Smart Contracts

Understanding Smart Contracts for beginners

I’ve highlighted few definitions about Smart Contracts below;

Smart contracts simply means pieces of code that allow the Ethereum blockchain to immediately transport or move data. i.e Instructions of how and when data should move.

Another definition from Wikipedia “ A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible”

Smart contracts are new technology that enables automatic negotiation, fulfillment and execution of agreement terms in a blockchain environment “J.R. Gutierrez ”

A smart contract, also known as a cryptocontract , is a computer program that directly controls the transfer of digital currencies or assets between parties under certain conditions. These contracts are stored on blockchain technology, a decentralized ledger that also underpins bitcoin and other cryptocurrencies.

If you are curious about how smart contract work, find it below;

It is an agreement between two people in the form of computer code. They run on the blockchain, so they are stored on a public database and cannot be changed. This transactions occurs in a smart contract that is processed by the blockchain, i.e they are sent automatically without a third party.

Here is a graphical example of smart contracts use cases;

Voting:

The recent Nigerian presidential election has stirred up the integrity of the current voting system and has been repeatedly challenged by politicians and voters. Is it rigged or isn’t it? With smart contracts, it will be impossible to rig it in any way.

If all votes were stored on a blockchain, it would be nearly impossible to hack and decode them. In addition, the automated nature of smart contracts can make the tedious process of voting much simpler and fully online. It may even boost the low turnout Nigeria usually gets. Blockchain startups like Horizon State want to enable transparent, unbiased voting in nations around the world.

Supply Chain

Supply chain cycle

Supply chains are hampered by a paper-based system of contracts. These forms have to pass through many hands for sometimes even the simplest tasks. Theft, loss and fraud are quite common due to the increased exposure this system creates. The blockchain and smart contracts nullify this by providing a secure, transparent digital version to all parties. It can automate tasks and transactions, and even restrict behavior based on the rules stored within its code.

Automobiles

Smart contracts drives self-driving cars.

It can enable vehicles to talk to each other on the road — like one allowing the other to make a lane change once certain conditions are met, like “If your passenger is late for work, plus has a route with worse traffic than mine, you can cut in front of me.” Make instant toll payments, identify the liable side in an accident.

Insurance

For an insurance company charging rates based on the way customers are operating their vehicles. Smart contracts can make vehicles to report data to the insurance companies.

Finance

Smart contracts has so much potential to save sums of money by automating various financial operations, including international transactions.

Legal Issues

Smart contracts has the potential of automating cases in a traceable and transparent way. Traditional model of contracts “i.e. relying on lawyers and notaries to resolve conflicts and ensure all aspects of the agreement are met” It saves money and time, it can make notaries and contract lawyers obsolete.

Healthcare

Smart contracts help streamline the process of authentication and authorization for insurance trials, patient data protection, regulation compliance and even healthcare supplies.

Real Estate

Here is how smart contracts works here, let’s suppose you rent an apartment for a week through airbnb, except this is a version of airbnb that exists on a blockchain in which you can pay in a cryptocurrency. After paying, you receive a digital receipt, as dictated within the code of the smart contract. The smart contract tracks whether you receive the “digital key” or not. If you don’t get this key by the specified date, the smart contract automatically gives you a refund.

Few Characteristics of smart contracts

They’re self-verifying due to automated possibilities; also self-enforcing when the rules are met at all stages and tamper-proof, as no one can change what’s been programmed.

Here are Capabilities of smart contracts

They automate processes done manually and ensure security. Also reduce relation to trusted intermediaries. In addition support multi-signature accounts to distribute funds as soon as all parties involved confirm the agreement. Users’ agreements are managed and utility are provided to other contracts (similar to how a software library works) and finally store information about an app (domain registration information, membership records, etc.)

Here are some Key note:

Smart contracts drives Automation of an operation, its requires more than one smart contract to complete tasks. Also need an entity called IoT, it assist with information to complete a task.they are programs and known as a crypto-contract.

The goal of this post is to introduce the term Smart Contracts and help with an understanding of this terminology in the world of Blockchain.