Real-world Use Cases for Smart Contracts
Smart contract Use Cases & Examples in 2023
Many blockchain-based networks rely heavily on smart contracts, and many blockchains designed with smart contract applications in mind, such as Ethereum, feature smart contracts as a central component. Once implemented, these digital contracts cannot be undone or altered and operate in a trustless, autonomous, decentralized, and transparent manner.
The code governing a smart contract specifies the transaction’s mechanisms and serves as the ultimate arbiter of any disputes that may arise. As a result, smart contracts can reduce or eliminate the use of middlemen and the need for third-party implementation of agreements.
What Are Smart Contracts?
Smart contracts are computer algorithms that carry out predefined actions following agreed-upon criteria. These applications are deployed on distributed networks that use immutable ledgers to record transactions.
For example, the information in a transaction recorded by a Solana smart contract is unalterable and cannot be changed by any entity, not even the Solana Foundation.
Smart contracts represent a trustworthy method for parties to conduct deals that call for privacy, openness, and transparency.
Why Are Smart Contracts Useful?
These self-executing contracts can be used for anything from the most basic transactions to the most complicated projects. Intermediaries always want their share of the profit, regardless of the field or circumstances. Since a smart contract is automatic, there is no need for a trusted third party or any associated fees. Smart contracts can be more financially viable if the process can be streamlined in this way.
While smart contracts are great for running straightforward trades, blockchain technology shines when dealing with complex exchanges between multiple parties. Solidity is a programming language used on the Ethereum Virtual Machine Hedera and other systems to create smart contract transactions. Once made, a smart contract can be used in conjunction with other deals and reused in the future.
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10 Utilization Cases of Smart Contracts
Smart contracts are self-executing agreements with the terms of the contract directly written into the code. They offer increased security, transparency, and efficiency compared to traditional contracts. Here are some real-world smart contract use cases:
Smart contract use case #1: Trade finance
Trade finance is a critical aspect of international trade that facilitates transactions between buyers and sellers, often involving multiple intermediaries like banks, insurers, and logistics providers. Smart contract technology stands to revolutionize trade finance by automating processes, increasing transparency, and reducing the risk of fraud. Here is a smart contract example of a real-world use case in trade finance:
A Letter of Credit (LC) is a financial instrument issued by a bank that guarantees the buyer’s payment to the seller. It is widely used in trade finance to mitigate the risk of non-payment. Smart contracts can automate the LC issuance and settlement process by using predefined conditions and data from trusted sources.
In this smart contract example, a buyer in the United States wants to purchase goods from a seller in China. The parties agree to use a smart contract-based LC for the transaction.
By automating the LC process, smart contracts can significantly reduce the time, cost, and complexity of trade finance. This can lead to increased efficiency, improved trust between trading partners, and a more accessible global trade ecosystem.
Smart contract use case #2: Records
Smart contracts can potentially revolutionize record-keeping processes in virtually every business in the world. The hospital sector stands to gain substantial benefits from this.
There are currently hundreds of millions of patient records stored in healthcare databases around the globe. These healthcare groups have spent millions on security, but the methods they use to access and store data now are much more susceptible to cyberattacks than their blockchain-based counterparts.
Complete medical record files might be encrypted and stored safely using blockchain technology. Associated smart contract technology also makes it possible to use a secret key so only authorized users can access the system.
Prescriptions, invoices, stock management, test results, and other medical data can all be stored and managed more efficiently with the help of blockchain smart contracts.
Smart contract use case #3: Property ownership
Smart contracts can streamline property ownership processes by automating property transfers and title registrations, increasing efficiency and security.
In a real-world use case, property data is stored on a blockchain, creating a tamper-proof record. When a buyer and seller agree to a transaction, a smart contract is created outlining terms and conditions. Automatically executing smart contracts verify the parties’ identities, check the property’s title and history, and, upon meeting the agreed conditions, automatically transfer ownership and update the land registry.
Smart contract use case #4: Mortgages
Smart contracts can revolutionize the mortgage industry by automating processes, enhancing security, and reducing costs.
As an example, a smart contract can manage the mortgage application, approval, and repayment processes. The smart contract verifies applicant information, assesses creditworthiness, and outlines loan terms. Upon approval, the smart contract automates fund disbursement, tracks repayments, and applies penalties for late payments or other breaches.
This streamlined process reduces the need for intermediaries, increases efficiency, and offers a transparent, auditable trail of the entire mortgage lifecycle.
Smart contract use case #5: Insurance
Smart contracts can transform the insurance industry by automating claims processing, enhancing transparency, and reducing fraud.
In a real-world use case, a smart contract is created based on the terms of an insurance policy. When a claim is filed, the smart contract automatically verifies the occurrence of the insured event using trusted data sources. If the claim meets the predefined conditions, the smart contract triggers the payout to the policyholder.
Smart contracts provide a transparent, auditable record of the entire insurance claim process.
Smart contract use case #6: Medical research
Smart contracts can significantly impact medical research by facilitating data sharing, ensuring data integrity, and automating financial incentives.
In a real-world use case, smart contracts can manage a decentralized data repository for medical research. Researchers can securely contribute and access data, with the smart contract ensuring proper data usage and consent. The smart contract can also automate traditional financial services.
