Understanding Smart contracts
Have you ever imagined a digital vending machine for all your agreements , imagine you and the other person putting all your terms and condition in an online machine and that giving you result in form of a contract , this is what we call smart contract . In smart contract, every process is automated and there is no middle man (lawyer) involved.
In essence, Smart Contracts can be defined as digital agreements that are stored and signed on Blockchain network. These smart contracts are self-executing codes in blockchain that gets activated as soon as the predetermined terms and condition of the contract are met. These T&C are written in specific bockchain programing language solidity.
Smart contracts were introduced In year 1994 by Nick Szabo an American computer science scientist and inventor of that times virtual currency ‘Bitgold ’in 1998 and described them as mechanism of digital transaction
Further in the year 2008, Satoshi Nakamoto introduced the revolutionary blockchain technology in a whitepaper. Five years later, the Ethereum blockchain platform made the practical use of smart contracts possible.
Importance of smart contracts
With the day-to-day advancement in technology, smart contracts have a wide range of applications. They can be used for a variety of purposes, such as selling products online where the items are sent automatically once the payment is done. From renting an apartment to buying a car everything can be streamlined with smart contracts. Even voting in elections can be made more secure and tamper-proof with the help of smart contracts.
They can and are also been used in media sector for royalty payments, In Decentralized finance (DeFi) apps, In of non-fungible tokens (NFTs) , In electoral polls by ensuring secure and transparent voting processes. It can also be used in healthcare sector and even in some of the application of civil law.
How are smart contracts created
The process of creating and using smart contracts is quite straightforward. Firstly, the involved patries agree on the details (terms and condition) of their agreement, outlining what will happen under specific conditions, then a computer program is written based on that agreement. This program is then uploaded to the blockchain system. The program waits for a trigger i.e. a specific action to happen, like a payment being received. Once that trigger occurs, the program automatically does what it's supposed to, like sending a product or unlocking a door.
While talking about the step by step creation then Smart contracts follow a structured process from agreement to execution. Initially, parties agree on specific terms and conditions, followed by the development of smart contracts either independently or with the assistance of a provider. Once developed, they are deployed onto the blockchain, where they become immutable.
During deployment, the contract's security is crucially verified. Subsequently, the smart contract continuously monitors the blockchain or other reliable sources for predetermined conditions or triggers, such as reaching a specific date or receiving a payment. When these conditions are met, the contract is automatically activated, executing predefined actions like transferring funds or recording ownership. The results of the execution are promptly recorded on the blockchain, ensuring transparency and accessibility of the agreement at all times.
What makes smart contracts so unique ?
Smart contracts stand out from traditional agreements due to several key characteristics. First, they are immutable, meaning their code cannot be altered once deployed on a blockchain, guaranteeing the integrity of the terms. Furthermore, they leverage the decentralized nature of blockchains, removing the need for a central authority and reducing costs and potential bias. Additionally, smart contracts operate autonomously, executing pre-defined actions automatically upon meeting specific conditions, streamlining processes.
Public blockchains also offer transparency, allowing anyone to view the code and execution history, fostering trust and reducing errors. Finally, strong cryptography secures smart contracts from hacking and unauthorized access. In essence, these features combine to create a secure, transparent, and efficient method for automating agreements and workflows.
Advantages of using smart contracts over traditional contracts
Smart contracts offer numerous advantages compared to conventional agreements. They streamline processes, eliminating the need for intermediaries like lawyers, which not only speeds up transactions but also reduces associated costs. Automation reduces the risk of errors, ensuring greater accuracy and efficiency.
Additionally, smart contracts provide enhanced security and transparency, as all parties involved can clearly see the terms of the agreement. Moreover, they facilitate consistent data access, streamline operations, prevent errors, and enable trustless transactions on decentralized networks, adhering to stringent security standards for fairness and transparency.
Conclusion
While we conclude , we can say that In essence, smart contracts are reshaping agreements for the digital age. Their automation, transparency, and security offer a compelling alternative to traditional contracts . They eliminate middlemen, streamline processes, and reduce errors.
Built on blockchain technology, smart contracts provide tamper-proof storage and self-execution based on predetermined conditions . Leveraging blockchain technology, smart contracts empower trustless interactions, eliminate intermediaries, and streamline processes. from online sales to voting systems, smart contracts hold immense potential to reshape various sectors by fostering trust and streamlining transactions.
