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HOKIE: About smart contracts in blockchain

Smart contracts are automatically executedwithout explanation, based on predetermined conditions set out in the contract.Because blockchain is a dist

Smart contracts are automatically executedwithout explanation, based on predetermined conditions set out in the contract.BeC.USe blockchain is a distributed ledger technology (DLT) that allows data tobe globally stored on different servers, it relies heavily on theserepositories to confirm transactions. So smart contracts are calling for theelimination of administrative overhead.

Smart contracts represent terms andconditions written in code that automatically transfer funds from one party tothe other once the predefined requirements of the contract are met. Forexample, when two parties agree to exchange cryptocurrencies, the transactionwill be carried out with a blockchain ledger via a protocol tied to a smartcontract.

Today, smart contracts are still popular inthe crypto industry, mainly used to exchange cryptocurrencies. But it's notlimited to cryptocurrencies; in fact, many insurance companies and real estatecompanies are adopting this standard protocol for better scalability at a lowerprice. In short, smart contracts are an important part of many platforms.That's why it's crucial to have a clear understanding of what smart contractsare about and how they work.

What is the purpose of smart contracts inblockchain?

Since smart contracts are programs that runon the blockchain, users need to send transactions to the blockchain to startthe program. Once the code has been defined and the logic locked, only theprogram can be run.

In general, the main purpose of smartcontracts is to simplify business transactions between parties by removing theintermediaries involved in traditional business processes. These contracts aredesigned to reduce payment delays, risk of error, and the complexity oftraditional contracts without compromising authenticity and credibility.

Its main unique advantage is that it allowstrusted transactions to take place without intermediaries.

How smart contracts work in blockchain?

Smart contracts are computer algorithmsdesigned to form, control and provide information about asset owners. It isindeed a program that runs on the Ethereum blockchain to automaticallyfacilitate, verify or execute trusted transactions. To understand how it works,we must first understand what constitutes an intelligent contract.

• signature. Two or more parties must agreeto advance the proposed terms and conditions.

• Critically determine the object of thecontract. The topic should be in the context of an intelligent contractenvironment.

• Please specify the terms. These termsneed to be precise and detailed. For example, Ethereum's smart contracts relyon Solidity and Serpent programming languages, so agreements should becompatible with precise language in specific mathematical terms.

After setting these requirements, you canenter a blockchain-based smart contract. However, the agreement needs to benegotiated before the terms can be implemented in the blockchain.

HOKIE: About smart contracts in blockchain


Typically, smart contracts automaticallytrIGGer actions based on the protocol between two consumers maintained on theblockchain. This means that when the seller intends to sell the BTC, the smartcontract transfers the management until the BTC is successfully transferredfrom one person to another. When that happens, the money will be released andnothing will change. All transaction information will be listed and stored in apublic database.

Who created smart contracts?

The concept of intelligent contract wasfirst put forward by the famous American cryptographer Nick Szabo. In 1996, hepublished an article on smart contracts in Extropy magazine, predicting thebenefits and features of the application of blockchain contracts. Over the nextfew years, he developed the concept in several articles.

Ian Grigg and Gary Howland are othercontributors to the concept of smart contracts. They published their work onRicardian contracts in 1996 as part of Ricardo's payments system.

The implementation of smart contractsbecame possible after bitcoin and its blockchain emerged and created the rightconditions. A few years later, the innovation finally spread on the Ethereumblockchain. Today, many alternative platforms alLOW.USers to take advantage ofthis feature, but Ethereum remains a pioneer.

How do smart contracts work?

As mentioned above, smart contractsrepresent computer agreements or, simply put, snippets of code that are basictechnical elements. They are used to specify all conditions of agreementreached between parties to a blockchain transaction. Once these conditions aremet, smart contracts are automatically traded.

Blockchain-based systems allow theirparticipants to reduce intermediation and excessive paperwork because it relieson public books where any interested party can verify all transactions. Thecore requirement here is to describe all protocol conditions by mathematicalrules using appropriate programming languages.

Blockchain represents a decentralizednetwork of nodes, each storing information about all transactions. More than50% of all of these nodes must be controlled in order to undo a transaction ordouble flower.

Suppose a person wants to initiate a smartcontract, they need to download special software and generate a public key topublish in the system. A startup message should then be sent and the node willreceive it. When the event established by the smart contract is complete, thecode executes.

For example, if certain requirements aremet (paying a certain amount of money), the vending machine will automaticallyprovide the ordered goods to the buyer. Smart contracts work in the same way.

In addition to transferring funds, thereare several other use cases:

• Digital identity: It removes forgeriesand provides personal identity for digital assets.

• Financial security: They're great fordebt management, automatic payments, or stock splits.

• Trading activity: Smart contracts offer agreat way to automate trading operations. Moreover, with their help,cross-border payments and international trade have become easier to manage.

• Clinical trials: It provides visibilityacross agencies, facilitates and automates data sharing, and reinforcesconfidentiality.

• Government: Smart contracts can improvetransparency and efficiency of voting.

Smart contract use cases are mutable andcover countless opportunities. They have the potential to become powerful toolsin many areas of human activity.

Characteristics of intelligent contracts

Smart contracts have some distinctivefeatures that set them apart from other forms of financial transactions:

• Autonomy: Users have full control overtheir protocols. The smart contract itself is a guarantee that precludesinterference from any other partner (broker, lawyer, notary, etc.).

• Security: A basic purpose of smartcontracts is to secure transactions. Information entered into the blockchaincannot be deleted or modified. Even if one of the parties violates its terms,the agreement remains intact.

