Blockchain technology is a game-changing phenomenon that has disrupted multiple industries by enabling safe, decentralised solutions for diverse transactions and operations. Implementing smart contracts is one of the most prominent uses of blockchain technology.
A smart contract is a self-executing contract in which the conditions of the buyer-seller agreement are directly encoded into lines of code. In 2013, Ethereum, the second largest blockchain network, pioneered the notion of smart contracts. Smart contracts have now become a vital element of many businesses, providing efficient and secure solutions for various business activities.
What Are Ethereum Smart Contracts?
They are self-executing contracts with the terms of the agreement between buyer and seller being written into lines of code. These contracts run on the Ethereum blockchain, a decentralised and secure platform. The code in the smart contract is automatically executed when specific conditions are met, eliminating the need for intermediaries and increasing the efficiency and security of the transaction.
Ethereum smart contracts are written in Solidity, a computer language comparable to JavaScript. The code defines the circumstances under which the contract will be carried out and the actions that will be executed if those requirements are satisfied. A smart contract, for example, might be used to transfer ownership of a digital asset from one party to another whenever specific criteria are met.
One of the primary advantages of smart contracts is that they can automate the process of contract execution, saving time and lowering the risk of human mistakes. As a result, they are ideal for a variety of industries, including banking, real estate, supply chain management, and others.
How Do Ethereum Smart Contracts Work?
Smart contracts automate the process of executing specific conditions when triggered by events, such as a transfer of funds. The requirements are pre-written in the code and enforced automatically once met. For instance, a smart contract can immediately release payment to a seller only after the buyer receives a product. In this way, smart contracts enforce the terms of an agreement automatically.
A smart contract process follows steps similar to the below example of buying and selling a product.
- The buyer and the seller agree on the terms of the sale, including price and delivery date.
- The buyer sends the agreed-upon amount of cryptocurrency, typically Ether, to the smart contract’s address.
- The smart contract code verifies if the conditions of the sale have been met, such as the receipt of the agreed-upon amount of cryptocurrency.
- If the conditions are met, the smart contract executes the terms of the agreement automatically. For example, it transfers ownership of the product to the buyer.
- The buyer now has access to the product and the seller has received payment. Both parties can trust that the smart contract has fulfilled and enforced the agreement.
- The Ethereum blockchain records the details of the transaction, including the product ownership transfer and payment. This provides a secure and permanent record of the transaction.
This process provides a secure and transparent way for individuals to buy and sell products using cryptocurrency. By using smart contracts, the risk of fraud and the need for intermediaries is reduced, and the process of buying and selling products is streamlined and automated.
The Technology Behind Smart Contracts
The Ethereum blockchain powers the technology underneath. This decentralised and distributed ledger securely records transactions and data. Smart contracts are self-executing computer programs that run on the Ethereum blockchain and enforce the terms of an agreement automatically.
Developers write these contracts in a high-level programming language and compile them into low-level bytecode, which the Ethereum blockchain stores. The Ethereum Virtual Machine, a computer network that runs the Ethereum blockchain, executes the bytecode. When someone makes a transaction on the Ethereum blockchain, it triggers the smart contract to run and enforce the agreement’s terms.
The decentralised and distributed nature of the ledger ensures the security and transparency of the agreement’s terms, as multiple computers store the transaction details, and anyone can audit them. By using smart contracts, individuals can automate various agreements and transactions, reducing the risk of fraud and the need for intermediaries.
Benefits of Ethereum Smart Contracts
Ethereum smart contracts offer numerous benefits to individuals and organisations. They reduce transaction costs and increase efficiency by eliminating the need for intermediaries. The self-executing nature of smart contracts ensures that the terms of an agreement are automatically enforced, increasing the security and transparency of transactions.
In addition, using a decentralised and distributed ledger eliminates the risk of fraud, as all transactions are recorded on multiple computers and can be audited by anyone.
A recent survey by Deloitte showed that 72% of executives believe that smart contracts will play a significant role in the future of business. At the same time, the market for decentralised finance (DeFi) applications built on the Ethereum blockchain has grown to over $40 billion in just a few years. These statistics show that Ethereum smart contracts are poised to play a significant role in shaping the future of various industries and revolutionising the way we do business.
Industries Benefiting From Ethereum Smart Contracts
Ethereum smart contracts have the potential to revolutionise various sectors by providing secure and efficient solutions for different business processes.
