Smart Contract is a term that describes a special set of protocols capable of automatically implementing the terms and agreements between the parties in the contract (in this case, computer systems) with the support of the company. turmeric Blockchain.
Szabo discussed the possibility of using Smart Contracts in various areas related to contractual arrangements - such as credit systems, payment processing and content copyright management.In the world of the cryptocurrency, we can define a Smart Contract as an application or program that runs on blockchain.
Smart Contract is like a digital contract that is enforced by a specific set of rules. These rules are predefined by computer code, and all nodes in the network must copy and enforce those rules.
In essence, Smart Contracts on the blockchain allow the creation of trustless protocols. That is, two parties to a contract can make commitments through the blockchain without having to know or trust each other.
They can ensure that if the conditions of the contract are not satisfied, the contract will not be enforced. In addition, the use of Smart Contracts eliminates the need for intermediaries, greatly reducing operational costs.
Although the protocol Bitcoin have supported Smart Contracts for many years, but they were made popular by Vitalik Buterin, creator and co-founder of Ethereum. However, each blockchain has a different Smart Contract implementation method.
How does Smart Contract work?
The mechanism of action of the Smart Contract can be said to be like with a vending machine. That is, they only automatically execute pre-programmed terms before the clause has met the necessary requirements.
First, the terms of the contract will be written in a programming language, then encrypted and transferred into a block of the Blockchain. After moving into the block, this Smart Contract will be distributed and replicated by the active nodes on that platform.
After receiving the deployment order, the contract will be deployed according to the predetermined terms. At the same time, Smart Contract will also automatically check the implementation of the commitments and terms stated in the contract.
Example to make it easier for you to understand:
Let's say you want to rent an apartment from me. You can pay your rent with cryptocurrency via Blockchain. The receipt will then be included in a copy of our Smart Contract; I will give you the password to the apartment on a certain date.
If that password does not arrive on time as agreed between the two parties, the Smart Contract will return the money. If it comes before maturity, the system will keep both the money and the token until maturity. The system works based on the proposition “If-Then” and monitored by hundreds of people, so there can be no errors in the delivery.
What are the benefits of smart contracts?
Smart Contract is an application that takes advantage of all the strengths of Blockchain technology so it has a lot of benefits, below are its main benefits.
- Automation: The process of executing the contract is automatically equal. At the same time, you are the creator of the contract, no longer having to depend on a broker, lawyer or anyone else. As such, it also removes the risks from third parties
- Not lost: Your documents are encrypted on a shared ledger, which means they can't be lost. With Blockchain, all your friends have a record of your documents.
- Safe: Blockchain will ensure the security of your documents. No hacker can threaten them.
- Speed: Use programming languages, software code to automate permissions, save hours of unnecessary work.
- Save: Smart contrast saves you a ton of money by eliminating the middleman.
- Exactly: Automated contracts are not only faster and cheaper, but they also avoid common writing errors.
Smart Contract What are the pros and cons?
1. Advantages of Smart Contract:
- Application of Smart Contract can be used in many areas in the future, currently some fields have implemented smart contracts including: Cryptocurrency, logistics, banking, real estate even voting.
- Freedom: Not controlled by any authority
- Safety and transparency
2. Disadvantages of Smart Contract:
- Legal: You will not be protected when an error occurs because the laws of other countries do not currently have a policy to exploit and manage smart contracts.
- Deployment costs: Need to pay for infrastructure systems, computers, and good programmers for them to deploy.
- Risks from the internet: The nature of Smart Contracts is very secure, but if you reveal some sensitive information or are exploited by hackers, you will definitely encounter trouble cases.
What does it take to create a Smart Contract?
To make a Smart Contract, you need to have the following requirements:
- Contract subject: Smart Contracts must be granted access to the products/services listed in the contract in order to automatically lock or unlock them.
- Electronic signature: All parties to a Smart Contract must agree to implement the agreement using their private keys (electronic signatures).
- Terms of contract: Terms in Smart Contract are in the form of a series of activities. And all parties to the contract must sign to accept it.
- Decentralized platform: The completed Smart Contract will be uploaded to the Blockchain of the respective decentralized platform and distributed to the nodes of that platform.
Applications of Smart Contract
According to Jerry Cuomo, vice president of blockchain technology at IBM, believes that Smart Contracts can be used in many cases, from financial services, healthcare to insurance. Here are some examples of its applications:
1. Use for Elections
Manipulating election results is very difficult, but still possible, but Smart Contract will never be able to manipulate. Because the votes that are protected by the ledger will need to be decrypted and a strong enough access authority is required to access it. And the truth is that no one holds such power in the blockchain.
2. Use for Managers
Blockchain not only provides a reliable ledger, but also eliminates risks thanks to an automated, transparent and accurate system. Often, business operations are often not always favorable due to waiting for consensus or resolving external and internal issues. The Blockchain Ledger will solve this.
In 2015, the Trust & Clearing Corporation (DTCC) used a blockchain ledger to store information about $1,500 trillion worth of securities assets, which translates to 345 million transactions.
3. Logistics (Supply Chain)
Supply Chain In any business is a long system and includes many different parts. Each department has certain jobs, which must be done sequentially. And it must be recorded so that when it occurs, you know where the problem is
This is a long and inefficient process, but with Smart Contract, each participating department can monitor the work progress to complete the task on time. Smart contract ensures transparency in contract terms, anti-fraud.
It can also provide supply chain monitoring if integrated with the Internet of Things.
4. Medical services
With Smart Contract then the patient's medical record will be encrypted and stored on the Blockchain with a private key, only those who have that key can access the records. At the same time, bills for surgeries are stored on the Blockchain and automatically transferred to the insurer.
Ledgers can also be used in the management of medical care, for example monitoring medications, test results and managing medical supplies.
Besides, Smart contracts also have countless other applications, such as in management, banking services, insurance, real estate, ......
It can be affirmed that Smart Contract has had a great influence on the world cryptocurrency, and they certainly changed the blockchain space.
While end users may not directly interact with smart contracts, these contracts could form the basis for a wide range of future applications, from financial services to supply chain management.
Taken together, Smart Contracts and blockchain have the potential to change almost every aspect of our society. But we need to wait and see if these disruptive technologies can overcome many of the barriers to large-scale adoption.