Meaning
Self performing protocol that automatically triggers contractual actions when predefined conditions are met within a digital ledger. The process of smart contract execution removes the need for intermediaries to verify and enforce the terms of an agreement. This automation applies to payments, inventory transfers and insurance claims where the logic of the contract can be expressed in computer code.
Digital Input
External sensors or verified databases provide the signals that start the automated process. When smart contract execution occurs, the system checks if the conditions, such as the arrival of a shipment at a GPS coordinate, have been satisfied. Once the criteria are met, the code executes the corresponding action without the possibility of human interference or delay.
Settlement Speed
Payments move from the buyer to the seller as soon as the work is verified by the network. Utilizing smart contract execution reduces the administrative cost of processing invoices and chasing late payments. This speed of settlement improves the cash flow for the service provider and reduces the credit risk for the entire network.
Execution Certainty
Terms are followed exactly as they were written because the human element is removed from enforcement. Trust in smart contract execution comes from the fact that the results are predictable and the record of the transaction is permanent. This certainty allows companies to engage in complex trades with new partners.
