The use of smart contracts on a blockchain is growing significantly, especially in insurance, banking, government, and other sectors with similar needs. Across the next five years, this growth is projected to be notable, with many sectors utilizing the many benefits of a smart contract—such as accuracy and transparency—to run a more efficient operation.
So how does the blockchain power smart contracts? It’s important to first properly understand the specifics of a blockchain. Consider a ledger in digital form—that’s the essence of a blockchain. This ledger is made available to a network of users, also known as nodes. When a record is written to the ledger, it is given a unique identifier and tied chronologically to the previous record. Any data written to the ledger uses one-way encryption for maximum security and is visible to all of the network’s nodes. This also enables regular auditing from the nodes to identify irregularities. With so many nodes working in a transparent way together, it becomes impossible for hacks or irregularities to make it through.
A contract is still a contract, whether smart or traditional—it’s a documented agreement between parties. In the traditional model, contracts use signatures on paper. This approval process means physically bringing the document from party to party, sometimes using scans and PDFs to expedite along the way. In a true old-school sense, this might mean physically mailing the package from party to party.
Smart contracts bring modern technological capabilities into the fold:
Increased accuracy: With a permanent record in chronological order, the signature process is sequenced in a way to gain maximum efficiency. Instant transmission upon signatures significantly expedites the workflow.
Increased transparency: Because the blockchain is visible to all parties, all signatures—as well as the contract status—are recorded in a completely transparent way that also turns the ledger into a single source of truth.
Absolute permanence: Smart contracts on a blockchain create a permanent immutable record that can also be relied upon to provide information regarding dates and signature status, even years down the line.
Smart contracts make sense for many industries, but for insurance, banking, and government, they can be particularly useful. Find out why with a look at these use cases for smart contracts on a blockchain:
Blockchain smart contracts for banking: If you’ve ever bought a home, you know how complex the mortgage process can be. But unlike dealing with insurance, mortgage contracts involve a lot of legwork by the individual homeowner or home buyer—not insurance agents or other professionals who spend their days dealing with these sorts of things. Smart contracts make this much easier to understand with an always-accessible digital process that provides an easy to-do list of required documentation and contract signature status. This can also create tracking optional items, such as waiving inspections or obtaining proof of insurance in specialized circumstances.
Blockchain smart contracts for governments: Bureaucracy in government work is nothing new, but being able to cut through the paper trail saves significant time and effort—and taxpayer money. Blockchain-driven smart contracts increases efficiency by enabling the approval chain directly into the actual contract. That means that approvals, signatures, contingencies, and further documentation all become digitally carried in a safe, secure, and transparent way. While the volume of government signatures required may not change, the path to get there has been shortened with blockchain smart contracts.
Blockchain smart contracts for insurance: When auto accidents happen, every involved party has to deal with insurance—and sometimes, the local police and the DMV. A smart contract creates a single source of truth, while maintaining transparency to everyone involved: the insurance agents, the drivers, the police, the insurance adjuster, legal teams, the repair shop, etc. All of this enables for digital uploading of key documentation and photos for proof of both process and claims. The result? While the circumstances may be unpleasant, at least the smart contract on a blockchain can create a smooth process that ensures minimal disputes about records or status.
Is it possible for paperwork to go completely digital? With smart contracts on a blockchain, this is very feasible—even for heavily bureaucratic situations like government contracts. Oracle Blockchain Platform Cloud Service is one such tool that can help organizations create and automate smart contracts. Learn more about this smart contract platform or the rest of Oracle Blockchain’s capabilities.