Documents on blockchain: what are smart contracts and how are they used?

Documents on blockchain: what are smart contracts and how are they used?

Today, smart contracts are used in various industries: they replace traditional paper documents and help to make transactions without intermediaries. We offer to understand what smart contracts are and what benefits business gets from their implementation.

What are smart contracts?

A smart contract is an electronic algorithm on blockchain that is stored in a distributed ledger. It describes the terms and conditions of the transaction, after fulfilling of which a certain action takes place (often it is the translation of cryptocurrency).

Smart contracts contain information about the parties' obligations and penalties for violation of the terms and condition of the contract. However, unlike traditional documents, they are performed automatically, if all the terms of the contract are fulfilled.

Advantages of smart contracts

The use of smart contracts simplifies work in various industries and improves the conclusion of transactions. Here are just some of the advantages that smart contracts offer to business.

Absence of intermediaries

Since smart contracts are concluded on blockchain, there is no need for third parties. This ensures complete autonomy, and also allows you to accelerate the signing of contracts.


When documents are signed in the traditional way, it is necessary to use legal and banking services. However, smart contracts are concluded without intermediaries, which allows you to reduce the cost of paying for third-party services.


Records about transactions and payments made cannot be faked, since they are stored in a distributed ledger. Thanks to this technology, all records are easy to be verified. So that, participants are insured against fraud and will for sure receive payment.


Records in smart contracts are reliable: a document cannot be falsified, since it works on blockchain. Moreover, the terms and conditions of a digital document cannot be interpreted ambiguously, since they are written in a programming language. It means that the contract will be executed only if the specific conditions are strictly met.

BBC Moscow: Documents on blockchain: what are smart contracts and how are they used? 1

Where smart contracts are used: examples of introduction

Smart contracts can be used in various fields to ensure security and reliability of transactions.

Banking sector

Banks are one of the first organizations to start smart contracts introduction. Such contracts can be used in the financial sector for simple transactions: transfer of money from one person to another. Digital contracts will also help to make more complex agreement, for example, mortgage loans.


In the sphere of insurance smart contracts can be used to make insurance payments: the blockchain technology allows you to make transactions quickly.

In addition, smart contracts define clear payment parameters. Thus, customers can be sure that the terms of the contract will be met.

Public sector

In the state environment, digital contracts will allow paying state duties, fees or fines.

One of the main applications of smart contracts in the public sector is voting. Thus, there is no chance for external interference and election results falsification.

For example, in Russia, the system of smart contracts is used for voting on the Active citizen platform used to resolve development issues of Moscow. The project is implemented on the Ethereum platform and allows carrying out open voting.

Real estate

Smart contracts can be used to conclude transactions for the purchase and sale of real estate.

The terms of the contract will provide that the payment will be made to the account of the seller only after the right of ownership for the apartment will be transferred to the buyer and a record to the state register of real estate will be made. Such a system will help to avoid fraud and protect buyers.

Smart contracts are a safe and convenient system for making deals. They replace the traditional forms of contracts, providing faster paying for services without intermediaries.

Smart contracts and the blockchain technology will be discussed at Blockchain Conference Moscow.

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