The world has experienced a hype loss in the most popular technology, blockchain. Despite the crash of the 2018 blockchain technology in the database industry, mainstream adoption is very much still advancing.
The smart contract, however, is one area where blockchain technology has a very high potential for sharpening the saw. The idea is expanding and becoming more diverse. So what's behind the crypto smart contract hype? The self-execution protocol is stored in the blockchain. A steller concept that has witnessed huge investments in businesses due to its streamlining transactions, increased security, and reduction in costs. So for these prominent reasons, blockchain is being piloted and adopted across a variety of industries, from finance to healthcare.
In this article, we will explore the potential of smart contracts in more depth and catch how it is influencing our future.
Without further ado, let's dive in!
What makes smart contracts so special?
Long before bitcoin was invented, Nick Szabo coined the phrase, smart contract. He intended to automate transactions using a distributed ledger. The execution of agreements within a blockchain, where everything is decentralized.
Additionally, the consensus-driven protocol only operates when a specific set of predetermined criteria is met. The decentralized nature of smart contracts makes them unique, as no middleman or third party is involved. Simply put, nobody has control over the flow of money.
Several blockchains support smart contracts, but ETHEREUM is unquestionably the most widely used one. It employs a programming language known as Solidity. Besides, its syntax resembles Javascript.
How does it work?
To maintain the record, a third party or an intermediator is required. Smart contracts hold received funds until a certain goal/commitment is reached. A blockchain developer creates a payment event after setting the conditions between two parties. Here smart contract plays the role of the middleman. For instance, your money gets released if the goal is fulfilled, or else in a non-compliance case, a smart contract automatically transfers money back to its origin.
So who defines the parameter for the desired goal? Well, a developer in collaboration with business experts performs the task of defining and developing the logic. Further, followed by security testing, the application pass the approval phase. From here, the contract is then encrypted on a distributed ledger architecture.
Why should we trust a smart contract?
Smart contracts are immutable. So, for instance, once a transaction has been added to the blockchain, your code of the contract can never be tempered or changed.
Additionally, because they are distributed, everyone on the network may authenticate the contract's output. This makes it incredibly challenging for hackers to alter the contract covertly.
Now a question arises if it is stored in public records, then everyone knows your privacy? Well absolutely no, everything is confidential via a secure link under cryptography.
What are the potential benefits of smart Contracts?
Speed and accuracy
Crypto smart contracts have the potential to revolutionize the way we do business. In addition, smart contracts can help to speed up transaction times. As soon as the condition is met, the smart contract immediately executes. Moreover, unlike a manual contract, a smart contract is less prone to errors.
Cut costs
The use of smart contracts has been proposed as a way to reduce the cost of transactions. They may be used in a wide variety of fields, such as insurance, banking, and real estate.
Transparency
Smart contracts can be used to automate contract management and performance, and increase transparency. Since there is no 3rd party involved chances of tempering are close to none.
Security
Smart contracts can help to reduce the risk of fraud and reduce the time it takes to execute a contract. Moreover, breaking the encrypted record on the distributed ledger is extremely difficult.
As the use of smart contracts becomes more widespread, we will likely see more and more businesses and industries adopting this technology. This could potentially lead to a more efficient and secure global economy. However, as with any new technology, there is always the potential for unforeseen problems.
Can a smart contract be destroyed?
The immutability of smart contracts means that the terms of the contract will always be honored, and the contract cannot be tampered with by anyone (including the contract's creator). However, there are some scenarios in which a smart contract could be destroyed. For example, if the contract is deployed on a blockchain that later becomes deprecated, the contract would no longer be accessible or functional. Additionally, if the contract's code is damaged or corrupted, the contract may become unusable.
The developers use the self-destruct feature to terminate crypto smart contracts. This feature of Ethereum enables them to void a contract on the blockchain network. On the other hand, this feature can make the development more complicated and give attackers a way to attack.
Overall, the immutability of smart contracts is a prime feature that provides security to contract creators and users. Only time will tell if smart contracts are truly unbreakable and immutable. For now, they remain an intriguing and potentially game-changing technology.
Global applications
Supply chain
The most prominent application is in the supply chain industry. What’s worth trusting is that it offers real-time visibility into the system. This allows both parties to free up more time for other core tasks. The receiving party could trace the validity of their products.
Insurance
Banks use smart contracts to issue loans or to offer automated payments. The insurance companies are piloting blockchain technology for the smart insurance claim layout. Whenever a predefined condition occurs, a smart contract automatically executes and fulfills the terms, without any delay.
Voting
In the voting system, using a smart contract eliminates the possibility of swindling and fraud. Every vote is recorded on a public ledger. Besides, each vote has its unique ID on the blockchain, and there is no third party involved in the counting process.
Trade finance
A trusted global trade will only be possible on the smart contract infrastructure. The decentralizing nature will not allow gov or third parties to interfere, promoting one-to-one fair dealing.
Final thoughts
In conclusion, self-executed smart contracts offer several advantages over traditional contracts. They are irreversible and unbreakable i.e almost impossible to be changed once they are created. One cannot neglect the fact that as the benefits get directly to both parties, so is any loss.
The key aspect is that the transparency of the contract allows all parties to see the terms of the contract and its real-time execution. However, as more businesses will recognize its potential as a friendly smart contract, it will become a game-changer touted to be.