This approach fosters collaboration, maintains data privacy, and accelerates scientific advancements.
Smart contract use case #7: Voting
Voting procedures could see a transformation thanks to the improvements in security, transparency, and efficiency brought about by smart contracts.
A blockchain-based voting system that uses smart contracts to handle voter registration, vote casting, and vote tallying can be developed in a real-world use case. This system uses blockchain technology. Using reliable identity sources allows the smart contract to check voter eligibility, which also guarantees that each eligible voter can only cast one vote.
Votes are safely recorded on the blockchain, producing a record that cannot be altered after it has been created. When the allotted time for voting has passed, the smart contract will automatically count all the votes and announce the outcomes.
This method reduces the likelihood of voting fraud, cuts down on the amount of time spent on manual processes, and lays out a clear audit record for the entirety of the voting procedure.
Smart contract use case #8: Peer-to-peer (P2P) transactions
P2P transfers are just one of the many possible applications for smart contracts. The Ethereum Project and others like it owe their existence to this line of thinking.
Smart contracts can be made and agreed upon by users of all sizes on these sites. The duration of these agreements is contingent upon the fulfillment of certain conditions.
When the smart contract determines that all prerequisites have been satisfied, it enables the contract’s remaining provisions to be carried out. Although monetary exchange is usually involved, this is not always the case.
Smart contracts have been implemented in numerous industries, including initial coin offerings (ICOs) and online retail sales. Smart contracts are also being used to guarantee the work of contracted development teams and other businesses.
P2P smart contracts’ potential is practically limitless. Many functions presently performed by currency could, in theory, be taken over by these alternatives.
Smart contract use case #9: Product development
Using smart contracts to maintain a ledger of a product’s development phases is another exciting application of this emerging technology. The contract would become binding once signed by both sides.
The smart contract could be updated with project milestones and other details as they became available. Payment benchmarks agreed upon by the parties involved will trigger the release of agreed-upon funds as per the terms of the contract.
The ability to verify the authenticity of data and ensure its safety is a major selling point for smart contracts. Obviously, a business that has spent millions on research and development wants to ensure that its research and development are safe.
When data is stolen, the only way to get it back is through a drawn-out legal procedure that most businesses don’t have the resources to endure.
The ongoing patent disputes between Apple and Samsung are an excellent example of how crucial it is to establish ownership of intellectual property such as ideas.
There is a long list of possible applications for this innovative technology. Due to the nature of smart contracts, any business, from a one-person startup to a multinational corporation like Microsoft or Amazon, can engage in the development of a product.
Smart contract use case #10: Stocktaking
Blockchain-based smart contracts can also be useful in supply chain management. Devices connected to the Internet of Things (IoT) could be placed at various points in the production chain to keep track of the product at every stage.
As an example of smart contracts usage in stocktaking, supply chains could practically eradicate internal theft, as managers could pinpoint the precise moment and location where an item disappeared.
Smart contracts would allow managers to track real-time inventory and product movement across massive supply chains, like those found in giant warehouses. Managers could use this information to optimize stock levels and create more efficient procedures, resulting in faster shipping times.
An automated smart contract could do all of the aforementioned for supply chains that span multiple companies or locations, and it could even start reorders and payments for completed orders on its own.
The data stored in these agreements could also be used to help anticipate peak business times and plan seasonal inventory.
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Potential Smart Contract Advantages in Other Industries
This is by no means an all-inclusive summary of the real-world uses for smart contracts, and this technology has the potential to revolutionize countless other sectors in the distant future. The advantages of utilizing smart contract technology are being sought after by many researchers and developers as a means to meet the demands of the expanding IoT. The benefits of smart contracts may encourage the further integration of blockchain technology, which is already being used to provide security and openness to IoT devices.
The healthcare sector is also adopting blockchain technology to facilitate the safe, transparent, and decentralized exchange of patient information. Integrating smart contracts and complete decentralized applications (dApps) intended to solve key healthcare pain points like interoperability, identification, and authentication challenges may also strengthen the connection between blockchain technology and healthcare. Smart contracts and dApps are set to further revolutionize the world of digital deals as more and more use cases are discovered and developed.
To fully automate decentralized networks, our economy relies on smart contracts. Escrow, clinical studies, insurance, government procedures, and so on all benefit from the novel approaches made possible by smart contracts.
Frequently Asked Questions
What are smart contracts?
Smart contracts are self-executing agreements with the terms of the contract directly written into computer code. They are typically deployed on a blockchain, a decentralized and distributed digital ledger, which ensures security, transparency, and immutability.
How do smart contracts work?
Smart contracts work by automating the execution of a contract through computer code. When predefined conditions within the code are met, the smart contract automatically carries out the agreed-upon actions, without the need for intermediaries or manual intervention. This process streamlines transactions, reduces the risk of fraud, and increases trust between parties.
What are the business use cases of smart contracts?
Smart contracts can help businesses in many ways, ranging from overseeing supply chain automation, securely transferring property and money, and automating business processes such as for banks, medical facilities, and insurance.
COO & Co-founder
Written by Vitaliy Basiuk
COO & Co-founder at EvaCodes | Blockchain Enthusiast | Providing software development solutions in the blockchain industry