Review of Smart Contract Technology: What Is It Used For and How to Work With It?

smart contract technology

If not all the representatives of the crypto world heard about smart contracts, then probably most of them did. Therefore, it is so important to know the details of the work of this innovative technology of “smart contracts”, the concept of which was announced a couple of decades ago, but was not fully realized in 2014. What is it, how can it be applied in practice, and what future, thanks to smart contracts, is the industry waiting for?

Contents:
(please, click the topic to scroll down to it)

  1. What is a smart contract?
  2. What is the advantage of smart contracts in practice?
  3. How to work with smart contracts?
  4. What is a smart contract for practice?
  5. How reliable is a smart contract?
  6. Conclusion

1. What is a smart contract?

A familiar look at the financial system changed in 2008 with the appearance of the first cryptocurrency, a coin that has a value that is not confirmed by physical assets. But year 2014 gave the mankind a way to regulate payments without the participation of intermediaries and such guarantors as lawyers, courts and other traditional institutions.

Intelligent contracts were enabled in practice by the blockchain. What is the essence of innovation? Smart-contracts are something like program code containing a complete package of information about an upcoming transaction. Logic is the simplest: it does not require the participation of a third party. If Mr. X wishes to transfer a certain number of coins to Mr. Y for a particular service, the transaction will occur automatically if the parties comply with the prescribed conditions. If they fail to be complied by any of the parties, the transaction will not take place.

Smart contracts do not provide for the presence and even potential participation in the relations of the parties of any arbitrator. Everything is extremely logical and simple – a smart contract, in fact, is no different from the usual contract, in which there are:

  • signatures of the parties that confirmed their agreement with the terms of the contract;
  • the subject of the contract;
  • the conditions under which the contract will be executed.

2. What is the advantage of smart contracts in practice?

The most important thing is the lack of the need to attract guarantors for the fulfillment of obligations. The parties do not need to apply to the notary, exchange and other third parties who by their signature / seal will attest to the intentions and obligations of the contract’s parties. Also, technology implies full transparency and security of information stored in the blockchain. As a result, the parties receive their benefits under the contract and do not pay the commission to intermediaries.

3. How to work with smart contracts?

In this regard, all the issues are fully answered by the Ethereum, known to all the crypto community. In it, the filling of a smart contract is intuitively understandable and accessible to everyone. On the official site Ethereum you need to download the purse, come up with your electronic signature and key. You can not only apply ready-to-use templates, but create code yourself.

4. What is a smart contract for practice?

The security guarantee provided by this technology allows investors not to risk when investing assets in the ICO. The investor had the opportunity not to rely on the success promised by the developers of the new coin, but to “insure” their funds by writing in the contract the condition for an automatic refund.

Technology is attractive in various areas, where contractual relations between the parties arise. Banks, companies involved in insurance, logistics, etc. are interested in it.

5. How reliable is a smart contract?

Since a smart contract is a program code, it is not without possible shortcomings. They can be associated with the complexity of its independent compilation, not always sufficient flexibility of the blockchain and insufficient scalability.

It should be noted that, in the event of an error in the contract, there are no methods for regulating the dispute. Everything is done by the program, and the court has no tools to evaluate the propriety of its incorrect work.

6. Conclusion

The technology of smart contracts has great potential. In fact, they can be used in absolutely any sphere of life. But in order to make smart contracts become commonplace, it’s still necessary to do a huge amount of work. To date, the most reliable and secure platform for entering into smart contracts is Ethereum.

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