What are Blockchain-Based Smart Contracts?

The rapid growth of blockchain technology and cryptocurrencies has altered the financial industry in recent years, resulting in establishing a new crypto-economy.

Verified Market Research has published a recent report, “Smart Contracts Market.” According to the report, Global Smart Contracts Market was valued at USD 144.95 million in 2020 & is expected to reach USD 770.52 million by 2028, increasing at a CAGR of 24.55 % from 2021 to 2028.

New decentralized applications have emerged with smart contracts that do not require a trusted third party. Smart contracts are computer protocols that allow different parties to negotiate and agree without involving a third party.

Despite the positive aspects of smart contracts, security threats, weaknesses, and legal concerns continue to impede their implementation.
 In this post, we present a comprehensive analysis of blockchain-based smart contracts, as well as some of the current opportunities and obstacles facing smart contract adoption.

What are Smart Contracts?

Smart contracts are simply programs that run when certain conditions are met and are maintained on a blockchain. They’re generally used to automate the execution of an agreement so that all parties can be sure of the conclusion right away, without the need for any intermediaries or time waste.

Like any other contract, a smart contract sets out the conditions of an agreement. Unlike a traditional contract, a smart contract incorporates the rules into code on a blockchain, like Ethereum.

From loans and insurance to logistics and gaming, smart contracts allow developers to create apps that take advantage of blockchain security, reliability, and accessibility while providing complex peer-to-peer functionality.

What are the Essential Components of Smart Contracts?

Smart contracts are made up of a few key components:

  • Signatories – Two or more parties use the smart contract and digital signatures to give their final \’go forward’ on the proposed terms.
  • Subject – The subject of the agreement applies solely to the smart contract’s context.
  • Specific Terms – The smart contract\’s precise terms. Smart contracts must be mathematically stated and programmed to be compatible with the blockchain system.

How do Smart Contracts Work?

A network of computers can run activities when specific conditions are met and validated.

The activities may involve transferring payments to the appropriate parties, registering a vehicle, providing alerts, or issuing tickets. The blockchain updates after completing each transaction. This means the transaction is unalterable, and the results are only visible to those with access rights.

Participants must agree on:

  • The representation of transactions and relevant metadata on the blockchain.
  • Decide on the “ifwhen…then…” rules that apply to those transactions.
  • Investigate all possible exceptions, and 
  • Design a framework for resolving disputes to set the terms.

Developers can then write the smart contract, but firms that use blockchain for business increasingly provide templates, web interfaces, and other online tools to make smart contract construction easier.

Smart Contracts and Blockchain


Through smart contracts on the blockchain, anonymous parties can conduct transactions and agreements without the need for a central institution, external enforcement, or legal system. They rely on transparent, irrevocable, and traceable transactions.

Because all data recorded on the blockchain is immutable and safe, it is the ideal setting for smart contracts.

Applications of Smart Contracts

Smart contracts are interesting to stakeholders because of the ease of sharing and accessing. Smart contracts can automate, calculate, and organize payments, and carry out their terms and conditions automatically. 

They can alter a wide range of industries, and they are currently doing so in fields as diverse as finance, real estate, healthcare, insurance, and even elections.

Here are a few applications of Smart Contracts:

1. Getting Rid of Costly Trade Finance Errors

Smart contracts can help you avoid making costly mistakes. These contracts’ capacity to automate procedures and refine calculations also aids in lowering work hours.

Santander InnoVentures reported on the benefits and opportunities of blockchain in finance

They are:

  • Smart contracts will enable fundamental improvements in the infrastructure and processes of the financial services industry. 
  • By 2022, banks can save $15-20 billion per year on costs associated with “cross-border payments, securities trading, and regulatory compliance.
  • Using DLT to eliminate the middlemen to manage a mortgage-issuance process.
  • They believe that distributed ledgers will become the dominant method of managing large volumes of transactions.

2. Keeping Track of the Details of a Real-Estate Property

This industry uses smart contracts to document the ownership of property. Removing the need for lawyers or brokers improves transaction speed and efficiency. The seller controls this process.

