Since the beginning of humankind, we are always being social animals, we interact, form relations and to benefit our self we trade with each other. Trading is an essential part of our survival. Not only trading is related to money, but it is also related to every activity we provide others in return for something. It could be food, could be your time, could be your values.
But since trade happens between two parties, sometimes it raises trust problems. Not every human being is trustworthy nor anyone wants to get exploited.
People want more of something than they provide which is the biggest problem in trade. They can break the mutual agreement between two parties and one might get exploited.
To solve this problem in the digital world "Smart Contracts " are invented which basically act like our physical contracts where we write our requirements to fulfill and after requirement the order takes place. But this is in digital form, the contract is coded and it's on blockchain thus not requiring any lawyer to make a contract nor getting any third parties to handle contracts.
What are Smart Contracts?
These are the contracts that are programmed online such that when the requirements of two parties are met the contract is automatically executed and the final trade between the two parties is done. These are stored on blockchain so no one edit them after they have been created.
How do these Smart Contracts work?
The programmer creates the code in "if/then" and make a contract and store it on the blockchain. In code, the requirements of both parties are been set up. So when 1st performs a task like paying 100$ on-site the contracts verify it and as a result 100$ of ETH is sent to him. Hence, completing the task.
Why should we use Smart Contracts and What are the features.
Security: It is the main and sole reason to use smart contracts which eliminates us from the risk of exploiting the other parties after the mutual agreement. Once the Smart Contract is created it cannot tamper with it. So the security is preserved.
Transparency: Hence the smart contract is stored on blockchain everything is on the open domain and not hidden. No one can change after that as in blockchain to change every verifies the blocks which are impossible to hack.
Cost-Effective: Which we created a physical contract the lawyer is required or any third party is required to manage all the points in contracts and they cost a lot handling everything. With the help of smart contracts the lawyers and third - parties are eliminated which can save some money.
These are some of the main points which smart contracts solve.
How does it solve the biggest issue?
The biggest issue currently faced by us in the democracy is trusting the government which is exploring the people money which they pay tax on but the government not keeping words they promised.
The important part where we can introduce smart contracts is in voting and polls. Wherever possible, which makes any agency fail to tamper any data to get them in favor. The data will be public and secure on the blockchain which makes people of the country trust the process and the values of democracy will remain as it is.
This implementation will solve our biggest problem like corruption hence being transparent about everything action took place and not keeping public in dark.
Limitations:
Well, smart contracts are very good and reliable but they are useful to some extent, there are many situations where we cannot use them properly. There are some situations where we need physical parties to analyze the defects and problems faced by both parties. Like if there is an accident and there is a smart contract of insurance against it. It insurance will automatically deploy but still, we need a third party to verify the situation and if requirements are like whether the drive has been drinking, etc. In some physical situations, it cannot be fully used to its potential.
Potential of Smart Contracts
If you see the rise of the Ethereum network that's mainly because of the ability to create smart contracts on them. Due to only smart contracts, it has been able to achieve 2 nd position in the coin market.
Now, most of the Blockchain networks do smart contracts in which also come to SmartBCH. Which is really rising very and many new projects are being introduced.
SmartBCH will definitely gonna help BCH to bring much more liquidity and trading volume thus increasing the price.
Thank You.
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CyberCrypto
This is a very informative article mate, you explain everything well.