Smart Contracts have existed for years, and their implementation can be observed in
Numerous facets of life.
Do you know that every video game in the world follows this “Smart contract” rule?
Yea!! Never really considered that until recently…
The conclusion of this article will explain why this is the case.
You will have a better grasp on what a smart contract is, how it operates, its benefits, and where it can be applied in today’s fast-paced world.
Great!! Let’s immediately begin.
What are smart contracts?
Before I explain what smart contracts are, let’s clarify a few differences we have with blockchain, the underlying technology for smart contracts.
Blockchain is a “distributed immutable ledger” “Immutable” indicates that once an asset is added to the blockchain, it is extremely difficult to change or alter its properties.
Properties such as the ownership of an asset and its constituent characteristics. The term “distributed” denotes that decisions regarding the fate of these assets on the blockchain cannot be made by a single computer or person, but rather by various computer networks from around the world.
A “ledger” is an account or a location where a great deal of information can be stored. In conclusion, the blockchain can be viewed as “a public ledger containing the history of all transactions.” The blockchain is renowned for its “decentralized” transaction validation system. Smart contracts utilize this technology.
So, what are these Smart Contracts exactly?”
To store and validate an agreement’s terms, smart contracts are digital contracts that employ blockchain technology. It executes the necessary actions automatically once the terms have been met by all parties. It is comparable to a physical contract between two parties and a third party (a lawyer or middleman).
This third party monitors and enforces the contract terms once they have been agreed upon by both parties. The only difference in this case is that the computer code acts as the attorney or intermediary.
And its decentralized nature is supported by the blockchain technology it employs. The smart contract’s transactions are automatically processed and enforced by the blockchain, independent of any third party. An example Includes a video game for two players…
…such as Pro Evolution Soccer on PlayStation.
Each player’s objective is to “score a goal” within a specified time limit. Those are essentially the game’s fundamental rules. Each player is well aware of this rule, accepts it, and would fight ‘tooth and nail’ to enforce it “to get the ball into the opponent’s goal within the allotted time.
A player receives a point on the scoreboard only after achieving this. No one is rewarded if no player gets the ball into the back of the net within the allotted time. Nothing occurs. They will either advance to penalties or play a rematch. This is how Smart Contracts function.
The Terms of the contract (smart contract) are the rules of the game, and the code controlling the execution of these rules (in the game) is similar to the computer network that enforces the terms of a Smart Contract.
And unless this action is manipulated by a hacker with exceptional hacking skills, these computer codes would always ensure its success. Smart Contracts are distinguished by the fact that they cannot be easily hacked or altered (possibly ever!).
Now let’s examine how all of these arose in the first place.
When Were Intelligent Contracts Created?
Nick Szabo, a cryptographer and computer scientist, introduced the concept of smart contracts in 1994. He came up with the brilliant (no pun intended) idea of storing contracts as computer codes.
The impediment to implementing this concept was the lack of blockchain technology at the time. But good news!! In 2009, blockchain technology was first successfully applied to Bitcoin. Six years later, Vitalik Buterin established Ethereum, which served as the foundation for the first functional Smart Contracts. Explain in greater detail how this mind-boggling technology actually operates.
How they are constructed and operate
By being labeled “smart,” they are not actually that intelligent. This little boy is so intelligent that he scales his subjects every single time. Essentially, they are computer programs that convert business logic into codes and run them on the blockchain.
So, when a smart contract is created, the following occurs…
Businesses that want to implement smart contracts into their business systems would work with developers to create business rules. These rules would then direct the Smart Contract’s behavior in response to particular conditions.
These conditions could be as straightforward as authorizing payments, receiving shipping receipts, etc. To significantly more complex operations such as calculating the value of a derivative financial instrument, automatically releasing an insurance payment, etc.
These conditions would necessitate a more comprehensive application of business logic. After planning all of these, developers would use a “Smart Contract Writing Platform” to create and test the logic.
This would then be forwarded to a separate team for security auditing. A company or an internal specialist with expertise in this type of auditing could be employed. After authorization, the contract is then executed.
distributed to an already existing blockchain or other distributed ledger infrastructure.
After being distributed to these existing blockchains, the Smart Contract is designed to receive event updates from a “Oracle.” Oracle is a stream of encrypted data that is protected by cryptography.
As soon as it obtains the required combination of conditions from one or more of these oracles, the smart contract begins to execute. As soon as the contract is executed, the blockchain is updated. And the action becomes permanent. The transaction is then accessible to authorized parties.
The advantages of smart contracts
The advantages of smart contracts that make them a more desirable system for managing business contracts are as follows.
Less costly to manage
Smart contracts eliminate the middleman, making them simpler to manage. With a middleman, there would be numerous biases, second thoughts, etc. But smart contracts function based on their Design. Therefore, they do not require thorough monitoring or costly management.
They are distributed
Blockchain-based smart contracts facilitate the development of decentralized platforms. This reduces the reliance on a single entity for decision-making.
