Smart contracts are essentially automated agreements between the contract creator and the recipient. Written in code, this agreement is built into the Blockchain, making it permanent and irreversible.
One major benefit of blockchain that in this not any third party involved as happened traditionally. For example, instead of needing a bank to approve a fund transfer from client to freelancer, the process can happen automatically, thanks to a smart contract. In this we only require to agree both parties same or one concept.
I’m putting one more example here could be a group and the citizens it represents debating a law. If these two parties come to an agreement in a blockchain-based system, then agreement and transactions would be put into place via a smart contract.
History of smart contracts
Smart contracts are long predate blockchain technology. While Ethereum, introduced in 2014, is the most popular implementation, cryptographer Nick Szabo established the idea in the 1990s.
Back then, Szabo gave concept of a digital currency called Bit Gold. While the asset was never actually launched, this coin gave concept of smart contracts but their system not safe and secure and completely trustless.
Smart contracts have latest technology built in. They’re increasing security with different programming languages and highly complex networking data base, creating duplicates like secret contracts etc completely trustless.
How do smart contracts work?
Digital contract statements between two or more parties. If one group needs are met, then the agreement can be honored and the contract is considered complete. Let’s say a market asks a farmer for 100 ears of corn. The former will lock funds into a smart contract that can then be approved which can be delivered later. When a party deliver their work then funds release automatically.
Smart contracts designed for to operate bigger projects and facilitate persons to save expenses on retail system and other Government replacing.
On Ethereum, contracts are written in its major programming language, which completed. This means that the rules and limitations of smart contracts are already build in.
Here, few steps of smart contract idea are; First, a smart contract needs an agreement between two or more parties. Once both parties agreed and accept rule and limitations of smart contracts. The decision would be written into the dashboard of Smart contract, which is stored in the Blockchain network.
Once the contract is complete, the transaction is recorded. Then, all nodes will update their copy of the Blockchain with this transaction and release all information plus payment which both parties agreed before contract.
Where do smart contracts apply?
On Blockchain technology, coding is currency. Where all people transactions done by transferring codes or information. So, smart contract provides a platform of secure and safe sharing.
In the traditional world, land brokers are a necessary evil. Considering the act of selling a home is nothing in need of long and convoluted, owners will hire a broker to manage the confusing parts for them, like the paperwork and finding a buyer. While that sounds ideal for the vendor, remember that brokers take a big fee of the house’s sell price. A smart contract can take the place of a broker and solve the contract.
Insurance agent uses smart contract platform for to signing an approval and make secure transactions
One of the most popular implementations of smart contracts is within a supply chain.