain. Smart contracts can help in keeping track of the parcel possession, right from its dispatch from the warehouse to its destination of delivery. The tracking device of the parcel will be read and detected at every sensor that comes along the way. Whenever the parcel will be detected by a new sensor, its current location will be broadcast on the blockchain to all the IoT participants.
The recordings of all locations of the parcel will be maintained in an ordered and encrypted manner on the blockchain, thus offering a secure and reliable method for tracking parcels from its point of origin to its point of delivery.