The Blockchain Academy is ever ready to provide in-depth information to the bitcoin enthusiasts and blockchain users belonging to different industries, all over the world. In this post, I have decided to discuss the ever popular idea of smart contracts, which is in the limelight since the emergence of revolutionizing yet controversial technology of blockchain.
So, what are people discussing about when they discuss about the smart contracts? In the context of the blockchain technology and cryptocurrency, the smart contracts are:
· Pre-written logic (computer code)
· Saved and replicated on the distributed storage media (For instance, a blockchain)
· Run or executed by the computer network (generally the same ones operating the blockchain)
· Can lead to ledger updates (cryptocurrency payments etc)
It can be said that smart contracts are little programs, which execute “if this happens then do this”, operated and verified by a lot of computers to make sure the process is trustworthy. It blockchains offer us the distributed trustworthy storage, then the smart contracts provide us the distributed trustworthy calculations.
Smart contracts – The smart contract code
Blockchains are able to run code. While the earliest blockchains were developed to carry out a small set of basic operations, like transactions of the currency-like token, the techniques have been explored to enable blockchains to perform more complicated operations that are defined in full-fledged programming languages.
Since these programs are operated on a blockchain, they have very unique features as compared to other kinds of software. First, the program is recorded on blockchain itself, which offers it a blockchain’s characteristic censorship resistance and permanence. Second, the program may itself control the blockchain assets, i.e. it may save and transmit the amounts of cryptocurrency. Third, the program is run by the blockchain, implying it will always run as written and nobody can interfere in the operations.
To developers and users working with the blockchain technology directly, the word “smart contracts” is most generally used to refer to this blockchain code. We can see this use of the term on stackexchange, in Ethereum documentation, and in technicalities oriented articles. The term has been mainly linked with the Ethereum project, whose main purpose is to be a medium for smart contract code. However today, the term is used broadly across the area to refer to any multifaceted program that is saved and run on a blockchain.
Smart contracts- The smart legal contracts
Among users who work in law or finance, the term “smart contract” is frequently read quite in a different way than the meaning discussed so far. Here, the smart contract refers to an explicit use case of smart-contract code – a method of using blockchain technology to balance, or substitute, on hand legal contracts.
The smart legal contracts are most likely to be a blend of smart contract code and more customary legal language. For example, visualize a goods’ supplier entering a smart legal contract with the retailer. The payment terms may be defined in code and carried out automatically once the delivery is made. But the retailer may likely insist contract include an indemnity clause, whereby a supplier consents to indemnify the retailer against the claims emerging in case of a defective product. There is no point representing this clause in code, as it is not something that may self-execute – it exists to be understood and enforced by a court in case of litigation.
The smart contract gives you:
Autonomy –There is no need to be dependent on a broker, lawyer and intermediaries to confirm.
Trust – The documents are fully encrypted on the shared ledger. There is no possibility that someone may say they lost it.
Backup –Think of the situation when your bank lost your savings account. On the blockchain, all friends of yours have your back. It is because the documents are duplicated a lot of times over.
Safety – Cryptography, which is the encryption of websites, keeps the documents safe. There is no risk of hacking.
Speed –Smart contracts employ software code to computerize tasks, thereby saving hours off a series of business processes.
Smart contracts lead to precise set of outcomes. There’s never any perplexity and there’s never any need for litigation, Jeff Garzik, THE owner of blockchain services Bloq says.