With new evolutions and trends in technology each day, the interested ones have full feasts by devouring all the exciting information and developments. One such invention that has changed the way contracts work is the smart contract!
Smart contracts are simply programs that run when certain criteria are satisfied and maintained on a blockchain. They're usually used for automating the execution of an agreement. This way, all the parties can be sure of the result without any intermediaries or time loss.
Thanks to its automation, a smart contract has helped save the time and effort of millions of people. In simple terms, a smart contract has full control over a digital agreement and automatically executes itself after meeting the contractual conditions. Although it came out back in 1994, it only became popular after 2015.
There are three components of a smart contract: the parties who agreed to have a smart contract, the contract's subject, and the terms that the parties need to satisfy for a successful transaction between the two. The digital transaction protocols remain embedded on a decentralized blockchain and codified the contract to maintain transparency and security.
Blockchains encrypt the smart contracts so that the parties can see them from anywhere at any time. There is no involvement of a third party while enforcing this type of virtual contract. Since the contracts are in the decentralized blockchain network, any party can trace them.
Based on the applications of smart contracts, there are three types of smart contracts:
Smart contracts used for legal purposes are smart legal contracts. If the parties fail to fulfill the contractual conditions, the willing party may take legal action against them.
The communities bound in such contracts have to follow specific rules coded in the blockchain contracts. A member who takes action gets replaced through a self-enforcing code.
These contracts have a unique feature that allows them to remain in sync with the other blockchain contracts.
Smart contracts have many advantages. They are not only time-efficient and virtual, but also they are secure and transparent. Here are some of the many advantages of smart contracts that may attract you towards them:
The parties need to meet the preset conditions to execute the agreement. Since the conditions are extremely precise and to the point, smart contracts offer higher accuracy than traditional contracts. There are no chances for loopholes with the help of clear communication and no misinterpretations.
Thanks to software codes and the internet, these contracts execute immediately. The parties involved in the contract do not have to wait for long hours for the execution process since there is no need to check the documents manually.
As stated before, smart contracts offer high security to both parties. These unhackable crypto assets ensure that all of your data and information are safe from hackers and fraudsters.
Smart contracts provide high efficiency due to their speed and precision. More efficiency means more contracts and transactions within less operational time.
Smart contracts do not use any paper or environment harming constituents. They help play a role in the 'go green' movement for parties all across the globe as these contracts exist in the virtual world yet hold a significant meaning in the real world.
The execution of smart contracts does not involve any third party in it. The parties do not need middlemen like lawyers, banks, or witnesses, saving them money. The exclusion of third parties decreases the time needed to execute the contract.
Smart contracts' transparency, accuracy, and efficiency are incomparable to any other type of contract. The parties involved in the contract trust each other as they comply with the preset conditions.
Since smart contracts have so many advantages, it is only natural for them to have equally many real-life applications. Valuate Reports suggest that the market size of smart contracts may reach USD 345.4 million by 2026. It means that they are overtaking all types of industries and markets to grow. Here are some real-life applications of smart contracts that you may come across:
If we take a small example of medical records, we will find that around 60 million people die, whereas around 140 million babies take birth annually. These statistics indicate that hospitals across the globe have to maintain an insanely huge record of all births, deaths, and hospitalizations each day.
Blockchain transactions ensure that the data and records are safe, but the person affiliated with the records is the only one who can access them.
Games are the best way to keep us engaged and away from boredom. However, not all game-players know the importance of smart contracts and blockchain technology in their beloved games. Blockchain-based games like Final Fantasy XIV are soaring through the internet and winning the hearts of millions of players.
Cryptocurrency is growing at a fast pace in our digital world. Investors and public companies invest in cryptocurrencies heavily. To participate in the run, the common public has started learning about them too. However, not all are aware of the fact that cryptocurrencies are more than just virtual currencies.
Cryptographic keys lock or unlock functions like authentication and encryption. However, these cryptographic keys are not secure enough from hackers. If a user loses their cryptographic key, all of their data and encryptions will fade away permanently as there is no backup. For the safety of cryptographic keys, users turn towards smart cards.
Smart cards store and manage the cryptographic keys efficiently to ensure that the user’s data is in a secure technological environment. Smart cards store private keys and cryptographic keys for a smoother transfer of data and smart contracts. The combined security of blockchain technology and smart cards makes the process of executing smart contracts a child’s play for business owners. Smart keys also play important roles in SIM cards, credit and debit cards, and other cards that store our information.
Smart Contracts with Ethereum
If you have been into smart contracts, you must be knowing about Ethereum. Ethereum ecosystem is the second-largest blockchain in the current technology and is the first blockchain supporting the technology to run smart contracts. Ethereum blockchain technology acts as a backbone for running smart contracts.
Solidity is a programming language that adds executable codes in a block in Ethereum. No other blockchain offers this versatility, so Ethereum often helps in money exchange and property values.
Block chain-based Ethereum is not the only blockchain on which smart contracts can run, but most of them prefer it over any other blockchain technology. Here are some reasons why Ethereum blockchain technology is the ideal technology for all sectors:
The users do not have to depend on a central entity for managing their transactions. Ethereum smart contracts offer decentralized architecture so that the users can access their information themselves.
Unlike other platforms, Ethereum ensures that its users can manage their private blockchains instead of coding them from scratch. It saves the time and energy of the users.
An Ethereum user can work with millions of other users and hundreds of nodes with no technical issues. Most blockchain software offers a network of fewer than ten nodes, but this is not the case with Ethereum.
Features like custom block time and gas limit ensure that a network on Ethereum can have hundreds of transactions per second. This incomparable performance rate of Ethereum blockchain technology makes it the perfect choice for business owners of all industries and sectors.
Smart Contracts with NFTs
NFTs (Non-Fungible Tokens) are the trend now. Everyone owns an NFT of a game or artist. If you prefer collecting the merch of different games and shows, NFTs are your best choice.
NFT smart contracts can have a long way ahead together. Before understanding how they complement each other, you should know what an NFT and its characteristics are.
True to its name, an NFT is a unique virtual token. It acts as proof of ownership of a digital asset. Each NFT is different and unique. You cannot exchange an NFT with someone as it is non-fungible. Blockchain enables asset tokenization so that the parties involved in smart contracts can gain full rights on NFTs and other assets. Parties involved in a purchase or exchange often mint NFTs through smart contracts.
In the upcoming years, smart contracts may replace all types of manual contracts to give way to a greener and secure environment. Smart contracts will ensure the safety of data shared between the parties and will reduce the hassle in executing contracts.
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