Automate Your Contracts and Improve Your Operational Efficiency with Smart Contracts Applications
A smart contract is a self-executing contract that involves an agreement between a buyer and a seller without any intermediate. The agreement is directly written into lines of codes that are executed on the decentralized platform of blockchain. Traditionally, when a contract is made between two parties, a trusted third party executes the agreement, and this process has been continuing for centuries. The introduction of smart contracts minimizes the involvement of the third party by automating the complete process. The smart contracts also enable both the party to perform credible transactions without any trusted third party.
1. The History of Smart Contracts – When was it invented?
Smart contract application was first designed by Nick Szabo. Being a cryptographer, he was looking for a solution that minimises the necessity of a third party while making a contract, and that led him to come up with an idea. He successfully recorded automated contracts in the form of computer code. According to his design, he was able to activate the contract automatically in certain circumstances! It is a great way to remove the need for a trusted third party company, like a bank.
However, at that time, blockchain was not in his plan, so it was not a smooth way to perform this contract.
In case of smart contracts, when certain conditions in the agreement are met, the transactions happen.
2. Smart Contracts Explained:
Smart contracts boost the performance of dependable transactions without any engagement of the third party. It is almost like a vending machine where you can deposit change and press the button of the product you want to buy. That button activates a lever in the machine and pushes out the product. There is no need for the shopkeeper or intermediary. In case of smart contracts, the vending machine replaces the direct seller and allow consumers to make a purchase without the help of any third party or manual labour.
How do Smart Contracts work?
To learn how smart contracts work, you need to learn how you can use them. If you want to buy a property, you can make an agreement on Ethereum Blockchain with the help of smart contracts without any involvement of a third party. The agreement in the smart contracts will be like – Party A(the buyer) pays Party B (Seller) a certain amount of Ether (say 1000 Ether), and then party A receives the ownership of the property.
Once the Smart contract agreement is made, it cannot be changed or edited. That means party A feel secure about the ownership by buying to party B. In the traditional cases, one would need a middleman or a trusted third party (whom both party A and B have to pay), but the introduction of smart contracts (that are automatically executed when certain conditions of the agreement are met) eliminates the need of the third party (Bank, lawyer and broker), and save time and money.
3. How does Blockchain help in Smart Contracts?
The best part about the blockchain is it is a decentralized system. That means there is no need to pay a middleman for any transaction, and thus it saves your time and money. Smart contracts use blockchain to validate, verify and impose the agreed terms between multiple parties.
Smart contracts are written in this decentralized network in the form of codes to allow transaction and agreement among anonymous parties without the need for a central entity, legal system or external enforcement. The transactions made through blockchain are irreversible, traceable and transparent. Nothing can be better than blockchain when it comes to creating smart contracts applications.
Since blockchain is decentralized, no single entity can control it. And when smart contracts use blockchain, it becomes almost impossible to hack the contracts. To hack the blockchain or smart contracts, the hackers need more than half of the nodes, and they have to continue changing each block designed afterwards, which is practically not possible.
Since all data in the blockchain is immutable and secure, it creates the perfect environment for Smart contracts. The data of smart contracts is encrypted and exist on a ledger. That means the data and information recorded in the blocks will never be lost or deleted. Want to learn how it works? Get in touch with us today!
4. Who should use smart contracts?
Smart contracts can be a great tool for various industries. Be it contractual enforceability, regulatory compliance, property ownership, home buying, material provenance, supply chain management or document management, smart contracts can be the perfect option. It is also a great solution for banking and credit services, digital financial assets, decentralized storage, digital financial assets with the legal transfer of ownership.
Governments: Governments also use smart contracts running on the blockchain to make a transparent solution in the voting system. When voting applications use smart contracts and blockchain technology, they become secure from any vote fraud. When the voting transaction is written on the Smart Contracts applications, it cannot be edited or changed. Once the voting is over, the smart contracts will send a token to an address representing the winner of the vote.
Business management: Smart contracts can also be a great solution for businesses that save their money and ensure business growth. When businesses use smart contracts, they don't need any staff for managing the payroll. In the contracts, there will be a mentioned date for the payment of a person in Ether and s/he will be paid always on time.
Feel free to contact us to create smart contracts application on the blockchain.