The topic of smart contracts is a very important one for future business processes of IOTA. Some readers might already have heard of so called Smart Contracts, for others this term is completely new and again others are experts in this topic. This article is intended to help readers understand why smart contracts are so important to businesses and individuals, and what they have to do with IOTA.
A basic requirement for smart contracts was blockchain technology. Only through the use of blockchain technology it was possible to program smart contracts. In this case, data records (contract provisions) are combined into individual blocks and stored in encrypted form as a chain with a precisely calculated and associated check digit per block, whereby each block must form a consensus with the entire chain.
Smart Contracts facilitate transactions
At first glance, this may sound very complicated for the layman. The functionality of a smart contract becomes understandable if one compares it with the way we are used to or set up and concluded contracts. Where enforcement of paper-based contracts may require the involvement of lawyers and arbitration boards, ie third parties, Blockchain technology enables compliance with and implementation of contract terms without the need for a third party. And that’s the groundbreaking thing! Not only fine print can be dispensed with. It will also no longer be necessary to challenge a smart contract (the contract will only be valid if the previously defined conditions are met) and no contracts can be subsequently modified and manipulated (as in a valid blockchain only blocks out) Records with verified consensus can exist.
Application examples for Smart Contract
Accordingly, this new way of signing contracts has many advantages. The costs can be significantly reduced and the efficiency significantly increased. In cargo shipping alone, the cost of accounting and manual logging of orders and logging of the loading and unloading process is often 50% higher than the value of the load itself. Or, consider the fair distribution of revenues, e.g. in the music industry, where a musician decides who gets which parts, when he makes his works available for download on the net. So the potential is huge.
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