About Smart Contracts

The emergence of blockchain technology has led to the development of bitcoin and other cryptocurrencies. Although, digital currencies are not the only benefit of such innovation. Smart contracts will have a great impact on the financial sector and commerce. Keep reading if you want to know more about the concept of smart contracts.

With the transition to digital methods of communicating, storing, and processing information, the foundation for a new form of contracts was laid. In 1996, Nick Szabo introduced the concept of self-executable digital contracts, called smart contracts. This term includes computer algorithms designed to automate, facilitate, verify, or enforce the negotiation or performance of a contract between parties. The practical application of smart contracts came into use with blockchain technology. Decentralized blockchain-based systems are believed to be necessary conditions for the execution of a smart contract. Important to know, that this process does not require a third party or mediator since its code cannot be changed or modified accidentally. Beyond the blockchain ecosystem, a smart contract would just be software code.

Moreover, the main idea is that the computer algorithm eliminates the human factor in business operations. The smart contract, in particular, eliminates the chance of potential fraud, mistakes, intermediaries, and can help to cut down costs on equipment maintenance. The rapid growth of smart contracts began only in 2013, when Vitaly Buterin, the developer of Ethereum, founded a new digital currency. Then, he decided to expand the potential for smart contracts created in the ethereum environment by a universal decentralized blockchain platform aimed to program various data storage and processing systems. The terms of the agreement within the system have to be put mathematically. Nowadays, Side Chains and NXT systems have been added to the platforms where smart contracts function.

On the one hand, a smart contract can be created by anyone. But it requires special skills and knowledge, such as the language of smart contracts coding (i.e. Viper or Solidity). If you want to deploy your smart contract, you need to pay for this with ETH, however. The contract precisely describes the terms of implementation and is confirmed with the parties’ signature. It is also considered a reliable source of digital data. Along with that, smart contracts entail no risks, costs, or other traditional legal agreement problems. In addition to Ethereum, some other platforms use smart contracts such as NEO, Tezos, Cardano, Stellar, etc. Smart contacts are now used mainly for transactions involving the buying or selling of crypto-currencies. To use smart contracts is possible when both parties have accounts on the same exchange or blockchain platform.

However, smart contracts can change the vector of doing business. This technology will make radical transformations by speeding up transactions, reducing bureaucracy, and improving overall aggregate efficiency. Many industries, such as music, art, finance, retail, real estate, telecommunications, and supply chains, could take the advantage of smart contracts and use them for improving their services.

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Valentina BEREZA, Team bit4you