Smart Contracts In Cryptocurrency
Hello, we have something interesting to introduce to you today
You all understand the word contract, right? Private parties entering a formal and legally binding agreement is known as a contract. But have you heard of the term — ‘smart contract’?
What could smart contracts be?
They are a significant aspect of the crypto world, and we are here to tell you all about them.
What Are Smart Contracts?
Smart contracts are self-executing contracts where automated transactions occur when both parties have met the conditions specified in the transactions.
Then where do these executed contracts go? They get added to the blockchain as transactions. Thus, they run on the blockchain platform. The platform processes all the transactions in a contract; hence, no middlemen are required to execute these transactions.
Interesting right?
Let’s move forward and understand how they work so that the whole process gets even more simplified for all of us to comprehend.
For example, if Maria has a fridge that she wants to sell, the smart contract system will try to match and verify if anyone has met the conditions laid down by Maria. Suppose the system finds that a person named Samantha meets Maria’s requirements and vice-versa. In that case, the system will execute the contract automatically, and the contract amount will be transferred to Maria’s account from Samantha’s.
Moving ahead, let us now understand what the uses of these smart contracts are.
Uses of Smart Contracts
From healthcare to supply chain to government voting systems, smart contracts are used for many purposes.
Read ahead to know more deeply about them.
Health Care
Patients’ health records are encoded and stored on the blockchain platform with the help of a private key. Mainly all the records of patients — medical and hospital receipts can be stored on the blockchain and automatically shared even with insurance companies as ‘proof of service.’ Moreover, the use case does not end here, as the ledger can be used for even managing supplies, supervising drugs, etc
Supply Chain
All of you must have seen or heard the painful and never-ending process that supply chains suffer due to paper-based systems where forms must pass through multiple channels to get various approvals. And with all this comes the increased risks of fraud and loss.
Well, this is where smart contracts on blockchain come to the rescue. With their abilities to nullify risks, they tend to deliver an accessible and secure digital version to the parties involved in the chain. Thus they can be easily used for the payments and tasks to be executed automatically and for inventory management as well.
Government Voting Systems
You all must have heard or read that even voting systems are vulnerable to manipulation. In addition to this, voting systems are also highly inefficient because they require voters to show their identity, line up, and fill out forms.
Well, smart contracts can easily show their magic in such systems as well. Want to know how? Firstly, they provide a secure environment reducing the risks of manipulation. They are also ledger protected and thus cannot be easily decoded. And, when voting is transferred online, using smart contracts, they can easily increase the number of participants in the voting system.
So, as you all can see, in terms of real-world use cases, smart contracts do work like magic!
Types of Smart Contracts
Decentralized Autonomous Organizations (DAOs)
Decentralized Autonomous Organizations are blockchain communities bounded by specific rules coded into the contracts and integrated with governance mechanisms. Hence, all the actions are carried out by these codes only.
Smart Legal Contracts
These contracts require the parties to carry out their contractual obligations as they are legally enforceable. In any case, if it does not happen, strict legal actions can be taken against them.
Application Logic Contracts
These contracts involve application-based codes that remain merged with other blockchain contracts.
Advantages of Smart Contracts
Smart Contracts have many advantages, including -ACCURACY, TRANSPARENCY, SPEED, SECURITY — you name it, and they have it.
Accuracy
Using smart contracts eliminates the risk of errors due to the manual filling of various forms.
Speed
As smart contracts run on automatic processes and, in most cases, there is no human involvement, the speed of transactions is extremely high.
Reliability
The entered data on the blockchain cannot easily be tampered with. Smart contracts provide a highly secure environment in which both parties are strongly protected.
Disadvantages of Smart Contracts
Every technology that is a part of an even bigger technology also comes with its disadvantages.
Let’s dig deeper and take a closer look at what these are-
Seeking Technical Expertise Becomes A Must
Parties involved in smart contracts may not know how to write a smart contract code and, in such cases, would have to seek technical expertise. In addition, the risk of making human errors is also accompanied. As a result, the smart contract program would not be able to execute the functions according to the text agreements between the parties.
Vulnerabilities Are Not Easy To Fix
Due to flaws in their contractual design, smart contracts could become vulnerable to hacking. And these flaws do not have the chance of being corrected once the transaction is stored on the blockchain. There is no alternative way to change the data on a blockchain.
Difficult To Understand
Smart contracts involve terminology that cannot understand certain ambiguous terms and conditions; thus, the technology faces a problem in handling that.
So, you see, these smart contracts are actually “very smart,” and they come with their own set of efficient functions, advantages, and limitations. We hope this article gives you a clearer understanding of them. Stay tuned; we will surely keep providing you with more exciting and insightful information regarding the various aspects of the crypto world.
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