Logistics
Smart contracts can be used in the supply chain sector to automate tracking items as they move through the supply chain. This can increase the supply chain’s efficiency and transparency, lowering the risk of fraud and ensuring that items are delivered on time.
Real Estate
Smart contracts can be used in real estate to simplify purchasing and selling property, removing the need for middlemen such as real estate agents. Smart contracts can save time, money, and minimise the risk of fraud by automating the process.
Healthcare
Ethereum smart contracts can transform the healthcare industry by automating and optimising numerous operations. For example, electronic health records (EHRs) can be securely stored and maintained on the blockchain using smart contracts, boosting patient data privacy and security while making it easier for healthcare practitioners to access and exchange information.
Smart contracts may also help clinical studies by automating processes like delivering payments to participants when specific milestones are fulfilled and collecting and storing participant data.
Gaming
Ethereum smart contracts have the potential to change the gaming industry by allowing gamers to engage with games and participate in the gaming economy in new and inventive ways. They, for example, may be used to build decentralised, player-driven markets where users can buy, sell and exchange virtual commodities and currencies. The blockchain secures these markets, giving participants more transparency and security while participating in transactions.
Smart contracts could automate the hosting of in-game tournaments, such as awarding prizes and collecting entrance fees from players. Smart contracts can also build decentralised gaming platforms where participants can play games and earn rewards directly from the platform.
Companies Using Ethereum Smart Contracts
Many companies have adopted Ethereum smart contracts to provide secure and efficient solutions for their business processes. Some of the companies using Ethereum smart contracts include:
- Microsoft: Microsoft has adopted Ethereum smart contracts to provide a secure and transparent platform for managing the supply chain of its products.
- JPMorgan Chase: JPMorgan Chase is using them to increase the efficiency and security of its cross-border payments.
- Accenture: Accenture uses them to provide secure and transparent solutions for its clients’ supply chains.
Companies will continue to adopt blockchain technology as it evolves and offers significant business benefits.
Getting started with Ethereum smart contracts requires a company to understand Ethereum and blockchain technology. They can begin by educating themselves on the Ethereum blockchain, smart contracts, and the Solidity programming language.
Hiring a team of developers with experience in Ethereum and blockchain technology is also a great idea. This team will develop, test, and deploy the company’s smart contracts.
The next step would be choosing a development environment, such as Remix, Truffle, or Ganache, to build and test their smart contracts.
Finally, the company can deploy their smart contracts on the Ethereum blockchain and start using them to automate its business processes, increase transparency and security, and reduce costs. With the right team, resources, and determination, any company can get started with Ethereum smart contracts and leverage the power of decentralised technology.
Closing Thoughts
According to a report by Grand View Research, the global smart contract market is expected to reach $1.4 billion by 2025, growing at a CAGR of 25.2% from 2020 to 2025.
The future of the Ethereum blockchain is exciting and holds great potential for growth and development. In the next ten years, we can expect to see the following:
- Increased Adoption: As more individuals and organisations become aware of the benefits of decentralised technology, we can expect to see a significant increase in Ethereum blockchain adoption.
- Expansion of Decentralised Applications: The Ethereum blockchain allows for the creation of decentralised applications (dApps) that can run on the blockchain. We can expect to see the continued growth of this ecosystem with the development of new and innovative dApps.
- Development of New Use Cases: As the Ethereum blockchain evolves, it will likely lead to the creation of new use cases and applications. This could include decentralised finance, prediction markets, and more.
- Scaling Solutions: Scalability has been a significant challenge for the Ethereum blockchain. However, with the development of new scaling solutions, such as sharding, we can expect the Ethereum blockchain to be able to handle more transactions and become more widely adopted.
- More Competition: As the Ethereum blockchain grows, we can expect to see more competition from other blockchain platforms. However, the Ethereum blockchain has a large and established community, giving it a competitive advantage.
Overall, the future of the Ethereum blockchain is bright, and we expect to see continued growth and development in the coming years. The decentralised and distributed nature of the blockchain provides the potential for dramatically enhanced security, transparency, and efficiency in various industries.
Disclaimer: The information provided in this article is solely the author’s opinion and not investment advice – it is provided for educational purposes only. By using this, you agree that the information does not constitute any investment or financial instructions. Do conduct your own research and reach out to financial advisors before making any investment decisions.
The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltec.io.
The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltec.io.
The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.