Learn How Smart Contracts in Blockchain Redefine Value Exchange

Like the way the Internet changed the way we connect and share information, Blockchain is transforming how the value is exchanged, and trust is built up. This is being done through Smart Contracts by exchanging value as easy as information on the underlying decentralized and secure ledger technology of blockchain.





What is Smart Contract?

Smart Contracts are nothing but self-executing code on a blockchain that automatically implements the terms of an agreement between parties, which, in turn, helps in streamlining processes that are currently spread across multiple databases and ERP systems.

They are lines of software programs, not contracts in the legal sense, that extend blockchains’ utility from only keeping a record of financial transaction entries to automatically implementing terms of multiparty agreements. This is done through Consensus protocols, which lets the users agree upon the underlined lines of actions based upon an event. Following are the few benefits from Smart contract:



  • Speed: Since Smart contracts automate manual tasks, they increase the pace of performing various business processes.


  • Accuracy: Along with helping in the automation of manual processes, they also help in the reduction of errors.


  • Lower Execution risk: Decentralized and immutable processes eliminate the risk of manipulation, and the risk of wrongful execution is too removed.


  • Lower cost: Lesser human intervention fewer intermediaries lead to reduced cost of contract execution as compared to the usual business processes.


  • New business models: New ways of transactions and contract execution helps in the development of new kinds of business models ranging from reliable peer to peer sharing to trading in a secured environment.


  • Getting away with intermediaries: Smart contracts leads to elimination or reduction of the third-party intermediaries and provides the alternate technological trust factor.


How Does it Redefine Value Exchange?

All these abovementioned benefits lead to the implementation of Smart contracts in many different applications ranging from validating loan eligibility to executing trade agreements and transfer agreements. All these kinds of smart contracts were impossible earlier due to the maintenance of separate databases. All the involved parties are, now, able to validate the outcomes in real-time without the interruption of any third party.

The Smart contracts make the most sense in the cases where frequent transactions are occurring among a network of participants, and the counterparties perform manual or duplicative processes or tasks for each transaction. In concise terms, Smart contracts automate the exchange of values among parties without the need of middleman and human intervention in case of any agreement.


In traditional contracts and agreements, there was massive dependence on agents to fulfil the paperwork and other legal formalities. Agents and other go-betweens were the key trust factors for transferring the money or any other assets which had value. But, now, with the help of blockchain, Smart contracts replace the agents and agreements called Smart Contracts are coded into the system to automatically execute the actions based on the predetermined set of negotiations between the parties. The trust is built up due to secured blockchain technology. The cost involved in the flow of the value is reduced drastically, along with the speeding up of the execution of the agreement. Also, when the ‘value’ is transferred on the distributed ledger technology of the blockchain, new chains of data called blockchain are created and stored permanently without the risk of manipulation.

With their applications covering sectors, such as healthcare, Fintech, real estate, and even government, smart contracts are created to assist various purposes that include

  • identity verification
  • supply chain management
  • insurance services
  • bank credits and loans, and many others.

Some of the example that show the value exchanges due to Smart contracts are given below:

  • Freelance Work Exchanges

Many freelancers are helpless on projects when their client decides to add scope or delays payment for some unclear reason. On the other hand, companies that hire freelancers can feel duped if they discover that someone’s work experience is faked, and they can’t complete the job which they are hired for.

Smart contracts support a more honest and transparent working relationship, leading to a healthier experience for both freelancers and clients.

Project scope, deadlines, and payment terms are coded into the terms of the contract. Payments are held in escrow in a smart contract at the start of an assignment, to be released on successful completion of milestones of work. This helps freelancers preventing the scope creeps, ensuring that any new job does not hold up payments, and enabling them to get paid pretty for additional work.


  • Digital Rights and Intellectual Property

Smart contracts act as a platform for the creators of intellectual property to receive value for their work. Copyright and creator/owner attribution are coded into the terms of smart contracts, providing a traceable history of used IPs. Content owners, creators, and, most beneficially, artists are paid in a near-instantaneous manner whenever someone uses their licensed work.

Games: CryptoKitties is one of the first blockchain games in the world, built on the Ethereum protocol. CryptoKitties are collectibles tokens. Each CryptoKitty has unique attributes and is bought or sold with Ether, exchanged peer-to-peer, and bred to generate new kittens with some of their parents’ characteristics. These digital kittens are an entertaining and easy way to bring the concepts of blockchain and digital scarcity to a broader audience beyond the early adopters of cryptocurrency.


Music: Music is published as tokens on a blockchain and that allows musicians to retain ownership of their Intellectual Property, and helps them get paid.


A smart contract is not something like Artificial Intelligence, but, in its essence, it is just a set of codes created through the solidity programming language, which works on an IF/THEN principle. But what it carries within is the ability to automate a set of actions involving the flow of value (value, in this case, is ambiguous, but can mostly be identified as monetary) from one party/individual to another.

Related Posts

Join 30000+ Certified Professionals & Get Ahead In Your Career!

Invest In Your Learning Today!

Blockchain Council Certified Professional
Copyright © Blockchain Council | All rights reserved

Subscribe to Our Newsletter

To receive Offers & Newsletters

    Invest in your Learning! Check
    Certifications Tailored Just for you

    50,000+ Professionals certified so far by Blockchain Council



    expires in


    Sitewide offers do not apply to ChatGPT certification, certification bundles, learning paths, and corporate memberships.