The continuous advancement of the crypto realm paved the way for innovative technologies people have never seen before. This does not only include the unique cryptocurrencies but also the groundbreaking blockchain technology.
Interestingly enough, there is another intriguing feature found on the blockchain called smart contracts that are attracting the attention of various industries even outside the crypto market. Uncover what these self-executing agreements are and how they work by reading through the details at Cryptoshimbun:
What are smart contracts?
A smart contract is a self-executing agreement that drafts up the terms and conditions in a transaction between two parties in the lines of code. Nick Szabo, an American computer scientist, defined it as a computerized transaction protocol that executes the terms of a contract. He released a paper about this in 1994 where his goal was to improve the functionality of electronic transactions such as the POS (point of sale) to the digital realm.
A brief history of smart contracts
Nick Szabo, a legal scholar and known cryptographer who established the foundation for digital currency first introduced the idea of smart contracts in 1994. However, this did not gain the attention of many people because of the lack of digital platforms and a strong distributed ledger technology during this time. As a result, it was not fully utilized until 2008.
When the mysterious figure Satoshi Nakamoto created Bitcoin (BTC) and the revolutionary blockchain technology in 2008, it sparked a change in the digital finance field and opened the doors for many possibilities. The improvement of the blockchain and the popularity of cryptocurrencies like BTC paved the way for the idea of smart contracts to prosper.
As a result, it is now used across various platforms such as Ethereum, Hyperledger and Corda. Apart from that, it is currently applied in different ways such as in cryptocurrency transactions and other business-related matters.
How smart contracts work in the blockchain
All smart contracts consist of ‘if/when and then’ statements that are drafted into code on a blockchain. Within the said agreement, there will be different terms stated which are all necessary to satisfy both parties so that the transaction will be completed properly. To establish these conditions, both sides must first choose how they want their data to be shown on the blockchain.
Additionally, they have to agree on ‘if/when and then’ clauses that will serve as the main basis for the entire process. This also includes putting down all the possible exceptions in their case along with defining a certain framework in the off chance that a dispute may happen. Afterwards, the smart contract is made by the developer.
Once the terms and conditions of the transaction are met and verified, a network of computers then executes all the necessary actions. This can be different things like releasing the funds to designated participants, sending notifications and registering a vehicle among others.
Be informed that when the transactions are complete and added to the blockchain, they can no longer be changed and only the allowed parties can see all the details and results about it.
Benefits of using smart contracts
Using smart contracts comes with the following benefits:
It’s fast and efficient
Since smart contracts are digital and automated, it immediately executes the agreement after all the conditions are met. Unlike other kinds of transactions, utilizing a smart contract takes the least amount of time because it doesn’t have any paperwork to accomplish nor require long hours of checking any errors. That’s why it’s a suitable choice for those who want a quick yet highly efficient transaction process.
It’s transparent
All the important records of a certain transaction using smart contracts are shared among the participants. It leaves no room for doubt if any of the parties have changed anything about the agreement for their personal benefit.
It’s highly secured
Blockchain transactions including those that utilise smart contracts are encrypted, meaning no one can view the data when processed. This makes it difficult to hack and tamper with so you can be assured of its high level of security. Additionally, every single published record on the blockchain is already immutable once the transaction is complete.
It removes the need for intermediaries
Compared to its traditional counterpart, a smart contract removes the need for intermediaries when handling transactions. It then decreases the delay, lessens the cost and boosts the productivity of business processes.
Where can smart contracts be used?
Thanks to smart contracts, all kinds of transactions can now become easier and more convenient to process. This makes the process more efficient and fast-paced without any time to waste. Explore the different applications of smart contracts here:
Cryptocurrency transactions
Whenever you are buying or selling cryptocurrencies, you can easily complete your transaction using smart contracts. This is a feature usually found in the Ethereum blockchain that makes it easier for its users to transact with different people online, regardless of their location.
Transporting medications
Utilizing smart contracts allow large industries like the medical field to boost the supply chain transparency. This entails that the transporting of medications are thoroughly checked in the system and can easily be verified whenever they want across different parties.
An example of this is the Pharma Portal which is a blockchain-based platform that keeps track of the different temperature-controlled pharmaceuticals s powered by the IBM Blockchain Transparent Supply.
Improving the trust between retailers and suppliers
Since smart contracts are transparent, they can be used by both retailers and suppliers. It’s a modern means for both sides to quickly solve any disagreements in real-time and improve the visibility of everything happening in the supply chain. In turn, their business relationship will improve and their productivity levels will greatly increase.
International trades
One of the best features about using smart contracts is that they are fully digital so it’s easier for cross border transactions when you buy or sell things online. It also uses a standard set of rules that makes your trading experience easier to understand and faster to complete. Apart from that, it’s a safer method compared to other options.
Use smart contracts wisely!
The various perks that come with smart contracts such as dependable security and efficiency serve as proof of their amazing potential. This is not only an innovative idea today but will also greatly benefit you in the long run. Utilize them now in every transaction especially the most important ones for a quicker and hassle-free experience.