Smart contracts are synonymous with Ethereum but they aren't new. They're a great idea that has found its place in the blockchain era.
While ordinary contracts are written on paper, a smart contract is written in lines of computer code. It is simply a set of instructions designed to perform certain actions once certain conditions are met. But that makes a smart contract perfect for situations where two parties wish to enforce a mutual agreement, such as when one needs to be paid by the other once they've delivered a product or service. The smart contract will verify that this has taken place and distribute the payments accordingly.
An online shop could use a smart contract to ensure that products are dispatched once payment has been received. This kind of automation is ideal for improving efficiency and reducing human error.
Even though we may think of smart contracts as a recent innovation linked to cryptocurrencies, American cryptographer Nick Szabo first proposed them back in 1994. But now that blockchain has come along his idea has come of age. The Ethereum network's ERC-20 standard has opened the door to tokens being used for Initial Coin Offering (ICO) events.
A smart contract is ideal for the cheap, trustless exchange of value, so it's found its way into payment processing for decentralized apps and exchanges.
Smart contract use in the financial services industry has also increased. Such contracts can be used to automatically clear and settle trades, pay bond coupons, or even calculate and pay insurance claims.
Even though early adoption has been most obvious in the financial services sector, a smart contract is a versatile tool that can help with any industry where digital assets, information, or funds need to be transferred between parties.
A smart contract can help to streamline the process of equipment leasing, and in the healthcare industry, smart contract robustness will play an important role in preserving data integrity in clinical trials.
Authors are looking into smart contract use as a possible solution to enforcing intellectual property agreements, as such agreements can not only provide an unassailable record of shared ownership rights but can also make sure that royalties are dispersed equitably.