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Key Things To Know About Smart Contract Development - Velvetech
Key Things To Know About Smart Contract Development - Velvetech
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Imagine any process that requires a contract and extensive paperwork. For example, selling a house or registering a car. Such
transactions between different stakeholders who don’t really know each other need an intermediary.
Middlemen can oversee the deal and facilitate its completion. However, they don’t work for free but charge a commission
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which can be a substantial sum. Here, smart contracts can come in and ease the entire process.
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Today, we will help you understand what smart contracts are, how they work, as well as their benefits and use case examples.
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For example, in the case of selling a house, a smart contract can perform the tasks of an estate agent thanks to its self-
executing ability. All the necessary terms are preprogrammed into the code, and if all conditions are met — the deal goes
through. Just like that, there’s no longer any need to pay a commission.
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To give you a better understanding of how smart contracts actually work, we can compare them to vending machines.
With an automat, you simply feed it money, select the product, wait for the machine to verify that your bills aren’t fake, and
hand you the chosen snack. It’s a simple agreement execution where the algorithms in the machine act as a middleman. If you
didn’t provide viable bills — you get them back and don’t receive the product. If your cash was legitimate — it goes to the
vendor while you quickly get the food you wanted.
So, how does a smart contract work? In a similar way. By following an “if/when” principle, a blockchain-based smart contract
is only executed when predetermined conditions are met and verified. Moreover, you can include as many stipulations as you
Security
First of all, smart contracts are highly secure because they are difficult to hack. Thanks to blockchain
transactions being encrypted, your documents are completely safe. In fact, it’s one of the most secure
technologies available on the market.
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Costs
When you remove intermediaries from the process, you immediately reduce the costs of operations.
There’s no longer a need for a chain of notaries, agents, advisors, and other middlemen. With a smart
contract, commissions and consulting fees can be drastically reduced.
Transparency
Speed
Finally, smart contracts are automated, meaning that whenever a certain condition is met, the contract is
immediately executed. Paperwork processing tasks disappear. Thus, there’s no time wasted on fixing
mistakes that typically occur when manual labor is involved.
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Despite caution surrounding new technologies, some industries are already embracing smart contracts development. Let’s
take a deeper look at use cases in finance, healthcare, insurance, and real estate.
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In investment banking, loan settlement cycles can be reduced by half thanks to the quicker processing time that smart
contracts provide. As a result, clients are happy about the increased speed of the process and customer experience improves.
At the same time, investment banks themselves observe lower operational costs thanks to the boost of efficiency. It’s a win-
win opportunity for everyone involved.
Healthcare
In healthcare, patient medical records are of utmost value and often become targets of cyberattacks. Thus, industry leaders
With blockchain and smart contracts, health records can be securely stored and encrypted with access granted to specific,
predetermined individuals. Also, things like prescription fillings can be automated, leading to a decreased processing time and
better patient experience.
Insurance
The insurance industry is often plagued with long claim processing times and money wasted on fraudulent claims.
By turning to smart contracts, insurance providers can see significant cost savings because of automation and reduced
overheads in claim handling. Lower processing time leads to money saving opportunities which can also benefit customers.
If insurers gain a way to cut costs, they might be willing to share that “win” with clients in the form of lower premiums. It’s kind
of like a domino effect on various areas of the business.
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Real Estate
In real estate, smart contracts are typically used to record and transfer property ownership. A buyer usually doesn’t want to
send over the money before having the property in his name. Similarly, a seller is hesitant to transmit ownership before
receiving funds. Until now, third parties were a must-have to fulfill an agreement. That doesn’t have to be the case any longer.
This way you can reduce the need for intermediaries like lawyers or brokers, thus optimizing the speed of the transaction. The
The contract will only be executed if the seller transfers the property and the buyer hands over the money. It’s a transparent,
secure, and fast way of transferring ownership.
Every new technology can face roadblocks on its way to mainstream adoption. Hence, let’s take a look at the limitations of
smart contracts so you can decide if they’re something you want to invest in.
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Smart contracts are built on blockchain technology, therefore digital currencies like Ether are used for payment. If your
business already has some experience with blockchain platforms or is willing to start the journey — you’ll likely not face a
problem.
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However, if blockchain sounds completely outside your current realm of possibilities and you have other digital initiatives to
prioritize — this type of project might need to wait.
Smart contracts are executed digitally, and the blockchain system has no consistent policy as of today. It leads to a variety of
questions relating to taxes and government involvement if something unexpected happens.
Regulatory concerns force some businesses to hesitate before starting smart contract development.
Moreover, a smart contract operates solely on objective facts. Hence, subjective judgments have no place here, making it a
less flexible agreement method.
First, you should understand what you need a smart contract for. Do you want to use it to verify transactions or transfer
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payments? In which business area do you plan to implement it?
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If you don’t have a clear idea about where to start — that’s okay. You can begin by talking to professionals about blockchain
development services and learning more about how smart contracts can help with your specific needs.
Finding a team to meet your requirements can take time. Yet, it is a process that
shouldn’t be too rushed because you’ll likely be working together for a while. It’s Get Your FREE
better to be thorough with your research, get recommendations if possible, and talk Step-by-Step Guide
to a few companies before settling with a vendor.
to Choosing a Trusted
If you feel ready to start the smart contract development journey — we are happy to Development Partner
help. Velvetech’s team has vast expertise in delivering custom blockchain solutions
that cater to each of our client’s requests. Download Now
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Henry Evans
Being involved in a spectrum of complex technology projects, Henry shares his all-round
expertise on Veltetech’s blog to help companies advance their business with digital solutions.
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