The smart contract has become the talk of the town ever since Ethereum made it a prominent aspect of peer-to-peer transactions. Though the concept of smart contracts existed in the 1990s and was later introduced into practical application via Bitcoin, Ethereum was the first protocol to revolutionize smart contracts. Vitalik Buterin, the co-founder of Ethereum, wanted smart contracts to be the fundamental building blocks of applications built on Ethereum.
The evolution of smart contracts since then has jumped leaps and bounds, and its use cases have been growing as well.
What are smart contracts?
First proposed by Nick Szabo in 1994, a smart contract is a self-executing contract running on a set of codes. The terms and conditions of the agreement are written in codes between the two parties of a transaction, and when both parties agree, the smart contract is implemented.
Once deployed into a blockchain protocol, smart contracts cannot be deleted by default and communicating with them is irreversible.
How do smart contracts work?
The working of smart contracts can be simplified into the following steps:
- One party codes the smart contract based on their requirements, and the coding is finished. The coding is finished.
- The contract goes live and is stored on a specific blockchain, say Ethereum.
- The contract executes when another party agrees to the conditions.
Benefits of smart contract development
- No intermediaries – Smart contracts remove any rent-seeking third-party intervention, such as banks or financial institutions, from the transaction.
- Transparency – The terms and conditions existing in the contract are fully accessible and visible to each relevant party.
- P2P transaction – Smart contracts establish a peer-to-peer transaction wherein both parties can interact and transfer assets directly.
- Security – Smart contracts use one of the highest levels of data encryption, making them one of the most secured items on the web.
- Speed – Thanks to the P2P transaction and smart contracts being coded and live on the internet, transactions can be executed very fast.
- Trust – Smart contracts, being transparent, autonomous and secure, erase any possibility of error, bias or manipulation.
Use cases of Smart Contracts
Smart contracts can be used effectively in the following industries that follow a clear set of regulations, algorithms and quantifiable terms of engagement:
- Real estate
- Supply Chain
Smart contracts are considered the future of contracts with newly found applications in many industries. It has become an integral part of transactions, enabling automation and efficiency in various business processes and dealings. With businesses finding prominent use cases of smart contracts, it is sure to become the next big thing on the internet.
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