The Smart Contracts: A Digital Agreement Yielding Protocols For Networking Businesses

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The Smart Contracts: A Digital Agreement Yielding Protocols For Networking  Businesses



With the help of Smart Contracts, we have built a system that won’t require any third-party interference, and it executes automatically and securely in a pre-determined way.

Back in the year 1994, a multi-professional named Nick Szabo planned to use an open distributed ledger to store contracts. Those plans were not executed until 2015 when we got introduced to Ethereum. A Blockchain is an immutable distributed ledger which means once you put information in a blockchain, it remains intact. It is a network of computers that will decide whether to change the information in it. This whole technology works on cryptologic algorithms and calculations of transferring data.

See Also: https://furkhan-aryans.blogspot.com/2020/12/block-chain-technology-peer-to-peer-non.html

The Blockchain when used along with any technological platforms like Bitcoin, or Ethereum, can produce decentralized applications (dApps). The core of these dApps is referred to as Smart Contract. These contracts are predicted to revolutionize many sectors and make transactional protocols more transparent, and easier. Smart Contracts are encouraged in order to eliminate all the malpractices in money transactions. They include certain pre-determined Terms and Conditions in the contract with no dependency on the manual process. The transactions done through smart contracts take only a few seconds to execute after we meet the initial criteria, otherwise, that would have taken a couple of days (excluding Sunday) to proceed if done through a traditional transactional process. The traditional transactions also carry a pair of risks along with them such as Arbitration and Enforcements, both enough to make the procedure more expensive.

A Smart Contract is a small computer program stored in a Blockchain. It comprises sets of codes that signify the business policies. Smart Contracts serve three major functions,

1.     Storing the Rules and Policies

2.     Verification of Rules

3.     Execution of Rules

The contracts are programmed to hold all the received funds until they achieve a specific goal. When the goal is achieved, the sponsors of the project will transfer money to the Smart Contract. Once the project is completed successfully, the smart contract will transfer money to its creators. And if the project doesn’t meet the required goals, then the smart contract will revert the amount back to the sponsors. Since we store these contracts with a Blockchain, everything is equally distributed and the data is not visible to anyone as they encrypt it.

Examples of smart contracts vary from a simple vending machine to the fund-raising platform Kickstarter. Regular users are the Banks that use these contracts to access loans and online transactions, Postal services use it for their payments after delivering the courier, and the Insurance companies use smart contracts for processing claims.

Ethereum is a Blockchain where you can write programming codes and it is specifically designed to support smart contracts. We can program this contract in a programming language known as Solidity, which was created especially for Ethereum and has a similar syntax as that of JavaScript. It represents the contract in the code format. Bitcoin also supports smart contracts, but in a limited way as compared to Ethereum. Smart Contracts have a growing number of use cases ranging from Decentralized Finance (DEFI) to Supply chain and crowd-funding. The contracts are the basic building blocks of decentralized applications. Several new emerging industries are relying heavily on Smart Contracts.

 

 

At last, let's take a look at the Pros and Cons of Smart Contracts,

Pros:

-        Open Source

-        Completely Automated

-        Pre-determined results

-        Faster transactions

-        No involvement of intermediaries

-        Transparent

-        Secure

Cons:

-        Variations in Protocols, Terms, and Conditions

-        Taxes are not fixed

-        Bugs

 

Along with an unclear future for various industries ahead, Smart Contracts seem to have cemented their identity among all and will dominate multiple sectors in the coming years.

 

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