How Smart Contracts Address Issues: 5 Examples of Use Cases

Blockchain technology has brought with it a couple of other useful innovations that now make up quite a share of tech and financial news – cryptocurrencies, initial coin offerings (ICO) and smart contracts. For professionals, these concepts are the routine; for crypto-enthusiasts, they are more or less understandable; however, for many people who have little to do with the blockchain sector, these terms are rather vague and unclear.

Everything seems to suggest that in the future blockchain and related technologies are going to play a significant role in the global economy, and with the speed they are evolving, the future is closer than you might think. So, since all of us are going to have to deal with blockchain sooner or later, we've decided to share some basic thoughts on the crypto-technologies and the way they may be used in everyday life.

What are smart contracts?

In fact, the concept of a 'smart contract' first appeared in 1994 — long before blockchain.  At that point, the term meant the implementation of contract law via electronic protocols with the purpose of enabling relations between parties over the Internet. The invention of blockchain brought the idea of smart contracts to a new level and added some new features, such as the immutability of records.

Smart contracts are pieces of software that control the transfer of certain assets between parties. How do smart contracts work? Smart contracts are based on the programmed conditions that are agreed by the parties. A smart contract is triggered by a specific event and verifies whether the conditions are met. If so, the assets pass between the parties as agreed.

One of the simplest smart contract examples may be a trade between two users who do not even know each other. They agree that the buyer is to transfer the money to the seller by the specified date, and in this case the seller is to give away the goods. The smart contract is triggered by the expiration date, which is when it checks that the money has been received and that the goods have been transferred. If either condition is not met, the smart contract either refunds the money or returns the goods, depending on which party failed the agreement.

Currently, smart contracts are developed on the basis of blockchain technology, with the Ethereum blockchain being the most optimal for smart contract creation.


Advantages of smart contracts

The main advantages of smart contracts originate in the blockchain specifics:

  • Absence of middle-man. Smart contracts are self-executing; that is, they automatically perform the programmed actions once the conditions are satisfied. This, on one hand, reduces the transaction cost and, on the other hand, makes it more secure.
  • Increased security. As they use the blockchain functionality, smart contracts leverage the benefits of the immutable ledger – a system of records where no single record can be altered post factum.
  • Faster transaction processing. This benefit is directly related to the self-executing nature of smart contracts. With the absence of middle-men and no need to manually approve and process the transaction, it can go through much faster, sometimes within minutes.
  • Better trust between parties. Even though the parties to a smart contract may never know each other, trust is established by the immutability of the blockchain ledger.

These advantages have not gone unnoticed, and now quite a number of industries use smart contracts for the functions that have been traditionally executed by other means.

Smart contract uses in various industries

Although blockchain smart contracts in their current implementation are relatively new, there are already quite a number of both existing and potential uses for this technology.

Finance and trading

This is the obvious example of smart contract use that first comes to mind. Smart contracts are the perfect vehicle for money transfer between parties. If you scroll up a bit and reread the list of the smart contract benefits, you will see that they have everything banks have been offering for years, but better. Transactions by smart contracts are secure and transparent, while also fast and very cost-effective.

The automated processes that smart contracts support also reduce the possibility of errors, as the contracts execute in strict accordance with the pre-programmed conditions.

Another finance-related use of smart contracts is the initial coin offering, or ICO. ICO is a new fundraising methodology in which investors support a project with crypto-money in exchange for tokens that can be later traded at the exchange. All ICOs are based on smart contracts regulating the token assignment to the investors according to their contributions.


Property ownership matters

The advantages of smart contracts are especially obvious in real estate ownership matters. When any real property is purchased or otherwise transferred, it always involves a very complicated legal procedure that can take months to complete. Needless to say, all legal services have their cost, thus the final amounts can rise considerably for both parties. If we are talking about cross-border real estate transactions, we are getting into an even more complex rigamarole involving compliance with different laws.

If real estate or other property is purchased on a smart contract, most of these issues are simply irrelevant. First, if the property is recorded in a blockchain register, it becomes very easy to trace its origin and all previous transactions. Remember, the blockchain registers are immutable by nature, thus the information in them is always true. This removes the complicated procedure of due diligence intended to prevent any fraud. The “digital identity” of the property will serve this purpose.

Second, property transactions will be significantly simplified if smart contracts are used. Due to their self-executing nature, smart contracts can verify that both parties have fulfilled their obligations and then release the property and the money. Again, no middle-men are involved, thus no additional costs are necessary.


The healthcare system is based on storing billions of various records. Most of these records are highly sensitive, as they contain either personal health information or research data that is the property of the research facility. Medical institutions spend millions on security measures to protect their records from theft.

Blockchain-based record-keeping solutions provide much more secure storage than traditional ones. With the current level of cyber-attacks, blockchain is much better protected than the usual methods of data storage, both online and offline. Smart contracts can be set to release certain records upon the presentation of a private key that is issued only to specified people. They can also be used to schedule record destruction at a certain point, and the owner can rest assured that the data is erased and can never be accessed again.



If you have ever made an insurance claim, you know how long it takes to process via the usual channels. With hundreds of insurance fraud cases, companies spend time and money carefully examining each claim to verify that the insurance event has actually occurred. Such verification involves tons of manual work that translates into billable hours for insurance company personnel and, consequently, into higher insurance premium costs for clients.

When insurance policies are made on the basis of a smart contract, the amount of manual verification required is sharply reduced. The smart contract can check that the conditions specified in the policy occurred and then it releases the payment to the client. Moreover, the smart contract can store lots of additional data that is required in claim processing – for example, for traffic incidents, data from drivers' licenses, police records, and previous accidents.

Using smart contracts can dramatically reduce the time and cost of claim processing for insurance companies. Both the company and the clients will benefit from such a solution, reducing costs for both sides.

Product development and copyrighted content

Again, we refer to the immutable record ledger that is the prominent feature of blockchain. When a company makes an agreement with an outsourcer to develop a product, this agreement can also take the form of a smart contract. The product development stages are recorded in the ledger, and these records, on one hand, prove product development milestones, and on the other hand, can trigger partial payments, if such a condition was programmed.

A smart contract can also protect the property rights of the developed product by enabling the tracing of its origin and by providing the blockchain security mechanisms. The immutable record of the initial idea can be sufficient proof of ownership, thus, long and expensive lawsuits will not be necessary.

The same concept can be also applied to any content that is protected by copyright. The blockchain stores the ownership rights, and any transfer will be also clearly and transparently recorded. Moreover, as blockchain requires consensus to approve a transaction, the copyright transfer will be done with a high degree of trust. Of course, things like royalty payments can also be triggered by smart contracts automatically.

What's in the future?

We said at the beginning that the future is closer than you think. Indeed, the advantages of smart contracts in blockchain are too obvious to be ignored. Their potential for cost-saving, automation and acceleration are recognized by an increasing number of industries worldwide. We have already admired the first-ever case of real estate sale on a smart contract – the sale of an apartment in Kyiv on an Ethereum smart contract. We are sure to see more cases quite soon.

Many countries are now working on adapting their laws to blockchain procedures, in order to bring crypto-transactions into the legal field. However, the development of blockchain technology and smart contracts is not going to wait for all legal issues to be cleared, and we can expect more interesting applications and integrations that may change our lives.
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