Smart Contract Platforms Software Trends
Smart contract platforms let people carry out trustless business transactions without intermediaries. These platforms help to turn agreement and contract terms into computer code. The code executes itself automatically when the predetermined conditions coded into the program are met. This process eliminates reliance on human factors which are often biased, subjective, and error-prone.
Smart contracts run on a public blockchain, making them decentralized, secured, easy to track and audit. They also reduce transaction costs while increasing processing speed significantly.
The rising adoption of blockchain technology is driving the smart contracts market. The global smart contracts market will reach $345.4 million by 2026, up from $106.7 million in 2019, growing at an 18.1% CAGR between 2021 and 2026.
From banking to insurance and healthcare, Smart contracts can streamline operational processes, improving trust and efficiency. Developers can also adapt it to different use cases. This article takes you through everything you need to know about smart contract platforms.
Why use smart contract platforms?
One of the main reasons people use smart contract platforms is their high decentralization which makes them free from government and regulatory interference. The platforms also let users build and run decentralized applications (dApps). These applications are open to anyone with internet access. They don’t usually experience downtime unless the blockchain network goes down, which could be rare since the platforms are difficult to attack.
Smart contract platforms’ scalability lets businesses bring blockchain technology to their organizations. The platforms enable them to deploy and manage private and public blockchain networks instead of building one from scratch, saving them money.
Another reason people use smart contract platforms is because of their high interoperability, which allows them to transfer assets seamlessly between networks. This easy flow of data between blockchains cuts down the cost of sharing information. It also lets organizations save costs on IT infrastructures.
Smart contract platforms’ transactions are accurate and transparent, eliminating miscommunications. The platforms record data in chronological order in an immutable public ledger called blockchain, making it impossible to delete or modify them without the agreement of all the people involved.
Thousands of the network’s participants verify and confirm transactions, and the ledger updates the information automatically as they happen. Each record becomes a block with a unique identifying hash and can permanently hold information for future uses. The smart contract platforms’ high encryption feature makes the network secure and private, keeping users safe.
Unlike traditional data storage devices which can fail anytime, smart contract platforms duplicate all transaction records so that all the parties have the same record. They guarantee data safety by creating backups in different locations and on various media, and it’s pretty impossible for all the backups to suffer data storage failure.
Additionally, the platforms create a trustless environment that lets people and businesses enter into agreement confidently. For instance, they natively support the development of self-executing applications that digitize contract terms and execute the outcomes when parties to the agreement meet the predetermined condition. Some smart contract platform applications can also automate repetitive tasks, allowing users to focus on more important matters.
In addition to being transparent, secure, fast, and accurate, the decentralized platforms also allow people to make peer-to-peer payments, store and exchange value, making them appealing to a broad user base.
Who uses smart contract platforms?
Smart contract platforms have seen wide applications across different industries. One of the most common use-cases is in insurance because of its trustless transaction capabilities.
Smart contract applications can settle insurance claims as soon as possible. Some auto insurance companies rely on them to facilitate policies, including proper documentation. They usually set the contract to execute itself when an accident happens.
Besides automating policy executions, insurtechs and some startups are also creating blockchain-powered insurance products. The absence of intermediaries means faster payout, lower administrative costs and improved transparency.
Supply chain management companies also use smart contract platforms’ solutions to streamline their processes. These solutions can track items transparently and at a granular level. They can also reduce manual verification and improve traceability. Some shipping companies integrate sensors to track when a ship arrives at the port to trigger smart contract actions like issuing the appropriate landing documents or automate payments.
Additionally, the decentralized and immutable records on the blockchain public ledger allow stakeholders to access information seamlessly, ensuring trust. Smart contract deployment can help warehouse managers to monitor stock levels in real-time and see the time it takes products to move through the supply chain. It could also re-order stock automatically and initiate payments.
Another major application of smart contract platforms’ solutions is in financial services. Loan and mortgage companies leverage them to streamline application processes. They also rely on smart contracts to track monthly payments and release the property when borrowers pay off their loans.
Furthermore, some financial companies, including banks utilize decentralized platforms to store financial data for security, transparency, and accuracy. Smart contracts enable them to ensure uniform data recording across the organizations, allowing all the teams to work with the same data. They can also automate data management, reducing auditing costs and reporting.
Individuals, regardless of their nationalities and status, use smart contract platforms’ DeFi systems to facilitate peer-to-peer transactions and store values provided they have a cryptocurrency wallet, fund, and internet connection. They can also create NFTs to record ownership or tokenize their assets, including intangible valuables like intellectual properties. People can also stake their cryptos or mine blocks for rewards, scaling their income.
Smart contract platforms have shown potential in state governance. Some national governments use them to efficiently manage operations like title recording and property transfers. Using smart contracts helps them eliminate manual processes, reduce auditing costs and enshrine efficiency within the system. Smart contract platforms can also facilitate electronic elections, digital identity management, and electronic data recording. Besides these, smart contracts are also adaptable to many scenarios, making them see wide adoption in governance.
