For the last few years, blockchain technology has been revolutionizing the world of finance. The creation of cryptocurrencies, particularly Bitcoin and Ethereum, has had a huge impact on the global economy.
However, blockchain technology isn’t only capable of providing benefits to the financial sector, it’s also in the process of revolutionizing the legal sector. The world-renowned smart contracts are proof of this.
- What are smart contracts?
- How do smart contracts work?
What are smart contracts?
Smart contracts are digital contracts created using blockchain technology, which ensures that all terms and conditions agreed by the parties concerned are automatically enforced.
How do smart contracts work?
The terms and conditions agreed by the parties are written into a code using a programming language. This code includes conditional instructions.
It may sound complicated at first, but understanding it is really very simple. Read on to find out more:
Smart contracts, like traditional contracts, contain both terms and conditions, and clauses.
In traditional contracts, where there is a condition that has been agreed upon by the parties, the corresponding clause is then verified to determine the action which should be taken as a result of said condition being met. In smart contracts, this verification is done automatically instead.
But what does ‘automatically’ mean?
When the parties sign the smart contract and a contract condition is later met, the smart contract – thanks to blockchain technology – detects the condition and automatically determines the corresponding clause to be executed.
Smart contracts do not require an actual person to verify how the events happened or which condition occurred (yes, oracles do exist, but we’ll talk about that in another post). The blockchain is in charge of doing all this.
Moreover, thanks to this advanced technology, the terms, and conditions signed in the contract are irreversible. Once the smart contract has been created, the logged data cannot be modified, rewritten, or deleted.
This means that the parties concerned can rest assured that there’s no risk of contract manipulation. The parties must comply with all signed terms and conditions.
Did you know how many benefits there are for your business in using smart contracts over traditional contracts?
Autonomy, money and time saved, greater security… Blockchain technology has already begun to revolutionize the legal sector via smart contracts and now, thanks to Insurechain, your business can enjoy all the benefits too!