Infrastructures for smart contracts are available.
Smart contracts platforms, such as Ethereum, provide developers with the infrastructure they need to build transaction-based applications quickly and affordably.
They are trustworthy and transparent.
Transactions are irreversible and trackable because they are encoded in computer codes. This allows for increased transparency and security.
Intelligent Contracts are self-executing.
In contrast to real-world situations, where disputes and biases can arise, codes lack biases. They adhere to the rules in order to self-enforce immediately and automatically, based on the conditions in their code.
Applications for intelligent contracts
Intelligent Contracts and Voting
Over time, the probability that every election will not be rigged has diminished. It is very difficult for elections not to be rigged. If Smart Contracts could be implemented in elections, citizens’ concerns would be alleviated due to their transparency and security.
Decoding and altering blockchain-protected votes requires a computing system with high processing power and speed. No one possesses this much computing power, so only God could hack the system!
Smart contracts can reduce the friction that discourages citizens from voting in large numbers. Citizens must line up, present identification, and fill out forms prior to casting a ballot, which causes friction. All of that stressful material. With Smart Contracts, online voting is possible. Consequently, millennials would be motivated to vote in large numbers.
Smart contracts expedite and streamline international commerce.
IBM Blockchain has this “we trade” trade finance network where businesses can participate in establishing a system of trust for global trading. This trading network employs more effective rules and simplified trading options to reduce friction and risk during the trading process. Therefore, any bank or business that trades with this network has a greater variety of trading opportunities.
Intelligent contracts can enhance Health Systems
We frequently encounter instances in which patients’ data are taken and used for research purposes without their consent. It leaves no room for the patient to decide whether or not they want their private information disclosed. With Smart Contracts, health systems will record and transfer data efficiently and securely. This would give patients complete control over their health information. If researchers must use their data, they must pay for it… The patient would have to decide whether or not they wish to sell it to them.
Smart contracts facilitate business administration.
Achieving a replicable workflow has always been one of the most difficult aspects of business management. Every day, managers encounter unforeseen occurrences. On a daily basis, there are numerous back-and-forths in business operations…
…permissions must be issued…
Internal and external issues that affect the business must be resolved.
However, Smart Contracts make it easier to manage the communication and workflow of a team. It would be simpler to attain greater precision, greater openness, and an automated system.
Intelligent Contracts for Retail and Supply
Smart Contracts can be utilized by the retail-supply industry to increase openness. Based on the If/then premise or statement structure, a supplier such as UPS could state, “If” I receive cash upon delivery at a specific location in a thriving market, “then” a new product should be developed because an existing product was just delivered. The paper-based systems that slow down the retail supply chain can be eliminated using Smart Contracts. And all participants can have easier access to a digital version of these documents. This would make the entire process more secure and facilitate the development of solid relationships that would benefit more significant work and innovations.
Smart Contracts in Real Estate
Occasionally, renting an apartment to a tenant can be extremely challenging. You would need to pay a middleman, such as a local newspaper or Craigslist, to do the advertising for you. And this is not the end of the story. You would also need to employ someone to collect the rent. But smart contracts make the process simpler. The distributed ledger network performs nearly all tasks and reduces expenses. All that is required is payment via Bitcoin, and the contract will be encoded. Since the rules have been established, the Blockchain automatically executes the contract without the need for a third party.
Future of Intelligent Contracts
The future of smart contracts lies in resolving the issues associated with their implementation.
Some problems like
• The introduction of bugs into the code, which may lead to malfunctions.
• The government’s inability to properly regulate them due to their “decentralized” nature.
• How they (government) can combat tax evasion that may emerge in the future.
And many more events would occur as time progressed.
Therefore, based on the unfolding events with this technology,
Future Smart Contracts will have a profound effect on a variety of industries, which is quite evident.
healthcare, automobiles, real estate, and law, among others. The list is exhaustive.
Technologies based on Blockchain for processing Smart Contracts
There are a limited number of Smart Contract templates available for use.
These blockchain technologies operate concurrently with Bitcoin and expand the scope of smart contract possibilities.
With the exception of their limited ability to process documents, Smart Contracts are excellent tools for handling Bitcoin transactions.
Ethereum is widely recognized as a platform for executing smart contracts on the blockchain. It is distinctive because it permits more advanced coding and processing.
So the thing about technology is that it changes extremely rapidly…
What is incredibly popular today may become obsolete tomorrow…
who can say?
…perhaps a replacement from someone’s junkyard will take its place…
Smart contracts, however, do not appear to be slowing down at all.
From its applications in Business, health, Real Estate, and even Government, it is evident that there is still much to be discovered.
You’d be astonished at the future possibilities we’ll discover with this emerging technology.
Therefore, a comprehensive understanding of its internal chemistry is essential.
It would be irreplaceable in the future.
So, what other secret Smart contract advancements have you discovered that are not mentioned here?
Please do leave a comment…
That would be so useful.
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