Smart contracts provide a more transparent and cost-effective option for property title management. Smart contracts keep track of a property’s history, location, and other pertinent information for title assessment. They assist in preventing fraud by using tamper-proof and secure encrypted codes.

Real-Time Example

A Sydney seaside property would cost roughly $2.3 million, which is out of reach for most people, including myself. Assume the owner is willing to tokenize the property and sell it on a public exchange in order to attract more investors. Five customers have completed the buying orders, resulting in a total of $460,000 in tokens. They now jointly own the home after executing a multi-signature smart contract that is fully executed on the blockchain network.

With a multi-signature smart contract, new investors can be sure that all future decisions will be made when a majority of owners agree.

It may sound absurd, but it is something that could be built to help automate the process of getting started investing in real estate at a lesser cost than the usual method.

3. Securing Medical Data

Blockchain is helping many healthcare organizations to deliver reliable automation and up-to-date security measures. Hospitals are popular targets for cyber hackers because they store a lot of sensitive data. 

Data breaches have affected even prominent names in the industry, such as UCLA Health, resulting in the compromise of 4.5 million patient details.

In this context, ensuring secure patient data sharing between healthcare providers is crucial to upholding care standards. Patient data can be securely kept on a blockchain using smart contracts, which can only be accessed with the patient’s private key.

Patients can trust that their medical professionals will always have access to the information they require and that their information will be kept secure in this manner.

4. Improving the Ease and Integrity of Elections

Blockchain voting systems could become a dominant technology for elections in the future. Blockchain voting systems could increase accessibility, encourage increased voter engagement, and speed up the process of tallying and reporting results by making voting safe and accessible through digital methods. 

Smart contracts would be able to verify voters’ identities, preventing multiple ballots from being cast, which is a common target for election hackers.

5. Minimizing the Claim Frauds in Insurance Industry

The insurance business spends millions of dollars each year processing claims. Fraudulent claims also waste money. 

Smart contracts improve claim processing by incorporating frequent error checks and assisting in administering policies from individuals or organizations. Consumers will save money due to faster processing times, including premium rates.
According to Lloyd’s of London, Insurance companies will be able to fill up the gaps in coverage that occur with the underwriting process, as they’ll be able to manage risks from corporate buyers much better.

Benefits of Smart Contracts

Smart contracts have numerous advantages over traditional contracts in various industries. They are, in theory, more efficient and reliable than traditional contract law, and they are also supposed to provide greater security because all acts are documented and validated. 

As a result, they can be able to save money and time while increasing transparency.

1. High Processing Speed & Efficiency

  • Once a condition is met, the contract is immediately executed.
  • Smart contracts are digital and automated, so they do not require paperwork.
  • It does not take time to correct errors, which are common when completing paperwork by hand.

2. Cost-Effective

Smart contracts can automate cross-organizational business operations. 

This reduces many operational costs and resources, including the staff who monitor the status of a complex process that runs in response to conditions across organizations.

3. Transparency and Trust

As there is no third party, transaction records are transparent among participants. There is no need to worry about changes in the information.

4. Security

  • The encryption mechanism of blockchain makes it difficult to attack.
  • The entire chain of entries before and after each item on a distributed ledger makes it virtually impossible for hackers to change one record on it.

5. Reliability

Smart contracts can also use blockchain ledgers and other distributed ledger technologies to keep a permanent record of all activity linked to the execution of complex procedures. 

It also offers automated transactions, which eliminate the possibility of human error and ensure contract execution accuracy.

Challenges with Smart Contracts

Smart contracts can potentially pose several obstacles, which can limit their widespread adoption.

1. Human Errors

Smart contracts, like paper contracts, are vulnerable to fraud due to human error. Individual coders develop the code for smart contracts.

As a result, a smart contract code has a (high) possibility of having numerous errors. They can be intercepted, delayed, and corrupted. Some errors have proved to be extremely costly.

2. Lack of Engineering Expertise

Smart contracts will require a new kind of encryption and forensics expert to check software code and translate it into human-readable form as they become more common. 

