What Are Smart Contracts?
Smart contracts are self-executing protocols automating the transactions or agreements between two parties and executing the right part according to their progress. The code of smart contracts is viewable publicly and still tamper-proof. Using blockchain technology, smart contracts ensure compliance by approaching contracts and agreements in a different way.
For instance, let’s say you are about to rent a house through smart contracts. Once you pay the advance, the smart contract executes the message “Open house doors” and provides you with a passcode. This lets you use the house for which you paid the advance by entering the specifically generated passcode. When the rent of the house is not paid, the smart contract makes the house inaccessible to you. This is how every agreement mentioned aspect is taken care of by smart contracts in an automated way without needing manual verification of everything.
Fintech Industries and Their Popularity
The use of state-of-the-art technologies in the financial sector is commonly termed fintech. Modern technologies such as Artificial Intelligence, IoT, Blockchain, Data Science are all playing a vital role in the upliftment of fintech businesses and services. Compared to traditional methods, these tech tools are useful for making processes speedy, secure, and convenient. A wide range of business models, events, and products are supporting the fintech industry with alluring payment benefits from cashless to virtual payments.
These innovations have made the fintech industries to gain huge popularity and along with it came increased profits. With everything in the world getting digitized and people adopting it at the same rate, fintech services are also rising in demand.
Smart Contracts in Fintech Businesses
One of the priming concepts of blockchain technology supporting the fintech industry at a vast amount is smart contracts. They can eliminate intermediaries, carry out self-error checking mechanisms, perform individually, and find out the right process to follow easily with no compromise.
Payments and value transfer also become a cakewalk with smart contracts. For efficient business growth, avoiding unwanted hindrances is the first step to follow. And this is the whole reason backed up by blockchain, smart contracts are really helpful in the fintech businesses. With the exclusion of third parties from any fintech-related service, unnecessary enforceability, periodical checks, and possible breaches can all be completely avoided. Without the intervention of third parties or intermediaries, the financial transactions and other processes are done at a faster than usual speed. Undoubtedly, smart contract development serves as the best replacement for traditional contracts.
Here are some of the key features of smart contracts that serve as beneficial for all the businesses inculcating them, especially fintech businesses.
#1 Digital Signatures
Each party that is involved in the agreement or the smart contract confirms that they will abide by the rules and regulations that come with the contract by offering a cryptographic digital signature.
#2 Oracles
To know if the contract is fulfilled or not both parties must rely on something. This is why certain data sources showcasing the logic of the smart contract and that are mutually agreed upon are induced as oracles.
#3 Self-execution
Without any intervention of either of the parties, the contract automatically executes the required action and proceeds it further when the conditions are rightly met. If the conditions are not met, it indicates the parties regarding the same and halts the process until further action is performed. Post which again it undergoes condition checking.
With no worries about other party’s intervention or possible breaches, smart contracts support automated assessment through which the users can transact anything of value effortlessly and securely.
Smart Contracts – The Future of Fintech and Digital Proceedings
The future of fintech industries and all other digital proceedings are predicted to be in the hands of smart contracts. This is no surprise since the adoption of smart contracts has already begun. Especially for the fintech industry, there are many advantages of smart contracts supporting it in a number of ways. Building automated systems for finance-related services and businesses makes the work easier and using smart contracts for the same keeps the data safer.
The below-listed advantages of smart contracts supporting the fintech industry will justify that smart contracts are going to be the future of the fintech industry.
#1 Trust
The data logged in the blockchain cannot be changed once stored i.e, they are immutable. This makes smart contracts immutable too and no party can cheat or hack to change the contract in any possible way.
#2 Convenience
Since the contracts are defiance to changes, each and every transaction record that occurred relative to the contract will be stored in chronological order. These transactions are accessible by some authorities and can be viewed and checked at any time when needed.
#3 No Third-parties
As discussed before, the third-party intervention or the middlemen’s involvement is completely eradicated with smart contracts since everything is handled automatically. This also helps in reducing transaction costs, speeds up processes, provides enhanced data security, etc.,
#4 High-end Security
Every transaction that takes place is encrypted and stored on the blockchain. Hence they cannot be changed at any instance thereby maintaining high-end security and privacy.
#5 Standard Code
The costs of negotiations and agreements can be low compared to traditional agreements with standardized code and code execution of smart contracts.
#6 Certainty
Counterparty risks, settlement anomalies, and other similar risks can be avoided by making use of well-designed smart contracts which are automatically executed as per conditions fed in the code.
#7 Innovation
By automating the payment flows and digital asset flows, new products, and business models can be easily promoted. The contracts can also be tweaked to offer newer versions or upgrades. Regulatory compliance, reporting models, and stress testing features can be imparted in smart contracts to support legal innovations.
Wrap Up
Smart contracts and their impeccable advantages provided can definitely help fintech industries reach new heights in the forthcoming tech future. They are already proving their worth in many industries including fintech and it is to be noted that the best is yet to be seen. The new contract forms, improved accuracies, and worldwise transaction verification will all be possible in a few years.
If you are looking to innovate and make your fintech business more efficient, then there is no better option than inculcating smart contract development. To do so, you will need to partner with the best smart contract development company so that you can get the best services. Uberdoo can satisfy your needs by offering flawless smart contact development services developed by our team of seasoned blockchain professionals. Do you wish to know more? Connect with us and share your project requirements right away!
