How To Use Smart Contracts

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How To Use Smart Contracts

We tell how smart contracts appeared, how they work, where they can be used and what are their advantages.

What is a smart contract?

A smart contract (or smart contract) is a special protocol designed for parties who can participate in negotiations, check their conditions, implement agreements and monitor contract performance.

How did the smart contracts come about?

Some may argue that the blockchain is notable for its applications that record various data and events. Others believe that the greatest value of the blockchain is in its ability to process transactions. All these functions of the blockchain, like many others, can be combined to create an extremely useful application – smart contracts.

How do smart contracts work?

The basic principle can be explained by the example of a vending machine that implicitly executes instructions. The fulfillment of the obligations of the parties is checked automatically.

What do you need to create a smart contract?

The subject of the agreement

The program must have access to the goods or services about which the contract is concluded, and be able to automatically give or close access to them.

Terms of an agreement

Conditions of a smart contract in the form of an exact sequence of operations. All members must sign these terms.

Decentralized platform

The smart contract is recorded in the blockchain of this platform and is distributed on its nodes.

What are the benefits of smart contacts?

Security

The smart contract is encrypted and stored distributed, which guarantees protection against loss or unauthorized changes.

What are the disadvantages of smart contracts?

Human factor

The code is written by people, and they can be wrong, while the smart contract is recorded in the blockchain, and therefore can not be changed. A good example of such a mistake is the story of DAO. Errors of developers have cost dearly to users, and companies – hackers took advantage of the vulnerability and stole about $ 60 million.

Undefined legal status

Today, smart contracts are not regulated by governments, so if the government decides to create a legal framework for smart contracts, problems may arise.

Why to use smart contracts

Smart contracts can optimize and automate a wide variety of transactions that occur in any professional sector. They can help businesses establish trust with their customers and ensure maximum transparency of transactions. And, most importantly, they are unchanged, that is, eliminate the risk that someone will change the contract in order to take advantage of the benefits at the expense of others. These features can be very valuable, especially in industries such as the financial sector or public administration. Although smart contracts are a simple concept, the nuances associated with their use, in reality, can complicate matters.

I’m a freelance writer and full-time curious person. My main interests are philosophy, politics, art, culture, science, and how they’re all interlinked. When I’m not writing, I’m fronting a band, producing records, and making videos. I’m also currently working on launching a YouTube channel that will focus on culture and politics. I think blockchain technology is fascinating because of the huge potential it has to revolutionise not only the financial sector, but society as a whole.