We all have dealt with a contract at some point in our lives but now, we stand at a crossroads between manual and automation – and to the extent possible, it’s time to switch. The first choice should be smart contracts.
Super fast, super smart
Most of us know a smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Its purpose is to reduce transactional costs associated with traditional contracting.
Using a smart contract’s Blockchain technology1 you can exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a third party.
A blockchain is formed of data, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data unless agreed by all relevant parties.2
Briefly, here is how it works – and all without human intervention. Assets and contract terms are first coded and put into the block of a Blockchain. This triggers a smart contract distributed and copied multiple times between the nodes of the platform. Immediately, the contract starts to be performed in accordance with the contract terms. The program checks the implementation of the commitments automatically.
These smart contracts also work as escrow services, meaning for example that both the money and the ownership rights will be stored in the system and distributed to the participating parties at exactly the same time.
For instance, if one party wishes to sell his or her property, in traditional methods you need documentation, paperwork and people to contact brokers. But as just shown, it’s obvious that with smart contracts things are much easier, more technological friendly, and speedy.
Benefits of smart contracts
Autonomy — Smart contracts remove the need for a third-party intermediary or facilitator.
Trust — No one can steal or lose any of your documents, because they are encrypted and safely stored on a secured, shared ledger.
Savings — Notaries, estate agents, advisors, assistants and many other intermediaries are not needed thanks to smart contracts and costly delays are eliminated.
Safety — If implemented correctly, smart contracts are extremely difficult to hack. Moreover, perfect environments for smart contracts are protected with complex code language called cryptography which will keep your documents safe.
Efficiency — With smart contracts you will save much time normally wasted on manual processing with all of its paper shuffling, slow sending (snail mail) or trucking them to specific places.
Companies are moving forward and fast!
The way forward means a robust pathway for smart contracts:
- Deloitte’s 2019 Global Blockchain Surveyof 1,000 executives spanning seven countries and nine different industries confirmed Blockchain as a priority when it comes to budget planning. Of these, 40 percent claim their organizations will invest upwards of $5 million in the technology over the next 12 months. About 58 percent said that smart contracts are important to their organizations or projects as potential benefits of blockchain.3
- KPMG's Technology Industry Innovation Survey on blockchain confirm the above. Waleed Nasir, head of product development at Virtual Force said 41% of technology companies plan to roll out the technology in the next three years.4
We already know that with increasing technological advancement and globalisation, we foresee rapid development and acceptability of smart contracts with business worldwide. Smart Contracts need fine tuning at the beginning, but afterwards they do their jobs without any intervention. Benefits are extensive when compared to traditional contracts.
ABOUT THE AUTHORS
Mohit Khullar, Head of Commercial and Contracts with SMEC (India) Private Limited, is a part of the Senior Management in India. He carries along a rich and proven track record of more than 19 years in the areas of Contracts Management, Commercial Management, Drafting and negotiations and Business strategies.
Prachika Agarwal, Contract Specialist, attorney has been working in the industry for the last 5 years. She has rich exposure to Contracts management, Dispute resolution and secretarial compliances. She is currently assisting Mohit with various contractual and commercial requirements.)
- See also Blockgeeks Article: What is blockchain technology? A step-by-step guide for beginners, published 2016.
- Definition of Blockchain by Wikipedia
- Deloitte’s 2019 Global Blockchain Survey
- KPMG's Technology Industry Innovation Survey on blockchain