Making flawlessly functional smart contracts necessitates a great deal of engineering knowledge. Experienced coders are also hard to come by and are expensive.

Various legal and regulatory issues are preventing smart contracts from becoming more widely used. Smart contracts do not contain a proper legal status. They are not subject to any official government regulations.

4. Enforceability and Interpretation

If there is a disagreement about whether a smart contract adequately memorialized the parties’ intentions or whether one party has breached the contract, the parties can still go to court or use alternative dispute resolution. 

The enforceability of smart contracts will vary depending on contract law in different regions.

5. Issues of jurisdiction

Smart contracts also present questions of jurisdiction. They don’t live in a single place, but rather exist in several places at the same time.

Existing laws are jurisdiction-based. Differences in laws between countries can be extremely problematic, resulting in inconsistencies in rights and obligations, and a lack of clarity about the repercussions of contract violations.

Platforms Using Smart Contracts

1. Ethereum

Ethereum was the first smart contract platform in the world, and it remains the most popular among developers today.

Ethereum’s smart contract platform offers standardization, security, and support. Deploying smart contracts and Dapps on the platform has proven to be quite simple thanks to elegantly worded regulations, well-defined development criteria, and the platform’s scripting language, Solidity. 

In terms of developer count ( ~ 200,000), Ethereum outperforms all other smart contract platforms, making its development community one of the most vibrant and dynamic.

2. Hyperledger Fabric

Hyperledger Fabric is a permissioned blockchain, which means that participants’ identities are transparent and require authentication. This makes Hyperledger particularly appealing to businesses that deal with sensitive data and must adhere to data protection requirements such as the GDPR.

3. Stellar

Stellar is the only non-Turing complete platform on this list, which means it’s only appropriate for basic smart contract use cases like initial coin offerings (ICOs) or simple escrow contracts.  

In terms of speed, cost-effectiveness, and transaction security, it is one of the greatest platforms for money exchange because of its limited reach. Stellar outperforms any other smart contract platform.

The smart contracts of Stellar function using multi-signature, batching, and time limitations. In a nutshell, Stellar could be the appropriate choice for a corporation looking for a simple but successful smart contract solution.

4. Solana

Top software developers from Intel, Dropbox, and Qualcomm invented Solana in 2017.

Its goal is to address scalability concerns. Solana has achieved a record-breaking transaction throughput of 65,000 transactions per second. 

In other words, rather than being grouped in blocks, each transaction exists within its block and is an input to the next transaction.

It’s possible to see which transactions were the first and last in a given block this way. 

Solana is one of the quickest platforms on the market, which makes it appealing to Dapps that require immediate outputs.

It’s a Wrap!

There is a long way to go before smart contracts are the standard. It will take time to replace over 50 years of complex processes and contracts with standardised, enforceable ones. 

We are heading in the right direction with the increased acceptance of blockchain and Bitcoin.

Parangat is a Blockchain application development business with years of experience. 

If you’re planning to adopt a smart contract in place for your company, reach out to us, and we’ll conduct an audit to help you discover impediments and possibilities for deploying smart contract development services for your company.

4 thoughts on “What are Blockchain-Based Smart Contracts?”

  1. Whether or not you believe in God, this is a “must-read” message!

    Throughout history, we can see how we have been slowly conditioned to come to this point where we are on the verge of a cashless society. Did you know that Jesus foretold of this event almost 2,000 years ago?

    In Revelation 13:16-18, it states,

    “He (the false prophet who deceives many by his miracles–Revelation 19:20) causes all, both small and great, rich and poor, free and slave, to receive a mark on their right hand or on their foreheads, and that no one may buy or sell except one who has the mark or the name of the beast, or the number of his name.

    Here is wisdom. Let him who has understanding calculate the number of the beast, for it is the number of a man: His number is 666.”

    Speaking to the last generation, this could only be speaking of a cashless society. Why? Revelation 13:17 says that we cannot buy or sell unless we receive the mark of the beast. If physical money was still in use, we could buy or sell with one another without receiving the mark. This would contradict scripture that states we need the mark to buy or sell!

