What are smart contracts and what are its use cases?

What are Smart Contracts?

Smart contracts are the programs stored on the blockchain that run when predetermined conditions are met. Smart contracts are typically used to automate an agreement to make the participating parties aware and certain of the outcome. The execution of smart contracts is handled in a decentralized environment without the involvement of any intermediaries. They also automate the workflow and trigger the next action when conditions are met.

Smart contracts work on “if-then” statements written into the code of blockchain. When the predetermined conditions are met and verified, the network of computers executes the actions. The actions may include:

  • Releasing funds to appropriate parties.
  • Sending notifications.
  • Registering a vehicle or issuing a ticket.

The blockchain is updated when transactions are complete. It means that transactions are recorded and cannot be changed. Moreover, only the parties having granted permission can view the results.

A smart contract includes many stipulations needed to satisfy the participants and assure that the tasks are done efficiently. To establish the terms, the participants need to identify how the data and transactions are represented on the blockchain, define a framework for resolving disputes, agree on “if-then” rules that govern the transactions and explore all possible exceptions.

Many organizations that use blockchain for business are increasingly trying to provide simple templates, web interfaces and other tools to simplify structuring smart contracts.

What are the use cases of Smart Contracts?

Smart contracts have numerous use cases. Some of the example use cases are described below:

Government Voting System

Smart contracts offer a secure environment and ensure that no one can make changes in the voting system. The votes are protected on the ledger using a smart contract, which is extremely difficult to decode.

Moreover, it is anticipated that the use of smart contracts in the voting system would increase the turnover of voters and remove the limitations of the inefficient, antiquated voting system that required voters to line up, prove their identities and complete forms.

Supply Chain

Supply chains have suffered huge losses due to traditional paper-based systems where papers pass through multiple channels to get approvals. The system also incorporates increasing risks of fraud and manipulations.

Blockchain nullifies all such risks by offering an accessible and secure digital version to parties involved in the chain. Smart contracts are also used for the automation of payments and inventory management.


Blockchain implements cryptographic techniques to securely store the encoded health records of patients using a private key. Only the authorized users will be granted access to the patients’ health information and records. Smart contracts play a vital role in conducting secure and confidential research.

Blockchain stores all the receipts of patients that can automatically be shared with the insurance companies as proof of service. Moreover, a ledger can also be used for other activities such as regulation compliance, supervising drugs and managing supplies.

Financial Services

Smart contracts have transformed traditional financial services and provided a more secure way of handling processes. For insurance claims, smart contracts perform error checking, routing and also transfer payments if found appropriate.

Smart contracts eliminate all possibilities of infiltration of accounting records. It also allows shareholders to take part in decision-making in a transparent manner. Smart contracts are also helpful in trade clearing, where the funds are transferred once the settlement amount is calculated.

In a nutshell, Smart contracts introduce a simple way to handle business operations. It is an agreement in the form of computer programs executed automatically once the pre-programmed conditions are met. Smart contracts offer numerous benefits such as high security, real-time execution and transparency. Businesses can largely benefit from smart contracts as these have the potential to introduce radical change and allow international business and trade to speed up transactions, reduce paperwork and bring cost-efficiency.


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