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Smart Contracts? What are they?

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Written by   42
6 months ago

You all are here because you are crypto worms and love writing obviously. Being in the world of crypto really means stumbling upon words related to or near to this vivid and ever growing technology. One such word I came across is Smart Contracts and when I read on it, it got me all fascinated and now I want to transfer that spark to you so that you too get to marvel on the advancements of era we have entered in and how technology is transcending the limits of imagination. Also, I will try to make it simple so as to carry more and more readers with the flow.

In my other post, I wrote a good deal about blockchain and also, how it fuels crypto currencies. Here is the link if you wanna read it first :

Smart contract is another awesome application of the BLOCKCHAIN.

Before starting any further, I would like to pitch a scenario which will help you get a hang of it easily:-

Most of us rely heavily on online shopping these days. Suppose you ordered some product from an E-commerce site and paid some amount for it online using credit, debit cards or upi etc. Now you already paid and did your share and are just relying on the E-commerce company to send you the product on the delivery date mentioned. Now it may be the case that they were fraud and your product will never come and also, your money is gone forever. Aren't you doomed now?

Or there might be an another case also. Suppose, E-commerce company relies on a logistic service to deliver your product and they paid some of your money to them for their service. But logistic people ditched them and never delivered your product and neither did they return any of the money. Aren't both of you i.e. E-commerce company and you doomed now?

What could be the possible solution for the above situation? One way is to trust some third party which will take your money and will give it to the E-commerce company only when they deliver your product and similarly there will be one between the logistics and company. But then again there are trust issues. Is it write to assume that the third party will never run away with the money leaving the problem as it was before. All we can do is rely on the reputation of the intermediary in this case.

This is where Smart Contracts kicks in. Smart contracts are code written in programming language which can specify rules as per the demands of the job and then process accordingly. In this case, smart contract can be written to hold the money which we paid to E-commerce company and release it to them only when the delivery completes. All of this happens in a fully automated way and as you know, code is law. Smart contracts will follow the rule of if and then :-

If delivery completes then pay the money to company else return it back to the customer. All of this is done in a fully automated way and also, it is faster than involving an intermediary which may take up to days. Also, the contract is registered on blockchain and thus no one change it once specified and be it days or years or centuries, the content will be as it is. There is no way any party can tamper with them and any of them can hold it as a proof in case any fraud occurs.

A more formal definition!!

Smart Contracts are automated(self-executing) contracts in which the terms of agreement between the parties participating in the business are written in lines of code. The code and agreements are placed on the distributed and decentralized blockchain technology. It eliminates the need of intermediary or third party or any other legal system and agreements with trust are can be made using them.

How can we write smart contracts?

Just so you know, smart contracts were first introduced on the Ethereum blockchain. You can write smart contracts for various purposes using Solidity, java, c++, javascript and you can explore more about languages. I also found an article about writing your first smart contract on the website and here is the link :-


  • They provide transparency.

  • Can't be tampered with as once they are created, they are immutable.

  • They provide speed of transactions over the traditional business processes as they are software codes and nothing is manual.

  • Easy to maintain as everything is on a machine. Storage devices and backup technology is pretty sharp these days.

  • They provide security as they use best available encryption algorithms.

  • They eliminate the need for lawyers and other intermediaries thus saving both time and money.

To demonstrate the power of this tech, here is its one use case in crowdfunding platforms. Suppose some startup needs funding for execution of activities and it uses crowdfunding but doesn't gets all the funding they required. In such case the fund deposited with the startup from different donors can be returned using if then rule. If fund collected then startup can use it else donors can get their money back and rules for this agreement strengthens the appropriate use of crowdfunding building trust among donors and those who require. Also, donors and receiver can make agreement about righteous use of the money entrusted by people in startup and in other case, legal proceedings can be made and no startup can be fraudulent in this way as all the transactions from different donors and the agreement preceding donations are recorded on the blockchain.

It is a very promising technology transforming the way traditional contracts functioned and strengthening trusts in business, finance, banks etcetera and can really be of great use to your business the way you want.

Thanks for reading friends, hope you liked it.

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Written by   42
6 months ago
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