If you’re considering investing in blockchain technology, you must already know its potential. Apart from it being a leading cryptocurrency technology, it also has numerous use cases and applications in the business and enterprise world. One particular use of blockchain technology in enterprises is smart contract development.
The most popular platform for building smart contracts is the Ethereum network. An Ethereum developer can write smart contracts on its blockchain that automatically execute according to their codes. This article shares what smart contracts are and how they can benefit enterprises.
What are smart contracts?
These are applications that run on a decentralized network powered by the Ethereum Virtual Machine (EVM). These applications are developed to automatically execute when parties meet set/specific conditions. They don’t need the intervention of an intermediary to complete. Therefore, the name ‘smart’ contract.
Previously, you had to rely on intermediaries to permit and enable digital transactions. Whether writing an email, storing and sharing documents, or effecting a digital payment, you needed a third party to compete in the digital process. However, smart contracts work through blockchain —a network of computers —to enforce pre-determined rules automatically when all conditions are met. Look at how the technology can benefit your business enterprise.
Smart Conract Benefits
Reduced operational costs
Ethereum smart contracts can help businesses save money by reducing their operational costs. Digital transactions have never been easier. Besides using more time and resources to get things done, manual data processing is laborious. Automation aids in the diminution of these expenses. For instance, some businesses like insurance and banking have high operational costs.
They devote too much of their time to maintaining and reconciling records. Therefore, there is a strong probability of human error or misinterpretation, leading to mistakes in the process outcomes. However, businesses can eliminate such errors through smart contracts, cutting processing time and at the same time improving efficiency and accuracy.
Enhanced transaction security
As with Bitcoin and other cryptocurrencies, smart contracts protect their blockchains by utilizing the most robust data encryption currently available on the market. This ensures that smart contracts are safe since parties can only change contractual terms through a consensus. However, it’s essential to be familiar with Ethereum vs Ethereum classic networks.
Increased transaction transparency
Ethereum smart contracts for business purposes allow all transactions on the blockchain to be visible to everyone using the system. For that reason, your associates, partners, suppliers, and service providers such as our auditors and accountants have easy access to your data, which makes their work easier.
All those with permission will have access to this data and will be able to see any changes you make. Managers can also track and approve changes and entries from their teams in real-time.
Better identity management
Generally, blockchain makes it easy to manage and authenticate users within an organization.
The Ethereum network makes it simple to generate and maintain separate identities for teams at various levels. Those with access to employee data can quickly check the details of a particular employee.
In addition, the Ethereum smart contracts enable you to create access privileges to some business data. This happens with automatic authorization and approval of employee requests. This helps you to easily verify and validate identities, allowing you to stay in control of your business information and data.
Reduced risk of fraud in business
Frauds in business transactions through collusion by managers and employees is a common occurrence. What’s worse, it is difficult to track down the perpetrators due to a lack of transparency about the transactions, where money has been exchanged, and where it finally ends up. However, Ethereum smart contracts allow you to monitor all transactions taking place in your business ecosystem easily.
It’s easy to create and initiate a contract between two parties that involve sharing funds without worrying about fraud. As stated elsewhere, blockchain transactions are transparent. On the other hand, smart contracts work on an if/then rules. That means if one party disagrees with the contract terms, it terminates automatically.
Faster and more efficient transactions
One of the critical motivations for businesses to adopt blockchain technology is to leverage the speed of processing business transactions. Businesses can have a leg up over their competitors because blockchain allows parties to complete transactions in real-time.
Customers will be able to quickly and easily conduct any business transaction with minimum errors with smart contracts. In addition, businesses can provide various business services on one platform. This includes being able to complete transactions and accept payments on popular Ethereum wallets at the same time.
Guaranteed transaction outcomes
Smart contracts can significantly minimize or eliminate the need for litigation and lawsuits arising from breaches or misinterpretations of contractual terms. This gives them quite an attractive characteristic beneficial to businesses. Using self-executing contracts means that the parties agree to abide by the rules and determinations set by the underlying code rather than subjecting themselves to interpretations made by parties outside of the contractual connection.
Conclusion
There are numerous advantages of using smart contract technology over traditional paper contracts in business. They include reduced costs of operation, improved efficiency, and increased security. Some industries may benefit more from smart contracts than others. Smart contracts eliminate the need for intermediaries to verify and authorize transactions in your business. However, it’s advisable to speak to an expert, particularly an Ethereum developer, to understand the best use of smart contracts if you decide to go this route for your firm.