    These verses could not be referring to something purely spiritual as scripture references two physical locations (our right hand or forehead) stating the mark will be on one “OR” the other. If this mark was purely spiritual, it would indicate both places, or one–not one OR the other!

    This is where it really starts to come together. It is amazing how accurate the Bible is concerning the implantable RFID microchip. Here are notes from a man named Carl Sanders who worked with a team of engineers to help develop this RFID chip:

    “Carl Sanders sat in seventeen New World Order meetings with heads-of-state officials such as Henry Kissinger and Bob Gates of the C.I.A. to discuss plans on how to bring about this one-world system. The government commissioned Carl Sanders to design a microchip for identifying and controlling the peoples of the world—a microchip that could be inserted under the skin with a hypodermic needle (a quick, convenient method that would be gradually accepted by society).

    Carl Sanders, with a team of engineers behind him, with U.S. grant monies supplied by tax dollars, took on this project and designed a microchip that is powered by a lithium battery, rechargeable through the temperature changes in our skin. Without the knowledge of the Bible (Brother Sanders was not a Christian at the time), these engineers spent one-and-a-half-million dollars doing research on the best and most convenient place to have the microchip inserted.

    Guess what? These researchers found that the forehead and the back of the hand (the two places the Bible says the mark will go) are not just the most convenient places, but are also the only viable places for rapid, consistent temperature changes in the skin to recharge the lithium battery. The microchip is approximately seven millimeters in length, .75 millimeters in diameter, about the size of a grain of rice. It is capable of storing pages upon pages of information about you. All your general history, work history, criminal record, health history, and financial data can be stored on this chip.

    Brother Sanders believes that this microchip, which he regretfully helped design, is the “mark” spoken about in Revelation 13:16–18. The original Greek word for “mark” is “charagma,” which means a “scratch or etching.” It is also interesting to note that the number 666 is actually a word in the original Greek. The word is “chi xi stigma,” with the last part, “stigma,” also meaning “to stick or prick.” Carl believes this is referring to a hypodermic needle when they poke into the skin to inject the microchip.”

    Mr. Sanders asked a doctor what would happen if the lithium contained within the RFID microchip leaked into the body. The doctor replied by saying a terrible sore would appear in that location. This is what the book of Revelation says:

    “And the first (angel) went, and poured out his vial on the earth; and there fell a noisome and grievous sore on the men which had the mark of the beast, and on them which worshipped his image” (Revelation 16:2).

    You can read more about it here–and to also understand the mystery behind the number 666: https://2RUTH.ORG

    The third angel’s warning in Revelation 14:9-11 states,

    “Then a third angel followed them, saying with a loud voice, ‘If anyone worships the beast and his image, and receives his mark on his forehead or on his hand, he himself shall also drink of the wine of the wrath of God, which is poured out full strength into the cup of His indignation. He shall be tormented with fire and brimstone in the presence of the holy angels and in the presence of the Lamb. And the smoke of their torment ascends forever and ever; and they have no rest day or night, who worship the beast and his image, and whoever receives the mark of his name.'”

    Great hope is in our midst, and is coming in a mighty way–the greatest revival for Jesus in the history of the world where we will see the most souls come to Him of all tribes, tongues, nations, and peoples (Rev. 7:9-10); for we have this promise in God’s Word in the midst of these dark times:

    “Then I saw an angel coming down from heaven, having the key to the bottomless pit and a great chain in his hand. He laid hold of the dragon, that serpent of old, who is the Devil and Satan, and bound him for a thousand years (not literal–rather a spiritual label for time spent in eternity); and he cast him into the bottomless pit, and shut him up, and set a seal on him, so that he should deceive the nations no more till the thousand years were finished. But after these things he must be released for a little while (when the Antichrist and false prophet will rise up and God will test the world).” (Revelation 20:1-3)

    “The coming of the lawless one (the Antichrist) is according to the working of Satan, with all power, signs, and lying wonders, and with all unrighteous deception among those who perish, because they did not receive the love of the truth, that they might be saved. And for this reason God will send them strong delusion, that they should believe the lie, that they all may be condemned who did not believe the truth but had pleasure in unrighteousness.” (2 Thessalonians 2:9-12)”

    Who is Barack Obama, and why is he still in the public scene?

