Smart contracts defined
Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. They can also automate a workflow, triggering the next action when conditions are met.
How smart contracts work
Smart contracts work by following simple “if/when…then…” statements that are written into code on a blockchain. A network of computers executes the actions when predetermined conditions have been met and verified. These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The blockchain is then updated when the transaction is completed. That means the transaction cannot be changed, and only parties who have been granted permission can see the results.
Within a smart contract, there can be as many stipulations as needed to satisfy the participants that the task will be completed satisfactorily. To establish the terms, participants must determine how transactions and their data are represented on the blockchain, agree on the “if/when...then…” rules that govern those transactions, explore all possible exceptions, and define a framework for resolving disputes.
Then the smart contract can be programmed by a developer – although increasingly, organizations that use blockchain for business provide templates, web interfaces, and other online tools to simplify structuring smart contracts.
Benefits of smart contracts
- Speed, efficiency and accuracy
- Trust and transparency
- Security
- Savings
- Applications of smart contracts
- Explore how businesses benefit from smart contracts in active blockchain solutions
Safeguarding the efficacy of medications
Sonoco and IBM are working to reduce issues in the transport of lifesaving medications by increasing supply chain transparency. Powered by IBM Blockchain Transparent Supply, Pharma Portal is a blockchain-based platform that tracks temperature-controlled pharmaceuticals through the supply chain to provide trusted, reliable and accurate data across multiple parties.
Making international trade faster and more efficient
By joining we.trade, the trade finance network convened by IBM Blockchain, businesses are creating an ecosystem of trust for global trade. As a blockchain-based platform, we.trade uses standardized rules and simplified trading options to reduce friction and risk while easing the trading process and expanding trade opportunities for participating companies and banks.