BITSONIC’s Crypto Book — Smart Contract
Features of smart contracts
1) No need for an intermediary, no waste of time and cost
2) Documents will never be stolen or lost when making a contract
3) Anyone can execute contracts through smart contracts
4) All documents are encrypted for security reasons
The best method of contracts
Smart contracts are most useful when mutual transactions happen. This allows the transaction history to be shared transparently and reduces fees as no intermediaries are involved.
You can check the details through Etherscan.
It has high security as it is an electronic contract designed on a blockchain. Besides, the contract is executed when the conditions between the trading parties are matched without a third party participating in the middle.
How do smart contracts work?
Smart contracts implement a P2P method that works when certain conditions are met without an intermediary. It supports anyone to sign and modify contracts easily and quickly.
In the case of documentary contracts, an intermediary is usually involved in executing the contract. However, smart contracts are automatically executed by the blockchain, verifying and guaranteeing the contract’s validity.
Security issues
Since smart contracts have been developed and utilized for a short while, errors and functions need to be corrected.
Entering the result value to establish a contract is called ‘Oracle’. In order to establish a mutual contract, the contractor enters the result value. If an incorrect value is entered, an error occurs. One of the typical characteristics of a blockchain is that it cannot be forged or altered. However, if incorrect information is initially entered, an unknown contract is concluded due to this characteristic.
Like ordinary contracts that occur in everyday life, smart contracts should be changed or canceled depending on the situation. However, in order to change or cancel the contract, specific skills are required. Since it can be canceled only if a particular function is designed in advance, still unsolved issues remained.
Smart contracts have been developed and utilized for not long time. We cannot say that we have implemented the perfect technology yet. Still, we look forward to providing solutions to existing constraints and creating new added value.
Distribution industry
There are some issues caught by selling fake foods or selling foods that have expired. Usually, it took about 7 days to identify and track the retailer, but Walmart shortened the tracking time to 2.2 seconds by implementing a smart contract.
“Kaola,” an overseas direct purchase platform under Alibaba, uses smart contracts to track products’ distribution process and check whether they are authentic. Through this, it is possible to solve problems such as product inconsistency and omission of logistics information that occur at overseas direct purchases.
Check the distribution ecosystem based on the blockchain through our last posting, Blockchain Economy Distribution Ecosystem.
Financial industry
In the traditional financial industry, an intermediary is involved in managing and operating all financial processes. However, the user who makes a transaction cannot check the transaction process, so the user has no choice but to leave everything to the financial institution to do the transaction.
However, using smart contracts, users can trade faster with security and a cheaper fee.
For example, Shinhan Bank in Korea implemented a blockchain qualification verification system. It can replace the verification process of documents required for the loan service for the first time in Korea. They applied a smart contract to the interest rate swap transaction (derivatives), so shortened the process to handle transaction confirmation and fund settlement and reduced time and cost spent.
Content copyright and profit share
In social media today, quality content should be accumulated to complete a single platform. It takes a lot of time to create a piece of content, or it takes a high cost depending on its quality. However, the content that is indiscriminately duplicated is enormous.
What about the music distribution market? The distributors and producers have more revenue than copyright holders who made music in the music distribution market. It seems unfair, but the reality is. The importance of content is increasing, but the protection system against it is still insufficient. One day, these limitations will be solved through the implementation of smart contracts.
Utilities of smart contracts
By registering content in a smart contract, the content information is transparently shared and managed, protecting the rights of creation and preventing duplication. Besides, a solution will be given to what has not been properly compensated for the content.
Smart contracts will provide more reasonable rewards to simplify the process for intermediaries, and the process will be shortened so that users can use the service efficiently.
Check the contents ecosystem based on the blockchain through our last posting, blockchain economy [Contents Industry].
