Contracts have existed for as long as human beings and organizations have done business with one another. Over time, they have evolved in size and complexity, becoming the basis for modern businesses across the globe. However, powerful technology has emerged in the contemporary world and is gradually transforming the conventional ways of managing contracts.
Now comes the world of blockchain technology and smart contracts. Blockchain technology is a digital ledger that can record anything of value in a computer code. While it was launched to support cryptocurrencies, developers saw the potential of blockchain to disrupt traditional record keeping.
Smart contracts are virtual agreements that can facilitate the exchange of money and assets and provide many advantages over traditional contracts.
One of the attractive features of smart contract platforms such as Avalanche is transparency. All the terms and conditions of the contracts are fully visible to all the relevant stakeholders eliminating the possibility of disputes once the agreement is established.
Smart contracts operate on software code and run through the internet so that they can execute transactions very fast. That eliminates the need for parties to process documents manually, saving them a lot of time and money.
Smart contracts are more secure, which explains why most organizations utilize them. They use the highest level of data encryption, similar to cryptocurrencies, which means cryptos and smart contracts are among the most secure internet systems.
Automated contracts eliminate the human error associated with filling out piles of forms. Smart contracts require the parties to explicitly record all the terms and conditions accessible to all parties, and any omission could be detrimental, resulting in transaction errors. Therefore smart contracts are more accurate than traditional contracts.
Since accuracy is fundamental in smart contracts, everything is explicit, eliminating any miscommunication. Therefore smart contracts eliminate the efficiency brought by gaps in communication.
Efficiency is the natural by-product of accuracy and speed. Smart contracts are highly efficient, resulting in more value-generating transactions. Efficiency is very critical in the modern world, no matter the industry.
Another feature of smart contracts is that they generate absolute trust during their execution. The contracts are autonomous, secure, and transparent, eliminating the chances of manipulation, bias, and errors. Once recorded, the system automatically executes the agreement.
Smart contracts eliminate the need for third parties and intermediaries, saving organizations a lot of money. There is no need for banks, lawyers, witnesses, or a chain of intermediaries with smart contracts.
Smart contracts remove the need to fill forms’ reams, allowing an organization to go paperless. That eliminates the labor associated with paper processes and contributes to the green movement.
Smart contracts record critical details in every transaction. Therefore every element used in an agreement is stored for future use, and the details are also easily retrievable in case of data loss.
Industries like banking, real estate, insurance, and healthcare can benefit significantly from smart contracts since they are built upon a system of transparent algorithms, rules, and quantifiable agreement terms.