Definition of ‘Smart Contracts’ - Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met.
What Are Smart Contracts?
Smart contracts definition - Smart contracts are programs stored on a blockchain that run when predetermined conditions are met.
A network of computers execute the actions when predetermined conditions have been met and verified.
These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket.
The blockchain is then updated when the transaction is completed. That means the transaction cannot be changed, and only parties who have been granted permission can see the results.
One of the most popular applications for smart contracts is in digital currency transactions. For example, let's say you want to buy a car from someone on Craigslist, using Bitcoin as payment.
You would need to trust that the other person will actually send you the car after receiving your payment. However, with a smart contract, you could set up the transaction to automatically release the car to you after the payment has been verified.
This eliminates the need for trust and can save both parties time and money.
Digital currencies are not the only use cases for smart contracts though. They can be used in any industry where transactions are needed to be completed securely and accurately. Some other examples include:
- Insurance claims
- Property rentals or sales
- Supply chain management
Smart contracts are still relatively new technology, but they are quickly gaining popularity due to their many benefits.
As more people become aware of them, we will likely see even more applications for them in the future. For now, it is important to understand what they are and how they can be used.
How Do Smart Contracts Work
Smart contracts are executed by a network of computers that run the program code. This network is made up of nodes, which are computers that store and execute smart contract code.
When you want to execute a smart contract, you send a request to one or more of these nodes. The node will then check to make sure that all of the conditions specified in the contract have been met. If they have, then the node will execute the code and update the blockchain accordingly.
So, smart contracts are executed through a decentralized network of computers. This makes them reliable and secure, as there is no single point of failure. In addition, the code is transparent and can be viewed by anyone who has permission to do so.
Benefits Of Smart Contracts
There are many benefits of using smart contracts. Some of the most notable benefits include:
- Security: As we mentioned earlier, smart contracts are executed through a decentralized network of computers. This makes them more secure than traditional transactions, which can be vulnerable to fraud or hacking.
- Accuracy: Smart contracts are automatically verified, which means there is less chance for mistakes or human error.
- Efficiency: Transactions that use smart contracts can be completed quickly and easily. There is no need for third-party verification, so the process can be streamlined.
- Transparency: As we also mentioned earlier, the code for smart contracts is transparent and can be viewed by anyone who has permission to do so. This helps to ensure that the contract is executed as intended.
Where Are Smart Contracts Used?
Voting: Smart contracts can be used to securely and accurately record votes. This could be, especially, useful in cases where there is a need for anonymity, such as voting for a president or school board members.
Property rentals or sales: Smart contracts can be used to streamline the process of renting or selling properties. For example, the contract could automatically release funds to the appropriate party once all conditions have been met.
Insurance claims: Smart contracts can be used to manage insurance claims. For example, the contract could automatically verify that all required documents have been submitted before releasing payment to the claimant.
Supply chain management: Smart contracts can be used to track and verify shipments throughout the supply chain. This would help to ensure that products are delivered on time and that there is no overlap or shortage of inventory.
Clinical trials: Smart contracts can be used to manage and track the progress of clinical trials. This would help to ensure that all data is accurately collected and that no fraudulent activities take place.
Loans: Smart contracts can be used to manage and track loans. This would help to ensure that payments are made on time and that the loan is not over-extended.
What Are Examples Of Smart Contracts?
There are many examples of smart contracts in use today. Some of the most notable ones include:
- The DAO: This was a smart contract that was used to manage a venture capital fund. It raised over $150 million before being hacked, resulting in a loss of over $50 million.
- Ethereum: Ethereum is a platform for building smart contracts. It was the first platform to allow developers to create smart contracts that run on a blockchain.
- IBM Food Trust: IBM has developed a system for tracking food shipments, using smart contracts. This helps to ensure that food is not tampered with or contaminated during transport.
- CarSmart: CarSmart is a platform that uses smart contracts to help drivers buy and sell cars. It has been used to complete over $100 million in transactions.
Which crypto has a smart contract?
Ethereum is the first and most well-known smart contract platform. It was created by Vitalik Buterin in 2015 and it allows developers to create decentralized applications (apps) on its blockchain. Ethereum's smart contracts are executed through Ether, which is the native cryptocurrency of the Ethereum network. Some other blockchains that support smart contracts include; Solana(SOL), Polkadot(DOT), Ergo(ERG), Algorand(ALGO), NEO, Lisk, and Cardano.
Why are smart contracts bad?
Smart contracts are bad because they are unchangeable and irreversible. If something goes wrong with the smart contract, there is no way to go back and fix it. For example, if a smart contract is used to release funds to the appropriate parties, but something goes wrong and the funds are released to the wrong party, the only option would be to create a new smart contract. The old smart contract would still be on the blockchain and there would be no way to change it. This could cause a lot of problems for businesses that use smart contracts. Another reason why smart contracts can be bad is that they are not always user-friendly. They can be difficult to understand and used correctly. This could lead to errors that cause problems with the smart contract.
What is a smart contract called?
A smart contract is also called a self-executing contract, blockchain contract, or distributed contract.