Are you curious about the future of Smart contracts? Are you interested in knowing what smart contracts are and how they work? Are you confused about how a smart contract is beneficial?
If yes! You have reached at right place to know all about smart contracts.
Smart contracts are known as building blocks of Ethereum’s application layer. They are computer programs that are stored on the blockchain. They are well-known programs that automatically execute transactions if certain conditions me, without the need for any intermediary. If you want to know all the details about smart contracts in Ethereum, that’s why are here, to clear out all your confusion related to them.
In this article, we will explore a brief introduction to smart contracts, and why the need for smart contracts is arising day-by-day. You will also learn about some uses of smart contracts in the industry. We are going to provide you with important features of smart contracts, a few limitations and what is the use of smart contracts in day-to-day business deals or projects. In short! This article is going to provide you with almost all the information related to smart contracts.
Let’s move forward to solve your queries about smart contracts!
What Are Smart Contracts?
Smart contracts are the tools that can execute transactions automatically if certain conditions are met and here you don’t require the help of any intermediary company or any entity. They are associated with Ethereum, which is a blockchain that was designed to accommodate smart contracts, but here the idea is not restricted to any specific platform or network.
We need an intermediary even to share a simple photo with our friends like Facebook or Twitter, which is a central authority that doesn’t just manage the network but also sets the rules and carries out their violations. Smart contracts are here to make this possible for digital tasks to be automated without the need for any central entity to manage and approve the transaction on the way. Smart contracts are only possible with the help of blockchains, which a networks of computers that work together to carry out the rules on the network without getting help from any intermediary.
Let us clear your confusion about Ethereum first, before delving into more detail!
Ethereum is the world’s largest cryptocurrency by market cap and it was created in 2013 specially for smart contracts. From now on, it will be one of the most popular platforms. It is common that, smart contracts are not used widely outside Ethereum. It is the best thing about smart contracts is that smart contracts have been in the market even before the emergence of blockchain technology. However recent advancements or developments in the blockchain make smart contracts very secure to use. They are one of the most promising applications that are based on blockchain technology.
Why Did The Need To Introduce Smart Contracts Arise?
Due to many advancements in the digital era, smart contracts are gaining more popularity for the preparation and execution of agreements. One of the best things about them is that they can be implemented among any two parties that are residing anywhere across the world. Using smart contracts, it becomes very easy to implement transparent, accessible, and free of distance geographical constraints. For more clearance, we can assume that if you are in the US and want to get into to agreement with a person UK, you can easily get into it without having to travel and sign the agreement.
After both parties reach a consensus on the rules/ regulations or conditions of that agreement, a smart contract gets designed by use of if, else. Then statements with the help of that code. It is then implemented over blockchain and then registered as a blockchain transaction minimizing the frictions that are involved in the legal process.
Important Features Of Smart Contracts:
After understanding the basics of smart contracts, you want to know the features of smart contracts, don’t worry here we are providing you with some important features of smart contracts.
1. Secure Platform:
Smart contracts are usually pieces of code that are specially designed to reduce human error and issues. They are considered very secure and they reside on the blockchain that is distributed across multiple systems and they are immutable. So you can use it confidently as there are no security risks.
2. Easily Accessible:
Smart contracts are very easy and efficient and they offer greater execution speed and promise to provide you a higher accuracy.
3. Easy To Implement and Track:
Once the smart contract is written in the form of code, on blockchain technology it is easy to execute it with the click as well as the consent of both parties. It is super easy to track it after it is registered as a transactional record in the blockchain.
4. Reduces Friction:
Smart contracts are useful in reducing friction, but how? They reduce friction incidents, involving intermediaries, geographical constraints, fees of execution as well and commission.
Smart contracts are considered transparent as you can share data, agreement terms, and execution history transparently with all the involved parties in the agreement.
6. Fast Speed:
Smart contracts help automate tasks by using computer processes and then saving the hours of various business processes.
Encourages Saving; in Terms of Energy, Time, and Finances:
Smart contracts are executed when certain conditions that are decided by both participating parties are met and it doesn’t require any intermediary to request that agreement.
Use Of Smart Contracts In Day-To-Day Projects:
If you want to know how smart contacts can be used in day-to-day projects or some business deals, yes you can use them. We are here to guide you all about this.
