What are smart contracts and who needs them?

Smart contracts appeared not so long ago: to be more precise, with the development of blockchain technology and the rise in popularity of cryptocurrencies. Right now, the trend is also rapidly gaining popularity, as day after day people all over the world learn about this benefits and see it firsthand. Avivi has been helping businesses run better since 2007 and is constantly expanding the list of IT services for your prosperity. Therefore, now we will tell you about smart contracts — one of the directions of our activity, which contributes to the development of any business.

A living example of the simplest smart contract

Before we start, we immediately offer a simple example of using the likeness of a smart contract directly by you. That's right, and for this, remember how you used to buy something in a regular vending machine. So you wanted, say, a bottle of water, you informed the machine about it when you pressed the corresponding button on its panel and put money into the bill acceptor. At this moment, you, as a buyer, have fulfilled all the necessary conditions for receiving the service — purchasing water. The machine reacted instantly and pushed the right bottle through the servo motor, which fell into the tray or directly into your hand. Now the car has fulfilled all the conditions before you — the deal is over and both of its participants are satisfied with the result.

Of course, this is only an example, but you have understood the main point: the transaction took place automatically, each of the parties did what they had to according to the algorithm, and therefore the result fully meets expectations. Smart contracts are created between living people and have much more complex algorithms, but their essence remains the same - everyone does and gets exactly what is stated in the agreement.

The smart contract phenomenon

So, a smart contract is a special algorithm created on decentralized blockchain technology for concluding and maintaining commercial contracts. To put it simply, it is an agreement between several parties fixed in the form of an electronic code that cannot be violated - this is simply impossible to do within the framework of the blockchain. The subject of such a contract can be anything, as in the case of concluding an ordinary contract on paper. However, unlike its "older brother", a modern smart contract has a number of advantages at once. Here are the main ones:

1. Only its participants (from 2 or more parties) take part in the agreement, and the presence of a third party is not required — lawyers, notaries, public authorities and other controlling structures. This also includes the absence of bank representatives during financial transactions. Without numerous intermediaries, the associated costs of concluding an agreement are practically non-existent;

2. Working with a contract takes much less time. Since smart contracts are operated by computers, all processes take place tens or even hundreds of times faster, literally in minutes. Therefore, changes occur instantly, in accordance with the conditions, and do not require users to wait;

3. The smart contract is self-executive, so the human factor and related errors are minimized;

4. Electronic agreements are the most democratic and transparent for their participants. Each of the parties and even each individual participant has the same copy of the smart contract, where absolutely all changes are noted. Thanks to blockchain technology, they can be traced back to the very first recording. Therefore, it is absolutely impossible to forge a smart contract;

5. Such a document is always available for viewing from any part of the world if there is an Internet connection. Also, the smart contract can be easily achieved and returned to at any time in the past;

6. Security of the highest level. In general, everything related to the blockchain has a special ability to protect data and uses incredibly complex encryption. In addition, complete anonymity reigns among the participants of the smart contract, so even with unauthorized access, attackers cannot find out who is who in real life;

7. Low cost compared to conventional contracts. This is partly due to the absence of intermediaries, partly due to technology and much smaller commissions for its use or payment for the work of programmers;

8. Electronic digital signatures instead of conventional ones on paper. We have already mentioned the advantages of EDS in previous articles. Therefore, let's just add that this confirmation technology is used as the only one in smart contracts.

Use of smart contracts

The list above can be continued, but the most important advantages have already been indicated. This determines the widest scope of application of smart contracts in virtually any field of human activity, where it is necessary to specify certain rules and follow their implementation.

For businesses, smart contracts are useful for many reasons. First, an electronic agreement is a guarantee of stable work, compliance with deadlines and a guarantee of the fulfillment of obligations by each of the parties. Secondly, smart contracts significantly speed up the work process and at the same time significantly save money. After all, Avivi has been working on business automation for years, and we are convinced that any technology that requires a minimum of human intervention should be implemented in business processes to strengthen the modern company and increase its competitiveness. That is why we offer clients the development of smart contract tools together with the implementation of CRM and ERP as an effective solution for further prosperity.

You will learn what smart contracts are, how they are developed and what technologies are used for this in further articles on the Avivi blog. But right now you can leave a request for a free consultation with our specialists and start using your own smart contracts to work with clients or partners. We will be happy to help your business become even more efficient with the use of modern IT technologies.