There are 5 main benefits of using smart contracts:

• Tamper-proof agreements
• Error-free processing
• Speed
• Parties involved given independence
• Trust and transparency

Let’s dive into these points further.

Tamper-proof agreements

Once a smart contract is deployed, the predetermined conditions cannot be changed or modified.

Take our housing example above to illustrate this. Once all the conditions are met and fulfilled, Sophia is required to pay a certain amount of digital currency (e.g. ETH or BTC) to Ava. In turn, Ava has a set period of time to vacate the property and hand over the house keys to Sophia.

The transaction is recorded on the blockchain like a digital receipt, and the smart contract acts as proof of ownership of the house. It verifies that Sophia is the new owner.

Error-free processing

Think about a time you made a mistake filling out an application form – it could be a loan, health insurance, a passport, or something else.

Smart contracts can remove human error from the manual writing process, which can save you a lot of time and effort.

With smart contracts, the application process is completed automatically, saving you a lot of time from traveling or having to refill it out. Instead of waiting 7-21 days for someone to tell you that your application was rejected because of a minor mistake, like using the wrong color ink, you can get instant feedback.

Speed

Since smart contracts are simply programs that run on the blockchain, processing transactions can be executed immediately after the conditions are satisfied.

Have you ever returned something back to a store and had to wait for days to get your money bank? With smart contracts, your money would be returned back to you as soon as a certain criteria was met. For example, it could be providing proof of purchase when returning an item, and the smart contract would return your money instantly.

Not only would this save a lot of time, it would also eliminate the need for paperwork too!

Parties involved given independence

This point refers to the idea that third parties and intermediaries are taken out of the equation through smart contracts.

When two parties want to make a transaction, they can deal with each other in a peer-to-peer way, and not have to rely on a third party to facilitate the whole process.

The agreement is made directly between the two parties and the deal is enforced through code.

Trust and transparency

At times, it may be difficult to trust a third party to be impartial and fair to both sides. The middleman may be biased or manipulated into changing the terms of the agreement at some point during the process.

This is where smart contracts come in, removing the need for a third party altogether through its decentralized, transparent, and autonomous nature.

Once a smart contract is written, it cannot be modified. It can, however, be verified by both parties at any time.

Additionally, every step of the process is recorded permanently on the blockchain, allowing anyone to verify the details of the transaction as well.