    So what’s in the name? The meaning of someone’s name can say a lot about a person. God throughout history has given names to people that have a specific meaning tied to their lives. How about the name Barack Obama? Let us take a look at what may be hiding beneath the surface.

    Jesus states in Luke 10:18, “…I saw Satan fall like lightning from heaven.”

    The Hebrew Strongs word (H1299) for “lightning”: “bârâq” (baw-rawk)

    In Isaiah chapter 14, verse 14, we read about Lucifer (Satan) saying in his heart:

    “I will ascend above the heights of the clouds, I will be like the Most High.”

    In the verses in Isaiah that refer directly to Lucifer, several times it mentions him falling from the heights or the heavens. The Hebrew word for the heights or heavens used here is Hebrew Strongs 1116: “bamah”–Pronounced (bam-maw’)

    In Hebrew, the letter “Waw” or “Vav” is often transliterated as a “U” or “O,” and it is primarily used as a conjunction to join concepts together. So to join in Hebrew poetry the concept of lightning (Baraq) and a high place like heaven or the heights of heaven (Bam-Maw), the letter “U” or “O” would be used. So, Baraq “O” Bam-Maw or Baraq “U” Bam-Maw in Hebrew poetry similar to the style written in Isaiah, would translate literally to “Lightning from the heights.” The word “Satan” in Hebrew is a direct translation, therefore “Satan.”

    When Jesus said to His disciples in Luke 10:18 that He saw Satan fall as lightning from heaven, if this were to be stated by a Jewish Rabbi today influenced by the poetry in the book of Isaiah, he would say these words in Hebrew–the words of Jesus in Luke 10:18 as, and I saw Satan as Baraq O Bam-Maw.

    Malie and Natasha are the names of Obama’s daughters. If we write those names backward (the devil does things backwards) we would get “ailam ahsatan”. Now if we remove the letters that spell “Alah” (the false god of Islam being Allah), we get “I am Satan”. Mere coincidence? I don’t think so!

    Obama’s campaign logo when he ran as President in the year 2008 was a sun over the horizon in the west, with the landscape as the flag of the United States. In the Isalmic religion, they have their own messiah that they are waiting for called the 12th Imam, or the Mahdi (the Antichrist of the Bible), and one prophecy concerning this man’s appearance is the sun rising in the west.

    “Then I saw another angel flying in the midst of heaven, having the everlasting gospel to preach to those who dwell on the earth—to every nation, tribe, tongue, and people— saying with a loud voice, ‘Fear God and give glory to Him, for the hour of His judgment has come; and worship Him who made heaven and earth, the sea and springs of water.'” (Revelation 14:6-7)

    Why have the words of Jesus in His Gospel accounts regarding His death, burial, and resurrection, been translated into over 3,000 languages, and nothing comes close (the Quran about 110 languages)? Because the same Spirit of God (YHVH) who created all people likewise transcends all people; therefore the power of His Word is not limited by people; while all other religions are man-made, therefore they tend to primarily stay within their own culture. The same God who speaks to all people through His creation of the heavens and earth that draws all people around the world likewise has sent His Word to the ends of the earth so that we may come to personally know Him to be saved in spirit and in truth through His Son Jesus Christ.

    Jesus stands alone among the other religions that say to rightly weigh the scales of good and evil and to make sure you have done more good than bad in this life. Is this how we conduct ourselves justly in a court of law? Bearing the image of God, is this how we project this image into reality?

    Our good works cannot save us. If we step before a judge, being guilty of a crime, the judge will not judge us by the good we have done, but rather by the crimes we have committed. If we as fallen humanity, created in God’s image, pose this type of justice, how much more a perfect, righteous, and Holy God?

