Hearing smart contracts everyday makes me wonder what at all that is. Sometime ago, we saw lionshare, and several other schemes that people were calling smart contracts. They were trying really hard to refer people since that was the only way they could earn some amounts of money. Immediately you pay, your uplink receives the money. That led to the question, what actually is a smart contract?
A smart contract is simply a program stored on a blockchain that runs when predetermined conditions are met. They are basically used to automate the execution of an agreement so that all participants can be immediate certain of an outcome.
Think of smart contract as a telegram bot or the other click earn bots we see around. These bots are programmed or coded in such a way that,they give a particular response when a particular button or key is pressed thus, when certain conditions are met. I also sometimes compare that to the javascript onclick function. This function is used to specify properties or actions on a webpage that should take place only and only if a particular button or div or element is clicked. Smart contracts also work the same way.
The difference between a telegram bot and a smart contract is that, a telegram bot is launched on the telegram API whereas a smart contract on the blockchain. Their way of functioning might be similar or different but they both render results in a common way.
The forsage smart contract for example was made to run in a way that, immediately a new user joins with a dedicated link and pays the money, it automatically goes to the uplink or the person who referred him/her.
Just like several apps and automated bots, smart contracts also work with the "if....then" statements. "If the new user pays, then give that money to the uplink. " These if/when and then statements are then translated into codes on a blockchain. Just as said earlier, a group of computers work together to perform the actions by the codes and as such ends up releasing funds, notifications or issuing a ticket. Transactions made by smart contracts do not allow third parties to view and as such, only parties that have permission to it can see the results.
Arslankhalid writes an article about smart contracts, where he mentions Nick Szabo as the first to describe the concept of smart contracts. Szabo talked about the uses of smart contracts and it could be really important thing.
Arslankhalid talks about the fact that blockchain smart contracts supports the creation of trustless protocols; a situation where two parties can make a commitment through the blockchain without mutual knowledge or trust.
Smart contracts permit trusted transactions and agreement to be carried out among anonymous people without the need of a central authority or enforcement mechanism.
Smart contracts are just like traditional contracts, rules and penalties are defined around an agreement and it automatically enforces these obligations. The integral components of a smart contract are termed as objects.
There are essentially three objects in a smart contract- the signatories; who are the parties involved the smart contracts that use digital signatures to approve or disapprove the contractual terms, the subject of agreement or contract and the specific terms.
These objects are basically what governs each and every smart contractor's operation. Smart contracts can be in various forms;
A smart contract can be made to transfer ownership of an apartment to someone once a certain amount of resource enters a seller's wallet.
Here, it is automated and immediately the amount enters the seller's account, the ownership is transferred. One thing about smart contracts is that, they are automated, transparent and irreversible. It does not need the consent of someone to execute what has being coded after its launch. It automatically renders and performs the actions when the particular conditions are met.
Government voting system
People might be thinking smart contracts are run in blockchain and blockchain is used for cryptocurrencies so how can it be used for voting? Blockchain is not used for only cryptocurrencies. I will be talking about blockchain sometime soon.
Using a system of smart contracts, smart contracts provide an environment which will be clear from manipulations. It will be transparent to parties who have the permission to access the output of it and as such, bias and manipulations are checked since no other third party is allowed in its operation.
Supply chain.
Traditionally, supply chains do suffer since forms have to pass through the hands of several channels before they are approved. The process only increases fraud since some of the channels can be easily compromised but for a situation where smart contracts are used, the blockchain aspect of it alone cancels all the risks by delivering accessible and secure digital version to parties involved in the chain.
When we talk about smart contracts, then we need to talk of the benefits or comfortable features we derive from using smart contracts.
Smart contracts incorporate critical tools for book keeping and eliminating the possibilities of infiltration of accounting records
Transparency :Smart contracts allow a group of people to take part in decision making it in a transparent way.The terms and conditions of a smart contract are visible to whom ever it may consent and there is no way to dispute them once the contract is established.
Accuracy: In a smart contract, all terms and conditions are recorded in details when such conditions are met, the actions are done but if they are not met, services are not rendered.
Clear communication : In smart contract, there is no room for miscommunication or misinterpretation. Smart contract are drastically cut down to efficiency.
Speed: Smart contracts do their actions with speed since there are no interferences permitted in their work when they are launched. There is no manual documentations needed, immediately a condition is met, actions continue.
Trust: Since smart contracts do not need anyone to call them to function after launch, they generate a sense of trust between two or more parties who are making an agreement. It generates absolute confidence for them as the my deal with one another. The transparency, autonomous and secure nature of the smart contract removes any possibility I'd manipulation, bias or error and as such parties develop trust for each other.
Smart contracts are really great options for businesses, parties and groups of people who wants to build trust among a group of people or better still wants more comfort in their dealings where results can not be manipulated or made biased.
Thank you all for your time. Please do leave a like , a comment and also subscribe.
References
quora.com
medium.com
corporatefinanceinstitue.com
coinflex.com
investopedia.com
ibm.com
Arslankhalid's article.
All pictures from unsplash
Sorry, I don't have the direct links to each reference