Smart contract platforms are also useful in industries with repetitive tasks. They can automate workflows, ensuring fast turnaround time and cutting labor costs. Additionally, blockchain-powered automated solutions can reduce errors, guaranteeing quality assurance.
Features
Smart contract platforms use blockchain technology to facilitate immutable transaction records. Blockchain is a shared, immutable ledger that stores transaction records across several computers linked in a peer-to-peer network. It also lets users track tangible and intangible assets and build trust. Also, the shared ledger records information only once, eliminating duplication that's common with traditional networks.
Only permissioned network members can access the information stored on the immutable ledger. Members share a single view of the truth. They have the exact copy of the same data. So they see transaction details end-to-end, giving them greater confidence.
Since the ledger is immutable, reversing a transaction record with an error is not possible. Users must add a new transaction to override the error. However, the network makes both transactions visible, making the process transparent.
Smart contract platforms let users transact businesses securely, without interference from any central authority. The platforms facilitate transactions through ‘robotic’ intermediaries. So users don’t have to worry about third parties like government or banking institutions looking over their shoulders to interfere in their dealings.
Unlike traditional banking systems that can limit their services to a specific group, the smart contract platforms are open to anyone, regardless of their nationality and status. Some of the platforms also feature a community-driven governance process that allows members to vote on key upgrades, allowing members to have a voice and decentralizing authority.
Some platforms also let users create and operate decentralized organizations on blockchain networks without hierarchical management. These digital organizations rely on decentralized voting systems to reach decisions. They also run based on protocols encoded into a smart contract.
Smart contract platforms cut down transaction costs. Their unique features like enhanced security, processing speed, better file authenticity, and others make them operate in a cheaper way. For instance, the platforms have a significantly lower error rate, resulting in lesser risks. They also require lower capital to run decentralized solutions and are less vulnerable to cyber attacks. Additionally, the platforms eliminate the need for third parties in transactions, reducing operation costs.
Smart contract platforms have shown huge cost-saving potential in financial services. A Santander Fintech study found that its distributed ledger feature could reduce financial service infrastructure costs by between $15 billion and $20 billion yearly by 2022. They reduce the need for manual data aggregation, amending, and sharing. The technology could also hasten regulatory reporting and document audits.
Users across industry verticals can also adapt the platform to their unique use cases.
Smart contract platforms can automate tasks, streamlining business processes and saving resources. The self-executable computer code performs specific actions usually done manually, allowing users to focus on more critical operations. As autonomous and independent agents, smart contracts are immune to human error, making them suitable for transactions requiring high-level accuracy, trust and transparency.
They can also facilitate paperless workforce by digitizing documents and minimizing paper-based processes. About 92 percent of managers and directors admitted in a survey to wasting time searching for paperwork daily, and 80 percent said they lose up to an hour each working day. Smart contracts platforms can streamline these processes by automating tasks with digital contracts.
Another great thing with smart contracts is that they are interruption-free, once they start execution, nobody can stop or interrupt them. It only takes a consensus agreement to terminate them.
Smart contract platforms support the development of decentralized applications. These applications, also called dApps, are digital programs that run on a blockchain or peer-to-peer computer networks instead of a single computer. Unlike standard web applications like on a server owned and managed by an organization, dApps runs on a decentralized network, making them free from centralized controls.
Furthermore, the decentralized application can complete transactions between two anonymous parties using smart contracts, eliminating the need for intermediaries or central authorities.
Also, dApps don’t have real owners—anyone can use its features once they go live on a blockchain network and not even the developers can take them down. They are also secure and difficult to attack. Additionally, users don’t need to submit their personal details to use the app features, making them privacy-compliant.
Developers build dApps for several purposes including gaming, finance and social media.
Smart contract platforms ensure guaranteed outcomes, enabling trustless transactions. The self-executing digital contracts provide users predictability in their transactions since they already know what to expect. The feature eliminates the need for litigation and courts, allowing users to enter into agreements trustlessly.
A trustless transaction is one in which parties to an agreement don’t have to place their trusts in a single entity or central authority. Rather, they rely on mathematical truths built into a computer code stored to facilitate a guaranteed outcome when the contract terms get fulfilled.
The decentralized platforms achieve the truth when the various computer nodes running on the network reach a common agreement based on the rules written into the software. Smart contract platforms incentivize members to help validate transactions, the widespread participation protects the network against abuse and corruption.
Smart contract platforms use built-in rules to execute digitized contract terms. They rely on logic to execute the agreements, which only happens when the parties meet the predetermined conditions. For instance, a developer could code a smart contract which forwards monthly flat access code to a tenant when he sends the predetermined rental rate to the smart contract application, which locks the fund as an insurance protocol.
Also, an insurance company could use smart contracts to release claim money based on events like floods or hurricanes or two parties could agree to automate crypto transfer when a shipment arrives at a port. The built-in rule capability makes smart contracts adaptable to many use cases.
They can have many rules, conditions, and logic built into it. Adding many of these lets the application execute more complex and comprehensive scenarios.
