A smart contracts is a type of code that allows you to verify and execute a contract automatically and easily. Although the conditions for hiring external agents to execute the plan have been discussed, it is clear that this represents a key paradigm shift for the business world.
These contracts work on blockchain instead of a server or a personal computer and do not require human intervention upfront to verify and enforce the conditions. Despite the most common problems they can present, it is worth highlighting the advantages they offer to the parties involved. In this article we show you the main benefits of smart contracts:
1 – Transparency.
The participants have the same information at the same time, which minimises possible manipulation of the clauses of the contract. As smart contracts are based on blockchain, they guarantee the immutability of data, allowing contracts and agreements to be made without the need to know each other and avoiding possible breaches of conditions or mistakes in the management and execution of the contract.
This transparency provides the parties with security and trust as the data and information relating to the contract is available to them throughout the life of the contract, as transactions are duplicated so that all parties involved have a record.
2 – Autonomy
Smart contracts do not require trusted third parties or human intervention in the process, which offers autonomy and independence to the parties.
This inherent feature of smart contracts brings other advantages such as cost reduction and process speed.
3 – Cost reduction
This advantage is also linked to the elimination of intermediaries. By not having to rely on a third party to verify the terms of the contract and provide the necessary confidence, the associated costs are reduced. Intermediary fees disappear in this type of contract.
The absence of intermediaries reduces the economic cost as well as the time cost. As it is done automatically, the time invested is reduced compared to contracts done manually and in the presence of a third party.
5 – Automatic updates
Thanks to its technological and autonomous nature, the terms of the contract are automatically adjusted and updated, thus dispensing not only with the presence of intermediaries, but also with new processes that carry out these updates.
These advantages may justify their use and popularisation in recent years, making smart contracts an opportunity for many companies and individuals.
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