Smart contracts are digital programs stored on a blockchain and automatically execute when certain predetermined conditions are met. They are often used to facilitate and automate the execution of agreements between parties, eliminating the need for intermediaries and reducing the risk of errors or delays. Smart contracts can also automate workflows by triggering specific actions to fulfill certain conditions.

Smart contracts operate by following a series of “if/when…then…” statements encoded into the blockchain. When the predetermined conditions are met and verified, a network of computers executes the specified actions. These actions could include transferring funds, registering a vehicle, sending notifications, or issuing tickets. The blockchain is then updated to reflect the completion of the transaction, which cannot be altered and can only be viewed by parties who have been granted permission.

To ensure that the terms of a smart contract are satisfactory to all parties involved, participants must determine how transactions and their data are represented on the blockchain, agree on the rules that govern those transactions, consider potential exceptions, and establish a framework for resolving disputes. Once these terms have been found, a developer can program the smart contract. However, many organizations that use blockchain for business provide templates and other online tools to make it easier to create smart contracts.

Here are 5 Smart contract examples

Real estate

A smart contract could automate a property’s ownership transfer once the agreed-upon purchase price has been paid.

Supply chain management

A smart contract could automate the tracking of goods as they move through the supply chain, ensuring that all parties are paid promptly.

Insurance

A smart contract could automate the payment of insurance claims once the policy terms have been met.

Voting

A smart contract could facilitate secure and transparent elections by automating the counting of votes and ensuring the integrity of the voting process.

Legal agreements

A smart contract could be used to automate the execution of legal agreements, such as contracts for the sale of goods or services.

Anatomy of Smart contracts

Parties: The parties involved in the contract, including the buyer, seller, and any intermediaries or arbitrators.

Conditions: The specific conditions must be met for the contract to be executed. These may include payment of a certain amount, delivery of goods or services, or fulfillment of certain obligations.

Actions: Actions will be taken once the contract conditions have been met. These may include the transfer of funds, the transfer of ownership of goods or assets, or the execution of a specific task.

Data: The data required for the contract to be executed, such as the price of goods or services, the delivery address, or the terms of the agreement.

Execution: The process by which the contract is executed, typically involving a network of computers that verify the conditions of the contract and execute the specified actions.

Dispute resolution: The process by which any disputes or disagreements regarding the contract are resolved, which may involve an arbitrator or other third party.

Smart contract