Smart contracts are a big part of blockchain integration and are of the essence because human beings are not reliable.
The blockchain can incorporate computerized sets of rules and mechanisms referred to as Smart Contracts.
In smart contracts, you need not fear bias, as it creates a trustless system, with written sets of code programmed for execution on some conditions.
They back this agreement into the blockchain, making it immutable as well as irreversible.
Nick Szabo, an American computer scientist and cryptographer as far back as 1994, introduced the concept of smart contracts.
But, Ethereum was the first blockchain to start smart contracts, using the Solidity programming language.
Many projects have adopted the Ethereum platform because it allows anyone to develop their coins on it.
Contracts on Ethereum get executed by EVM, Ethereum virtual machine.
EVM executes contracts on the Ethereum blockchain.
These smart contracts vary for different blockchains.
Polkadot uses the substrate programming language, while Solana uses the rust programming language.
As technology continues to develop, many people believe smart contracts will replace traditional contracts.
This is because of their open nature and the fact that you’ll know the contract code in advance, and cannot be changed or altered by malicious parties.
What is a Contract?
We can characterize a contract as a legally binding agreement with specific terms and conditions between two or more entities.
Here, there is a promise to exchange one element of value for another.
But, this depends on the document (oral contract or written contract) and on whether it’s enforceable by law.
What is a Traditional Contract?
A Traditional contract requires human interaction/validation to meet the terms and conditions.
It takes its next actions under the written agreement.
Thus, a traditional contract takes time due to checking the contract, validation, and approval.
It is expensive, as it may involve a third party; For instance, during a dispute.
There is no guarantee that the third party will not run away.
Traditional contracts are slow and expensive.
Depending on the intermediary, both parties may have to wait till working hours to settle the transactions.
What is a Smart Contract?
Smart contracts are self-executing, open-source, written codes stored on a blockchain when certain predetermined conditions are met.
Typically, they are used to automate the execution of an agreement.
All participants can be certain of the outcome, without a third party involvement or time loss.
In this type of contract, you see the blockchain in its highest form of decentralization.
They can also automate a workflow, triggering the next action when conditions are met.
How smart contracts work.
Smart contracts are only business rules translated into code and recorded on the blockchain.
What makes a smart contract different from business rules, automation software, or stored procedures?
The answer is that conceptually; the principle is the same, but smart contracts can support automating processes that stretch across corporate boundaries.
This involves multiple organizations; existing ways of automating business rules can’t do that.Bennett.
When it validates the conditions, a network of computers called nodes carries the activities out.
Transferring money to the right parties and giving alerts are examples of these conditions.
When the transaction is done, they then record it on the blockchain.
That means the transaction becomes transparent and immutable.
An Example of a Smart Contract.
To better understand what a smart contract can do and achieve, let’s look at the Ethereum-powered smart contract using the solidity programming language.
Here’s a contract that stores and retrieves value in a variable.
Before writing your contract to avoid errors, it is always necessary to comment out the license identifier and specify your solidity version, as seen in the picture below.
The above 6 lines of code store and retrieve the value in a variable for the Storage Contract.
Why is it called a “smart contract”?
As technology is developing, we can eventually implement smart contracts in our day-to-day contracts.
Smart contracts are undoubtedly the way forward.
Integrating various smart contract platforms will save businesses worldwide time and money.
As a result, minimal human involvement will free individuals from dealing with inconsistencies that come with the traditional method of contracting.
Here’s why it’s called a smart contract:
Independent – Smart contracts eliminate the need for third-party interference. The guarantee for the transaction is the program itself.
Speed – On Immediate validation, it executes the contract, eliminating the need for correcting errors that may arise due to manually writing the contract or passing through a hierarchy of commands and saving valuable time.
Reliability and Transparency – A smart contract is reliable in the sense that when recorded on the blockchain it is immutable, so there’s no fear of bias from a third party and it performs transactions transparently to the parties involved.
Security – The blockchain is a haven for smart contracts, creating a safe environment for deploying the contract and seeing that it encrypts records on the blockchain, which makes it difficult to get hacked.
Savings – With smart contracts, you get to save the money you’ll spend on a 3rd party and, by extension, their associated time delays incurring extra fees.