• Speed: If manual document processingtakes a lot of time, it can delay the task. Smart contracts minimize individualinvolvement and improve overall efficiency.

• Trust: Transaction participants do notneed to trust each other or partner vendors. A decentralized network providesan environment to ensure that tasks are completed without problems or delays.

• Cost-effectiveness: Excessive transactioncosts can be eliminated. And this is possible by removing the middleman fromprocess and protocol support.

• Accuracy: The process is automated, thussignificantly reducing the possibility of human error.

Examples of smart contracts

Smart contracts apply not only tocryptocurrency transactions, but also to everyday tasks in financial services,the Internet of Things and more. To your surprise, they are more practical thananyone thought.

Internet of Things (IoT) : The concept ofadding Internet capabilities to everyday objects in the home. Smart contractsenable users to achieve decentralized and trusted access control over Internetof Things systems.

Employment contracts: Smart contracts makethem easy to enforce. In human resources, employee details such as salary,professional roles and responsibilities can be easily recorded by using smartcontracts. At the same time, the transparency and immutability of smartcontracts enhance trust between employers and employees. Both parties may onlyuse smart contract technology to record part of the agreement. In this case,the contract could be:

• Fully automated without paper copies;

• Partially automated, with paper copies(in which case it is necessary to agree on which variant has higher priority,text or code);

• Partial automation, mainly on paper (forexample, smart contracts only regulate payment, whereas dispute resolutionprocedures can be found in paper contracts).

• Copyrighted content: The content ownershould receive royalties, but it is often difficult to determine who is thevalid content owner, as creating a single work can involve multiple parties.Smart contracts make it easy to understand the rights and responsibilities atany stage of the creative process.

Which cryptocurrencies and DApps use smartcontracts?

Today, smart contracts are closer to ourdaily lives than people think. Now it is not just big business that endorsesthem. Many blockchain platforMS.USe them in their activities and use a varietyof programming languages to write smart contracts.

Ethereum is one of the most popularoptions; This is why its original coding language, Solidity, is widely used bydevelopers. Other blockchains may choose something different.

Here's an overview of the blockchain thatcan handle smart contracts:

Bitcoin: The Bitcoin blockchain allowsfiles to be processed using smart contracts. However, there are limits to howyou can handle these files.

NXT: NXT provides the smart contracttemplate. However, the choice is limited because there is not much space tocustomize.

Ethereum: Ethereum thrives on smartcontracts because it supports advanced coding and processing with flexibilityand efficiency. The downside, however, is that it comes at a cost. Suppose youwant to customize something, but you need to contribute ETH tokens as paymentfor the computer power to perform it.

Stellar: This may be the oldest smartcontract platform, but its speed and security are arguably better thanEthereum's. It has a simpler, more direct, and easier to use interface.However, it is not suitable for complex contract development, as it isprimarily intended to facilitate simpler smart contracts.

Some of the most popular smartcontract-based Dapps include online financial platforms like MakerDAO andCompound, as well as decentralized exchanges like Uniswap.

Pros and cons of smart contracts

There are no one-size-fits-all solutions,including smart contracts. Sure, it's helpful in the decentralized world ofencryption, but it has its limitations. Here's what you need to know:

advantages

The advantages of smart contracts areobvious, which is the basis for the increasing popularity of smart contracts.They are autonomy, security, high-speed performance, and the possibility ofreducing costs associated with intermediaries. People choose them because theypromise affordable but accurate and efficient business transactions.

disadvantages

• It is true that smart contracts allow forthe exclusion of human error from operations. But at the same time, the smartcontract code itself can be flawed and vulnerable. These mistakes can lead togreat losses. There have been numerous instances of platforms being hacked andmoney stolen due to certain code errors. Take the infamous DAO hacker.

• The legality of such smart contracts isanother point of DIS.USsion. It is not clear how governments and legalauthorities should treat and regulate them, as they are outside national legalsystems. Whether they can be considered contracts by government agencies is amoot point. Being outside the legal system also means criminals CAN.USe thetechnology for illegal activities. Ultimately, that's because smart contractsaren't always black and white. So the terms and conditions are vague.

• Irreversible nature.

Not being able to change something in anintelligent contract can also be a disadvantage. Fixing errors and changingcontract terms would be an insurmountable problem.

• Privacy penetration

Transparency is a good thing, but notalways. Sometimes users need some privacy. Some platforms try to offer"smart private contracts" to their users, but this is not common. Inaddition, there can be costs involved in introducing new technologies. Onlyexperienced developers can create solid smart contracts.

In general, the technology still raises alot of questions. But what about the future? Will a new technology overcome itslimitations or replace it entirely?

What is the future of smart contracts?

It is clear today that the acceptance ofsmart contracts will only grow over time. Of course, they won't completelyreplace traditional paper contracts in the coming years, but they will carveout their own share of the market, especially when buying or exchanging goods,services and rights. There is no doubt that they will enter more and more areasof people's lives.

The legitimacy problems of many countrieswill be resolved in the next few years because they are inevitable. Even today,Arizona and Nevada have amended their state versions of the Uniform ElectronicTransactions Act (UETA) to explicitly include blockchain and smart contracts.

conclusion

The benefits of smart contracts cannot bedenied or underestimated. They appear to be a good alternative to traditionalprotocols, providing a higher level of performance. If they manage to getpositions, they will occupy contractual territory and the agreement will bechanged forever. They will change the way people do business.

Low cost, reduced fraud and delay, and fullautonomy make smart contracts attractive to the public. But smart contractswill only become more interesting if they increase the efficiency and certaintyof transactions and reduce the need for partner vendors.

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