Smart contract platforms support a decentralized finance (DeFi) system and the development of NFTs. As a DeFi platform, they make financial products accessible to anyone with an internet, regardless of their status and nationality. The decentralized financial system also allows peer-to-peer transactions without intermediaries, providing a sustainable alternative to the tightly controlled traditional banking system. Additionally, users can hold their money anyhow they want and control where it goes without any interference.
Besides DeFi, smart contract platforms support non-fungal tokens developments. NFTs are digital items that let people claim provable ownership of unique assets. It could be an art painting or event tickets. But whatever it is, they are unique and irreplaceable and come with unique metadata no other token can replicate, making them have only one owner at a time.
NFTs owners can trade their assets on specialized marketplaces for other NFTs. Smart contract platforms users can also tokenize their assets to create NFT to represent ownership. Asset tokenization lets owners store and trade the ownership of valuables securely on NFT exchange.
Smart contract platforms are often open-source projects, allowing several people to contribute to making them better. Their source codes are readily accessible and developers can freely modify it to enhance the platform. This feature enables free flow of ideas that makes the blockchain network more sophisticated. It also lets developers fix and upgrade the source code in less time than it would usually take, unlike in closed source applications where users may have to wait for a long time for the developers to upgrade the code.
Furthermore, most smart contract platforms also come with test environments and builders tools that let developers build and experiment on the platform. They also provide robust documentations and developer communities to help builders create applications with ease. Some come with live chat to asset creators in real-time.
Smart contract platforms use consensus protocols to protect the network against subversion and corruption. Consensus mechanism is a fault-tolerant methodologies that lets decentralized computer platforms achieve agreement, trust and security across the network. Unlike databases where administrators maintain and update records, smart contract platforms rely on contributions from hundreds of thousands of participants to validate transactions.
The two most commonly used consensus mechanisms are Proof of Work (PoW) and Proof of Stake (PoS). PoW requires the participating nodes (miners) to prove that the work they did qualifies them to add new transactions to the blockchain. This mechanism consumes high energy and needs high computing power. But in PoS, the participating nodes (validators) stake their tokens to accept task delegation to maintain the public ledger. Blockchain networks using this protocol allocate responsibilities to nodes based on the proportion of the virtual currency held by them.
Other consensus algorithms are Proof of Capacity (PoC) which allows the contributing nodes to share memory space, Proof of Burn (PoB) which requires transactors to send small crypto amount to inaccessible addresses to burn them out of existence and Proof of Activity (PoA) which is a hybrid of PoW and PoS.
FAQs
Q: Are smart contracts legally binding?
A: Smart contracts are legally enforceable if they comply with contract law. California law allows the use of electronic legal proceedings. However, the smart contract must have an offer, acceptance and consideration to be legally enforceable. Additionally, the parties must consent to sign the agreement electronically.
It’s their legal binding nature and ease of use that make many companies use them to handle the purchase and sales of their goods and services. They also enable quicker payments and contactless transactions.
Q: Can anyone modify smart contracts?
A: Smart contracts are natively immutable. Once you create them, nobody can delete or alter them, making them act as an unbreakable contract between parties. They live forever as is, on a shared, immutable public ledger on a decentralized network that stores information across several computers linked in a peer-to-peer network.
Q: Can hackers attack smart contract platforms?
A: Smart contract platforms are secure. Their high decentralization and distribution means there is not a single point of failure. Hacking into a part cannot affect the rest of the network, and it’s not that easy because the network uses encryption technology and cryptography to safeguard the assets and information on the platform. Changes on transaction-related data invalidates a block, causing the network to discard it.
Q: What makes smart contracts decentralized?
A: Smart contract platforms have hundreds of thousands of nodes all over the world that track all the transactions happening on the network, making them highly distributed. The distributed nodes ensure they are insusceptible to centralized authorities. They also keep them functional and live if something goes wrong on one server.
Q: What applications can people build on smart contract platforms?
A: Smart contract platforms allow applications developers to build on them. They could build apps covering voting, real estate, social media and much more. Most platforms offer simple interfaces that let builders develop dApps and usually permissionless, meaning anybody can join the network at any time. Only a handful of permissioned smart contract platforms allows authenticated users to develop on them.
Q: How are smart contracts different from normal software applications?
A: Smart contracts and business software like enterprise planning resources (ERP) can automate workflow and self-execute tasks, but the major difference between them is in decentralization. Normal software can run on private servers, unlike smart contract applications, making them under a centralized control. Software developers can also modify and delete the application which is impossible with smart contracts. While a hack can take down a software application, attacking hundreds of smart contract platform’s nodes won’t make a difference.
Recap
Smart contract platforms are revolutionizing how people transact businesses.
The platforms enable trustless environments that let users enter into contracts without the need to depend on subjective and error-prone human factors to execute the agreements. They are also decentralized from a single authority due to their distributed nodes, making them immutable, free from third-party interference and secure.
Additionally, smart contract platforms are open source projects which allow people to contribute to making them better. They also offer robust documentation and a developer community to enable builders to create and run applications on the platform. Businesses can also deploy private or public blockchain technology without building from scratch.
Experts believe that the need for lower transaction cost, speed, transparency and accuracy will continue to drive the adoption of smart contract platforms.
