Benefits of Using Smart Contracts

Among the benefits of Smart contracts it is possible to outline their ability to decrease a number transaction costs which accompany regular contracts, e.g. costs associated with ensuring performance of such contract (e.g. litigation costs or costs associated with provision of collaterals).

Besides, costs associated with involvement of the intermediary in the process performance of a contract (e.g. bank or insurance organization), are also excluded in Smart contracts due to their disintermediating nature.

However, it would not be correct to make a conclusion that Smart contracts are cheaper, than regular ones: infrastructure necessary for implementation of Smart contracts and costs associated with the development (“drafting”) of terms of Smart contracts are still rather high.

Verification in Real-time

Approvals are verified in real-time, based on conditions set in the contract, without any intervention, so there is no long-winded verification process. Smart Contracts move forward with its efficiency and speed. From a business standpoint, consolidating tasks and automating them can help streamline business operations and boost efficiency, allowing employees to concentrate on other tasks.

Cost-Effective

Companies can save on numerous costs since Smart Contracts can perform actions automatically when a certain state is changed without intermediaries such as banks or escrows services. Thus, it eliminates any organizations in the process of fulfillment of Smart Contracts.

Safety

Smart Contracts are stored on a blockchain that is duplicated into a series of copies stored across a network of separate machines, which is so-called ‘decentralization’.

The processing power required to corrupt a blockchain ledger entry doesn’t exist today, so trust and transparency is built into the system. Having said that, there is still a need to continue to keep a few steps ahead of threats.

Today, smart contracts are a prototypical example of “Amara’s Law,” the concept articulated by Stanford University computer scientist Roy Amara that we tend to overestimate new technology in the short run and underestimate it in the long run.

Although smart contracts will need to evolve before they are widely adopted for production use in complex commercial relationships, they have the impact to revolutionize the reward and incentive structure that shapes how parties contract in the future. To that end, and when thinking about smart contracts, it is important not to simply think how existing concepts and structures can be ported over to this new technology. Rather, the true revolution of smart contracts will come from entirely new paradigms that we have not yet envisioned.