What are smart contracts – Introduction
Smart contracts are considered as a new way to make transactions. They use the same technology that created the cryptocurrencies. They don’t need third parties to run and they can be used in different situations.
In this article, we’ll introduce you to the best information about it. Therefore, we’re going to explain to you how smart contracts work, on which platforms they can be developed and what are their advantages.
Let’s dive in!
Smart contracts definition
Smart contracts are digital contracts that run automatically, they don’t need third parties to make terms worth it. This technology is created by developers using coding languages.
Thus, smart contracts work as a software that runs predetermined processes for those who are involved in any transaction. This includes penalties for non-compliance of terms and rights and duties of anyone.
It’s important to highlight that smart contracts are present only in cyberspace, but they are worth as a physical contract. Depending on the smart contract purpose, it will be necessary to have a lawyer who will prepare it, and after that, the smart contract developer will code it.
How did smart contracts start?
Nick Szabo, an American computer scientist and cryptographer was the first to introduce Smart contracts – back in the 1990s. His idea was to create a breakthrough process involving e-commerce between people using the internet.
However, in the 1990s the internet tech wasn’t good enough to put smart contract tech into practice. Only when Bitcoin and blockchain technology emerged smart contracts got their place in the sun.
This article might interest you:
Major Advantages
Major smart contracts advantage is to make transactions more secure between strangers. Moreover, smart contract architecture is decentralized, in other words, they’re not backed by any financial institute nor private entities, and advantages don’t end there.
Actually, automation of rules and terms of smart contracts makes the processes easier and faster, besides it avoids the pitfalls and changes in the future.
Here, are the other smart contracts advantages:
- Greater accuracy to record all terms and conditions in explicit detail;
- Greater efficiency in compliance with requirements, once all operation is automated, with no bureaucracy;
- Low cost, once it removes the need for vast reams of paper.
It should be remembered that when you get a smart contract, both parties are able to know what’s happening at the moment. After all, it’s allowed to create a reminder for payday, run requirements or end up with a smart contract.
Technology behind a smart contracts
Smart contracts use Blockchain tech to work. In this case, data is stored using a decentralized computer network (there aren’t any fixed servers) made by users who access the system.
Smart contracts codes are recorded in the blocks that form the Blockchain tech. That’s why data couldn’t be modified in the future, avoiding scam.
In other words, the smart contract becomes stable once it’s released in cyberspace by its developer. Thus, if any party would like to change any information on it, it’ll be necessary to create another smart contract.
Network users are responsible for checking the automated operations that run the requirements of an agreement. If the transaction is approved by more than 50% of computers, it means that the transaction is valid and the self-executing process moves forward.
For more information about blockchain technology, check these out:
Platforms used for developing smart contracts
Smart contracts need to be launched within blockchain platforms. Ethereum network is one of these platforms. It has a large number of resources available to developers.
Nonetheless, there are other options in the market, for instance:
- Cardano;
- Polkadot;
- Solana;
- NXT;
- Bitcoin (BTC).
Regarding the process of encoding, NXT and BTC networks are limited. In the NXT network it’s impossible to create your smart contract from the beginning, besides you have to use some template available on the platform. On the other hand, the BTC network has a limited capacity of processing smart contracts, because its system focuses on financial transactions.
What are smart contracts used for?
Smart contracts can be used for almost any type of transaction that would be made in a traditional contract. For instance, rental and selling real estate, insurance documentation and copyright registration.
It’s also possible to use smart contracts to purchase online, close a deal with providers and so on.
Conclusion
Smart contracts are a breakthrough technology, because they have several possibilities of using and they’re a safe and convenient technology. After all, who would like to demand the other when a contract is breached? Or take legal action to stick to the deal?
Smart contracts save time and money and make people’s lives easier through efficient transactions. They’re safe and private.
Did you like this article? Check out ECC Project blog for more information about crypto and this universe!
