Understanding how the Smart contracts actually function.
The Smart Contracts are doomed to have the power to revolutionize the tge way many business models works these days by the usage of the Blockchain network. The transactions can be completed efficiently as well as at a faster rate. Specifically, the business models of the banking and the financial sector do realize the potential of this technology and have incorporated the technology since then in order to transform their client operations as well as business operation.
In a report, it is estimated that one 24% of the business think that they are on the Pinnacle of development that the Blockchain Technology could possibly bring into their business. Hence a huge section of the business are left untouched by the Technology so that their is completely renewed.
Let’s start by understanding Blockchain first.
While explaining about Smart Contracts, it is very necessary to explain the base technology of the Smart Contracts that is the Blockchain Technology. The blockchain technology is just a way of storing records in the form of blocks and which is secured by cryptography. The security is further achieved by its distributed ledger Technology where the records are transparent and all the nodes in the network have the provision to use it. A copy of the blockchain is made available to all the nodes and any changes in the records of it, is notified to all the other users and hence there can exist no copy where the data is different everyone has the same shared distributed ledger. If any tampering is done by anyone on the network then all the other notes are made aware of it.
Hence the blockchain technology provides us with a stored distributed ledger which is completely tampered proof. In a similar way, the Smart Contracts use the blockchain technology in order to store immutable records and transactions along with the cryptographic signatures and the timestamps.
How is blockchain technology powering smart contracts?
Among the most commonly asked questions one of them is that “how does the blockchain technology is applied by the Smart Contract in real life situation?” foreign instance where is considered the business of delivering a courier to a particular person. In a courier business, there are higher chances of having contracts during payment, courier dispatch, etc. The Smart Contract can seamlessly be used in such conditions in order to enforce the contract but in a smarter way
A Smart Contract is basically nothing but a piece of code which includes the details of the rules and conditions of an agreement and also the data like the amount of money involved in the transaction. For an instance when a customer pays a certain amount of money and he gets his respective service then the transaction is said to be completed.
Storing the Smart Contact and having multiple copies of the same on a blockchain network enhancers its security so that no party of the transaction can deny something. This particular transparent and shared network makes sure that the data is highly reliable and trustworthy. In our particular case, the smart contract would not release the money to the courier company and until the customer has confirmed that he has received his parcel.
Hence the Smart Contract would transfer the money or release the money to the courier company only when the customer confirmed his parcel arrival. According to a set of conditions mentioned in a Smart Contract, the respective actions are taken and each and every transaction is updated on the Smart Contract’s distributed ledger.
How Smart Contracts are useful in the financial sector.
As we know that the financial sector is the one which generally has a high number of transactions taking place and also a lot of trusts is required here. Our example was also a particular business model only but with fewer rules and regulations to be met.
These days a number of projects have been initiated and an unimaginable amount of funds are being raised in the name of the project and hence the Smart Contracts play a crucial role in acting as a middleman in order to secure our Investments.
The R3 Consortium has been making consistent efforts in order to develop a blockchain solution in the form of a software in order to be implemented in the banking and financial sector so that the traditional work methods like tiring paper works are replaced by effective and faster transactions which are also completely reliable and tamper-proof. The R3 company is leading a Consortium of almost 200 banks Financial Institutions as well as the technology companies in the field of research and development of the Distributed Ledger Technology.
This particular consortium is only one of the examples which can be bought into life in any field the user is willing to do.
According to another report, Barry Childe, the technical lead for the distributed ledger technology and the cryptocurrency at HSBC explains the potential of the distributed ledger Technology. He pointed out that the potential of the technology is not about what one firm or company is doing, it’s about the concept that the technology is a collaborative one that increases its potential.