One of the common challenges that enterprises both large and small alike encounter when engaging with another party for a business is the lack of trust. Owing to the lack of trust, enterprises are bound to sign a legal contract that is enforceable by law. However, the problem with traditional contracts is that they are cumbersome and exhaustive documents swamped with complicated terms and technical jargon that often act as a source of business or legal conflict. Furthermore, enterprises need to spend a substantial amount of time and money on intermediaries when finalizing contracts. The good news is that several new technologies have emerged in the past few years that are bringing a paradigm shift in the conventional ways of managing contracts. Blockchain is one such technology that is replacing traditional contracts with smart ones.
As the name suggests, Smart Contracts are self-executing programs based on Blockchain technology that automatically triggers an action once predetermined conditions are met. The self-executing and self-enforcing nature of Smart Contracts not only solves the issue of mistrust between two or more parties engaged in a business but also simplifies trade amongst them without the need for an intermediary. In other words, Smart Contracts build trust and transparency between the parties by allowing them to securely exchange digital or physical assets.
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Real-World Use Cases of Smart Contracts
Today, every business wants to automate their processes along with streamlining existing workflows, hence they are considering decentralized application development to leverage the potential of Smart Contracts. Take a quick look at various industries where Smart Contracts are revolutionizing operations.
The insurance sector is notorious for handling the maximum number of disputes. The reason behind this is the lack of automated administration in the insurance space and owing to this, it takes several weeks or a few months for an insurance company to process and settle claims. The delay in processing claims is infuriating for both insurance companies and their customers, which in turn, leads to high customer churn.
With the help of Smart Contracts, insurance companies can expedite the claim settlement process by automatically triggering a claim when a certain event takes place. For instance, if a car met with an accident, the Smart Contract would quickly recognize it by leveraging an array of technologies and initiate the claim process shortly after the accident. The prerequisite details such as the car number, location where the accident took place, and extent of damage would be recorded on the Blockchain network. This will not only help in determining fair compensation to policyholders but also ensures no fraud is done in the process. With automated claims settlement, insurance companies can cut down on high insurer costs, which in turn, leads to lower premiums. In a nutshell, insurance companies can take advantage of Smart Contracts that allow them to process and settle claims way faster than through their traditional manual processes.
2. Supply Chain Management
The traditional supply chain process is highly inefficient since it involves a lot of paperwork that needs to go through a slew of approval channels. Moreover, there are high chances of data loss and forgery in these traditional processes. Businesses operating in this domain can avert such risks by designing a Smart Contract for the end-to-end supply chain management. This self-executing contract can operate autonomously providing full visibility and transparency of the flow of goods to all the participants across the supply chain network. If any item is lost during the process, the Smart Contract would automatically trigger pre-defined escalation measures, which in turn, reduced disputes between vendors and retailers in the supply chain.
Businesses using Smart Contract development in the supply chain can take their inventory tracking to the next level whilst reducing the chances of thefts and frauds. Walmart, the leading retail company in the United States has already introduced Smart Contracts and Blockchain to manage its supply chain. Similarly, The Home Depot cuts down the significant amount of time it takes to resolve vendor disputes using Smart Contracts and Blockchain technology.
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3. Real Estate
Another popular use case of Smart Contracts is in the real estate vertical. Using Smart Contracts, both the parties (buyer and seller) can not only automate the deal to buy, sell, or rent properties but also expedite the process of change of property ownership whilst ensuring secure P2P transactions. For this to happen, the property needs to be digitized on the Blockchain network. Let’s understand with the help of an example, once the buyer pays the agreed amount to the seller, the Smart Contract would operate autonomously and change the property ownership based on the payment information recorded on the Blockchain network.
4. Financial Data Recording
Financial data is critical for every business irrespective of the size or industry vertical. Enterprises can use Smart Contracts for transparent and accurate data collection, which eliminates the need for exchanging other business documents resulting in streamlined administrative workflows. In other words, managing the uniform recording of financial data becomes a breeze using Smart Contracts, which in turn, reduces costs for reporting and auditing. These self-enforcing contracts can automatically execute set financial rules without requiring any intermediary, saving a significant amount of accountants’ time.
Smart Contracts have unmatched potential to disrupt almost every industry by eliminating the need for intermediaries. Using Smart Contracts, enterprises can not only automate and streamline their processes but also harness many other business benefits including better transparency, improved speed and efficiency, enhanced security, and more. If you are also planning to build decentralized applications that use Smart Contracts, you may hire seasoned developers from a reliable tech partner.