The financial services sector has been slow to adopt when it comes to smart contracts. This may be partly because the technology is still relatively new, and there are still many questions regarding its potential impact. However, a growing number of companies are taking advantage of smart contracts, and they are finding that they can add value to their businesses.
What Are Smart Contracts?
Smart contracts are described as self-executing contracts in which an agreement among two or more parties is directly written into lines of code. The code and the deals contained therein exist across a distributed, decentralized blockchain network. Once all parties agree to the terms, the smart contract will execute automatically without any third-party verification or interference.
Smart contracts are not just limited to financial transactions; they can also be used for real estate sales, insurance claims and even legal agreements. There are many different types of smart contracts; however, they all share one common trait: they allow users to exchange money, property or anything else of value without relying on an intermediary such as a bank or government agency.
Smart contracts can change a lot about how financial services are conducted. They make it possible for financial transactions to be legally-binding and utterly free from risk, so long as you trust the central bank’s reputation you are using. It is still too early to say exactly what kinds of applications smart contracts will have in the coming years; however, we believe there is good reason to think that they will become a mainstay of global finance in time.
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