Are you wondering what smart contracts are? Perhaps you have heard of them countless times, but you have no idea what they are all about. Well, one thing we will guarantee you is that you are about to peruse the right piece on smart contracts. You’re welcome! So, keep reading to learn more.
Global Financial Services Industry
The global financial services industry is currently undergoing some degree of disruption. We can’t stress that enough. This is thanks to blockchain technology; the technology of the future. A decade after it launched, blockchain technology has charted a clear course.
Are you wondering what course that is? Without question, its ultimate mission is to kick out fiat currency. And guess what? It’s been doing a great job at it! Not to mention that it’s just getting started. Yes, it’s still in its early stages.
In all this, we must not lose sight of the unique features that made all the difference. Some of these fascinating features include decentralized structure, global reach, topnotch security, speed, and others. Did we fail to mention it the other? Oh, that’s right, the revolutionary smart contracts!
Understanding Smart Contracts
To have a clear understanding of smart contracts, it’s critical you understand their history. It all started in 1994. At the time, a legal scholar, Nick Szabo, saw a decentralized ledger differently. He figured that it could be used to develop smart contracts.
This means that contracts could be converted to stored computer codes and replicated on the system. When the codes are running, the nodes connected to the network could be supervising them. Without a doubt, in a system where that is perfected, the codes can execute a lot of instructions. Lest we forget, smart contracts are also called blockchain contracts, self-executing contracts, or digital contracts.
How Smart Contracts Work
- The contract is written for two parties in the form of code and saved in the ledger. While the individuals involved are anonymous, the public ledger saves the contract.
- Upon triggering conditionals, such as strike price or expiration date, the contract executes itself according to the coded items.
- Regulators can use the smart contracts to track the activities of individual actors. However, the identities of the individuals involved remain anonymous.
Notable Applications
Indeed, there are countless applications of smart contracts in the real world.
- Automated transactions work with the principle of smart contracts. This is used in cryptocurrencies like Burtscoin (BURST) and Qora (QORA).
- Namecoin (NMC) is another unique application of the smart contracts.
- RootStock (RSK): With a sidechain technology, RSK smart contract-enabled platform is linked to the Bitcoin Blockchain.
- Ethereum is arguably the most popular smart contract-oriented platform.
- Bitcoin provides the Turing-complete language that offers a wide range of functions.
Will Smart Contracts Displace Lawyers?
Is that a million dollar question or what? Well, let’s find out. Hang on! Before we answer the question, let’s pick out some simple things that you can do with smart contracts. With smart contracts, you can exchange money, shares, property, and other valuables. While exchanging these items, they can be done without a middleman. What a wonder that is!
Now, to answer the question, we will draw a simple analogy of smart contracts with a vending machine. Basically, you will need to pay lawyers to get the documents prepared. But with smart contracts, you will just drop a token into the ledger. That’s all! So, smart contracts will define the rules and penalties of the agreement, taking the place of lawyers.
Additionally, smart contracts enforce all the laws pertaining to the obligations. So, looking at them as displacing lawyers, obviously, it’s almost a foregone conclusion. Yes, they won’t just displace lawyers from blockchain-related duties; they are also programmed to disrupt the banking industry.
Benefits of Smart Contracts
Without question, smart contracts offer a lot of benefits. Let’s put them into perspective.
Backup
Smart contracts serve as backup for files. On the blockchain, every node connected to the network has a copy of all the transactions. All the documents are duplicated and saved in many different nodes.
Autonomous
Coming to autonomy, you are the person drafting the agreement. There is no need for a lawyer, broker, or any other intermediary for that matter. Essentially, this deals with the danger of third-party manipulation.
Trustworthy
In addition to those, one of the goodies that smart contracts deliver to its users is trust. Yes, your encrypted document is saved on a shared ledger. With this structure, nobody can access your document and read the content as it is encrypted.
Accurate
With smart contracts, errors that could emanate from manually doing paperwork are eliminated for good.
Safe
Just like trust, cryptography ensures that your documents are safe. Hacking is practically impossible because a hacker will have to hack all the nodes connected to the blockchain. Hello hacker, get ready for it’s another mission impossible!
Cost-effective
Yes, smart contracts save money. Wondering how that is possible? Okay, here’s how! You pay bank charges to have your bank process your transactions, don’t you? Say no more to that because smart contracts cost you little to nothing.
Fast
While spending hours trying to sort out paperwork is a norm, that’s not the case with smart contracts. Ideally, smart contracts allow you to use commands to execute tasks. As a result, you save plenty of time.
Reliable
When data is entered on the blockchain, it cannot be deleted or changed, making it reliable. If a party fails to satisfy the contract terms, the smart contracts will protect the other party. In the course of executing the contract, the automated transactions ensure that errors are eliminated.
Conclusion
In conclusion, as the blockchain industry keeps evolving, smart contracts also keep pace with the trend. Today, smart contacts have transformed the banking industry. Again, they are just getting started! Just about a decade since the blockchain technology’s advent, its impacts have left critics eating their words. Despite government criticisms and bans, the cutting-edge technology is still making inroads into every sector.
Make no mistake, smart contracts are critical components of blockchain. As a matter of fact, smart contracts are “the brains” of blockchain technology. So, cynical governments and firms must take a second look at the innovative technology. This should be done with a view to exploring how it can enhance their operations. Hello critics, don’t fight it! Instead, explore the benefits of smart contracts as discussed above because “high-tech” is here to stay!
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