The brainchild of cryptographer and computer scientist Nick Szabo, Smart Contracts were originally brought to life around 25 years ago, in 1993 or 1994.
In his original famous example where he compared a Smart Contract to a digital vending machine, Szabo described how users could input data or value and receive a finite item from a machine–in this case, a real-world snack or a soft drink.
A Smart Contract takes the place of human interaction via artificial intelligence. Computers and computer code can now facilitate what previously took hours of expensive labor-intensive time by lawyers, paralegals, business specialists and others to do manually. This is especially valuable in the area of healthcare, where so many facets of record-keeping, billing, medical procedures, operations, telemedicine, pharmaceutical, patient rights, litigation and other legal matters, and so many day-to-day functions require contractual agreements. The Smart Contract can now speed up the process and for much less cost.
Below we will explain more specifically what a Smart Contract is, what it actually does, how it works and areas it has been implemented.
How Do Smart Contracts Work?
Please don’t let the technical aspects of this new way of doing things scare you. In fact, the Smart Contract actually simplifies matters in that it takes away the large amount of time and expense of interpretation and manually implementing responses and implementing actions. Written into the source code, these facets are all done seamlessly and automatically. What used to cause delay and bogged-down activity can now perform fluidly throughout the day.
Smart Contracts will now allow many aspects of healthcare and other industries to work behind the scenes without the need for human interaction and doing away with much human error. As long as the necessary terms for the contractual agreement are properly input into the computer code–including all remedies for non-compliance–then Smart Contracts will pretty much operate on auto-pilot.
Now let’s talk more about Smart Contracts themselves…
A Smart Contract is written in computer code and operates on a blockchain network or distributed ledger. The Smart Contract’s computer-based protocol is intended to digitally facilitate, contribute, verify, implement or enforce the negotiation or performance of a contract. Smart Contracts allow the performance of credible transactions without the need for an intermediary or third party. These transactions are both trackable and irreversible. Smart Contracts contain all of the information of the contracts’ terms and all actions of the contract are executed automatically. Smart Contracts have the ability to self-verify the conditions set forth in the contracts by using the data that they are given as well as self-executing the release of payment once the contract has been completed.
These contracts run on node networks that can control the contract’s participants to ensure that the contract will indeed be executed once it is written, thus making the creator of the contract free of worry if their contract will be executed as they want it to be or not.
Since the contract is written in logical computer code, there aren’t any subjective interpretations and fulfilling the contract triggers the contract’s payment. Likewise, if the Smart Contract’s contractual conditions are not met, payments may be withheld, as long as it’s been written into the contract.
There is much application for Smart Contracts’ use in many industries today, especially the healthcare industry. Where previously the time-consuming, tedious task of medical, insurance, billing, litigation and other healthcare-related contracts took hours of human power with attorneys, paralegals and such, now these same contractual needs can be written and executed by computers operating on the blockchain. This will save much in both cost and time.