Smart contracts can be used widely by businesses across many domains such as healthcare, e-commerce, real estate, decentralized finance, and many more. They are developed using an Ethereum blockchain by using solidity programming language, an open source blockchain where there is the availability of community help. Let us explain to you, for example, if you are a businessman and want to sell your products on an e-commerce store, you have to register on their portal and list yourself as a retailer. After registration, you will be asked to sign the agreement along with details of the listed products. A revenue-sharing agreement depends upon the sales and other rules or terms of the contract.
Smart Contracts are used to Sell Real Estate Property:
Smart contracts are used for the sale of real estate property and the terms of this deal involve many things, which include; the cost of the property, ownership transfer, purchase agreement, number of parking, maintenance charges, and society formation details along with other information. Keep in mind that, it is very secure about transaction records are stored as blockchain transactions.
Smart Contracts are used to Rent a Real Estate Property:
Smart contracts are used for renting real estate property and in this case, smart contracts are designed in a standard format. It includes details of broker, owners, and tenant, lease period, lock-in period, date of rent transfer every month as per the rent cycle as well as the terms of hand-over at the end of rent tenure.
Use-Cases In Which Smart Contracts Are Being Used In The Industry:
You want to know about the industries in which smart contracts can be used, so we are explaining all the domains below in which smart contracts can be used.
1. Real Estate Transactions:
The smart contract is used for real estate transactions. You can use multiple contracts that are hosted on blockchain, for execution of any real estate transactions in buying, selling, renting, or listing the property for a sale or rent.
2. Cryptocurrency Investments:
There are some platforms available to invest in cryptocurrencies like CoinDCX, CoinBase, and UnoCoin. However, some popular use cases are available in the domains of credit Lending, Preservation of medical records, access and identity verification and management.
Limitations Of Smart Contracts:
Smart contracts provide many benefits to their users but there are some limitations you must be familiar with.
Smart contracts are very difficult to change, we can say that changing smart contracts seems almost impossible. If there is any error in the code, it can be time-consuming and expensive to correct. Another limitation is the possibility of loopholes. Here parties will deal fairly and not to get benefits unethically from the contract. So using smart contracts makes it difficult to ensure that the conditions are net according to what was agreed upon. Smart contracts aim to eliminate third-party involvement but it is not always possible to eliminate them. Some contracts also include those terms that are not always understood, smart contracts are not always able to handle these terms and conditions that are considered vague. They are discussed just to aware you of them, so just because of a few limitations you can’t decide not to use smart contracts as there are many benefits to using smart contracts.
Why Ethereum Smart Contracts?
One of the best things about smart contracts is that the world’s first cryptocurrency Bitcoin was the first to support them. Every transaction in the smart contract is possible only when certain conditions are met. Here the user has to provide a digital signature proving that they own the cryptocurrency. Only the owner of Bitcoin can use a private key to produce such a digital signature.
Smart contracts are a very efficient digitalized way of executing those agreements among the related parties. They are usually computer protocols that facilitate digitally the verification, control, and execution of agreements. Smart contracts usually run on the blockchain platform which can process all the transactions in the contract. They are well known as they are a faster, cheaper, and more secure way of executing and managing agreements.
If you want to know about smart contracts, we have got you covered. We have provided you with an introduction to smart contracts along with their important features. We have explored how you can use smart contracts in your everyday projects. Along with benefits, there are many limitations to smart contracts, we have discussed them too just to inform you everything about smart contracts. We are hopeful that, this article is enough for you to learn what is smart contract and other important things about it. We appreciate it when someone shares feedback about our guide so let us know in the comments below.
Frequently Asked Questions:
1. How Smart Contracts Can Work Together?
Smart contracts cannot be used in isolation. Some smart contracts are designed to assist other smart contracts. Smart contracts form the building blocks for decentralized applications and even we can say that whole companies, dubbed decentralized autonomous, companies are then controlled by the smart contracts rather than the human executives.
2. How can I Set up a Smart Contract?
A developer can create a smart contract easily by writing a slab of code. Then the developer will push the smart contract in the Ethereum network, which then enforces the contract and it doesn’t allow anyone to take the money, without following the exact rules in the code. Thousands of computers are there in the world and each of them has a copy of this smart contract.
3. How can I use the Smart Contract?
Anyone can use the smart contract as it is very easy to use it. You should have a native token ether to use which can bought on cryptocurrency exchanges. Ethereum app will provide you with all the information or instructions on how to use their specific apps and smart contracts. The very common method of using an Ethereum wallet tool such as Metamask is to send the ether. Users are allowed to use smart contracts for a range of use cases. They can publish posts to microblogging apps and lend out money, and they don’t require an intermediary while using the variety of Ethereum apps.