What is a smart contract?

Simply put, a smart contract is a protocol for setting up contracts that, using information about the terms of the contract, performs all the actions envisaged in it automatically. These types of contracts allow valid transactions to take place without the intervention of third parties, and are in fact computer protocols designed to facilitate, verify, or execute a negotiation digitally. In addition, transactions in this process are traceable and irreversible.

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What is the purpose of a smart contract? (Smart Contract)

Imagine you need to sell a house. This is very time consuming and requires running and requires sufficient documentation, communication as well as a high level of risk. That is why the majority of home sellers decide to find a real estate agent, so that he can take over all the clerical and marketing work and supervise the work process until the contract is closed. In the end, after concluding a successful contract, the representatives of the seller and the buyer receive a percentage of the sale price as a commission. This amount of money is a significant financial loss for the seller. Despite such conditions, smart contracts can be much more efficient and lead to a revolution in the industry. Perhaps most importantly, they can address the issue of “trust”. To solve. The process of smart contracts is such that home ownership will only be transferred to the buyer if the agreed money is sent to the system. This means that both money and property rights are stored in this system and presented to the parties to the contract at exactly the same time. In addition, the transaction is monitored and approved by hundreds of others, so flawless delivery is guaranteed. Since the issue of “trust” between the parties is no longer an issue, there is no need for an intermediary. Everything a real estate agent does can be pre- planned in a smart contract , and both parties to the contract will save a considerable amount of money.

Where does the idea of a smart contract come from?

The idea initiated in 1994 by Nick Szabo (Nick Szabo) , computers and cryptography expert, was introduced in 1994. He defined the basic principles of the work, but at that time there was no suitable environment for the realization of his idea. Since the advent of China Blockchain technology, many changes have taken place, and Bitcoin has laid the foundation for smart contracts on the Chinese blockchain platform. However, its tools could not meet all these needs. Then, with the advent of Atrium, smart contracts were made available to the public and stimulated more transactions.

How Do Smart Contracts Work?

The general rule can be explained by how vending machines work. These devices automatically execute only the instructions given to them. You need to enter the required amount of cryptocurrency into the smart contract and then get the ownership of the house and other necessary permits in your account. At the beginning, the assets and terms of the contract are coded and placed on the block of a Chinese block. This contract is distributed and copied several times between platform nodes, and after its execution, the contract is executed according to the specified conditions. In addition, the program automatically monitors the fulfillment of obligations.

What do we need to create a smart contract?

Contract Subject

This program must have access to the goods and services under the contract to lock and unlock them automatically.

Digital signatures

All participants start the agreement by signing the contract through their private keys.

Terms of the contract

The terms of the smart contract are defined as a precise sequence of operations, and all participants must sign these terms.

Decentralized platform

The smart contract is placed on the platform blockchain and distributed among the platform nodes.

Real-world smart contract application

Smart contracts can be used in a variety of contexts, for example:

voting

Voting results can be placed on the Chinese block and distributed among the network nodes. All this data is encrypted and anonymous, so the possibility of any manipulation is eliminated.

logistic

In general, the supply chain includes different sections and links. Each link must receive its approval from the previous section in order for the provisions of its cooperation agreement to be enforceable. This is very time consuming and by implementing a smart contract, this time can be saved and each participant can also see the progress of the work and do their work on time. Smart contracts ensure transparency in the contract by ensuring transparency in the terms of the contract, and in addition to the integration of the Internet of Things, it is also possible to track shipments. Other applications of smart contracts include areas such as management, banking, insurance, real estate, and more.

What are the benefits of using a smart contract?

Smart contracts take full advantage of China Blockchain technology, such as:

Security

Smart contracts are encrypted and distributed between nodes on the network. This ensures that data is not lost or altered without your permission.

Speed and time saving

Most processes are automated, and as a result, most intermediaries are lost.

Standardization

There are a wide variety of smart contracts today. You can choose one of them and change it according to your needs.

Esteghlal

Smart contracts eliminate the need for intermediaries and essentially give you complete control over the agreement.

the trust

No one can steal or lose your documents because they are encrypted and securely stored in a general ledger. In addition, you do not need to trust the people you deal with or expect them to trust you, because the smart contract system easily solves the “trust” problem.

Cost savings

Thanks to smart contracts, there is no need for official offices, consultants, real estate agents and many other intermediaries, and by renewing the contract, many of the costs related to their services will be eliminated.

Performance

By using smart contracts, you also save time and no longer need to record a lot of paper documents, send or move them to specific places.

Disadvantages of smart contract

Aside from the positives mentioned above, smart contracts are not as flawless as many other new projects. Some of these shortcomings are:

The human factor

These codes are written by people and as a result it is possible that something wrong will happen. Even if a smart contract is registered in the Chinese bloc despite these mistakes, it can no longer be changed. For example, an error in the programming of a company’s algorithm led hackers to exploit this mistake and steal about $ 60 million.

Uncertain legal status

At present, smart contracts are not regulated by any government. So if government agencies decide to create a legal framework for smart contracts, this will be a problem.

Execution costs

Smart contracts cannot be done without programming. Therefore, having an experienced programmer, and adopting China blockchain technology in the internal structure of the company is essential to execute a smart contract.

Which blockchains can process smart contracts?

Bitcoin: Blockchain Bitcoin is a great option for processing bitcoin transactions, but it has few capabilities for processing documents.
Side Chains: This is another name for blockchains that operate in the vicinity of Bitcoin and provide more space for processing contracts.
NXT: NXT is a public blockchain platform that is a limited collection of templates for smart contracts. You must use what is given to you; You are not actually able to code.
Atrium: Atrium is a public blockchain platform that is highly advanced for encrypting and processing smart contracts. You can easily upload the code you want, but you have to pay for “ETH” tokens to do so.

Conclusion

Utilizing the benefits of smart contracts is not limited to small agreements, but governments and large corporations can also reap the many benefits. These types of contracts allow traders and buyers to track their purchases in the supply chain, which in turn increases trust in the work cycle. In addition, smart contracts save costs and time by eliminating the need for intermediaries, and simplify transactions by automating the process.