What Is A Smart Contract in Blockchain?
Smart contracts are computer programs used to enable the verification or enforcement of the negotiation of contracts digitally. A smart contract actually allows for the exchange of money, property, or things of significant value in a transparent and trust freeway at the same time removing the need for a middleman.
Smart contracts are basically computer application that works on a blockchain network; they are programmed to be self-executing after they have been signed. Smart contracts can be used for a lot of deals, as well as being used to build different decentralized exchanges, multiple games, and lots more. Smart contracts have begun to rattle the legal wold as well as financial worlds.
A smart contract is like one of the most important and useful tools connected to the blockchain. And, it can also enable the transfer of everything from bitcoin and fiat currency to goods transported around the world. Here’s what they do and why they’re likely to gain traction.
Features & Benefits of Smart Contracts in the Blockchain?
Trust: No one can steal your documents because they are encrypted and stored on a secure ledger. And you do not have to trust the person you are trying to have a business transaction with before going into business with them.
Autonomy: Smart contracts remove the need for a third party, thereby giving you control of the agreement.
Safety: Smart contracts are difficult to hack and are protected with complex cryptography.
Efficiency: You get to save a lot of time that would have been otherwise wasted on heaps of paper documents
Who Created Smart Contracts?
Smart contract was first described by a computer scientist named Nick Szabo in 1996. However, smart contracts was first implemented in 2009 with Bitcoin; which is the first cryptocurrency created by Satoshi Nakamoto.
Pros and Cons of Smart Contracts
- Economy and speed: Every piece of a smart contacts is automated and coded with eliminated facilitators.
- Standardization: You can use from a wide range of smart contracts available, one that best suits your needs.
- Security: There is no loss or change to smart contracts without one’s permission.
- Uncertain legal status: As at present, there is no government regulating smart contracts. We can expect some legislation in the new future. Definitely expect some changes to be made to the way smart contracts function.
- Cost of implementation: Smart contracts are computer programs created with codes. As a result, it is essential to employ the skills of a coder to make fail-proof smart contracts.
- Relatively young: Smart contact is still relatively young, and this might make it prone to problems.
How Smart Contract Works
All the rules and penalties of a contract are predefined by the smart contract, and it is also enforced by it. Therefore, the owner of the smart contract needs inject a required amount of cryptocurrency into the smart contract for it to function as designed. The smart contract will then check if all predetermine rules are met and sales may therefore occur or not.
A smart contract is 100% independent of human function. It is designed to work on its own. In addition, smart contracts can be designed to work with unlimited number of other smart contracts making them dependent on one another. There are three integral parts of every smart contract, which are the signatories (parties using the smart contract), subject of the agreement, and specific terms of the agreement.
Smart contracts operate in different environments where the use of public-key cryptography is supported and also require the use of an open and decentralized database.
Imagine you need to sell something on the internet, and you do not want to incur the charges of having a facilitator to ensure that the sale goes smoothly; then using a smart contract is the way to go.