    God has brought down His moral laws through the 10 commandments given to Moses at Mt. Siani. These laws were not given so we may be justified, but rather that we may see the need for a savior. They are the mirror of God’s character of what He has written in our hearts, with our conscious bearing witness that we know that it is wrong to steal, lie, dishonor our parents, murder, and so forth.

    We can try and follow the moral laws of the 10 commandments, but we will never catch up to them to be justified before a Holy God. That same word of the law given to Moses became flesh about 2,000 years ago in the body of Jesus Christ. He came to be our justification by fulfilling the law, living a sinless perfect life that only God could fulfill.

    The gap between us and the law can never be reconciled by our own merit, but the arm of Jesus is stretched out by the grace and mercy of God. And if we are to grab on, through faith in Him, He will pull us up being the one to justify us. As in the court of law, if someone steps in and pays our fine, even though we are guilty, the judge can do what is legal and just and let us go free. That is what Jesus did almost 2,000 years ago on the cross. It was a legal transaction being fulfilled in the spiritual realm by the shedding of His blood with His last word’s on the cross crying out, “It is finished!” (John 19:30).

    For God takes no pleasure in the death of the wicked (Ezekiel 18:23). This is why in Isaiah chapter 53, where it speaks of the coming Messiah and His soul being a sacrifice for our sins, why it says it pleased God to crush His only begotten Son.

    This is because the wrath that we deserve was justified by being poured out upon His Son. If that wrath was poured out on us, we would all perish to hell forever. God created a way of escape by pouring it out on His Son whose soul could not be left in Hades but was raised and seated at the right hand of God in power.

    So now when we put on the Lord Jesus Christ (Romans 13:14), where God no longer sees the person who deserves His wrath, but rather the glorious image of His perfect Son dwelling in us, justifying us as if we received the wrath we deserve, making a way of escape from the curse of death; now being conformed into the image of the heavenly man walking in a new nature, and no longer in the image of the fallen man Adam.

    Now what we must do is repent and put our trust and faith in the savior, confessing and forsaking our sins, and to receive His Holy Spirit that we may be born again (for Jesus says we must be born again to see and enter the Kingdom of God in John chapter 3). This is not just head knowledge of believing in Jesus, but rather receiving His words, taking them to heart, so that we may truly be transformed into the image of God. Where we no longer live to practice sin, but rather turn from our sins and practice righteousness through faith in Him in obedience to His Word by reading the Bible.

    Our works cannot save us, but they can condemn us; it is not that we earn our way into everlasting life, but that we obey our Lord Jesus Christ:

    Jesus says,

    “Not everyone who says to Me, ‘Lord, Lord,’ shall enter the kingdom of heaven, but he who does the will of My Father in heaven. Many will say to Me in that day, ‘Lord, Lord, have we not prophesied in Your name, cast out demons in Your name, and done many wonders in Your name?’ And then I will declare to them, ‘I never knew you; depart from Me, you who practice lawlessness!’ (Matthew 7:21-23)

    “And having been perfected, He became the author of eternal salvation to all who obey Him.” (Hebrews 5:9)

    “Now I saw a new heaven and a new earth, for the first heaven and the first earth had passed away. Also there was no more sea. Then I, John, saw the holy city, New Jerusalem, coming down out of heaven from God, prepared as a bride adorned for her husband. And I heard a loud voice from heaven saying, ‘Behold, the tabernacle of God is with men, and He will dwell with them, and they shall be His people. God Himself will be with them and be their God. And God will wipe away every tear from their eyes; there shall be no more death, nor sorrow, nor crying. There shall be no more pain, for the former things have passed away.’

    Then He who sat on the throne said, ‘Behold, I make all things new.’ And He said to me, ‘Write, for these words are true and faithful.’

    And He said to me, ‘It is done! I am the Alpha and the Omega, the Beginning and the End. I will give of the fountain of the water of life freely to him who thirsts. He who overcomes shall inherit all things, and I will be his God and he shall be My son. But the cowardly, unbelieving, abominable, murderers, sexually immoral, sorcerers, idolaters, and all liars shall have their part in the lake which burns with fire and brimstone, which is the second death.'” (Revelation 21:1-8)

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