Smart Contracts are best known when it comes to Ethereum and ICOs. However, in reality, Smart contracts already exist before that. Smart contracts were first introduced by an American computer scientist named Nick Szabo in 1994. He was also the one who invented BitGold in 1998 (ten years before Bitcoin).
What is Smart Contract?
According to CFA Level I Curriculum 2019, Smart Contracts means smart contracts, this contract is programmed to self-execute the terms agreed between the parties.
Smart contracts were first introduced by an American computer scientist named Nick Szabo in 1994. He was the one who invented the virtual currency Bit Gold in 1998 (ten years before Bitcoin). .
Benefits of Smart contracts
Smart Contract is an application that inherits many strengths of Blockchain technology, with the following benefits:
Automation: This process is fully automated, they do not depend on brokers or other third parties.
No loss: All documents are encrypted on a shared ledger, which means they can’t be lost.
Safety Guarantee: Your documents will always be safe by Blockchain and certainly not be threatened by any hacker.
Fast speed: Terms are automated by programming languages, software code is very fast so it saves time.
Cost savings: By skipping the middleman stage, it helps to save a large amount of money.
Accuracy: Common errors in writing papers are completely rectified.
How is a Smart Contract created?
For a smart contract to be programmed, the following elements are needed:
Contract holder: Has access to the products/services listed in the contract to automatically lock or unlock them.
Electronic signature: Contracting parties agree to implement agreements using private keys.
Contract terms: A clause takes the form of a series of activities and when agreeing to enter into a contract, both parties must sign to accept it.
Decentralized platform: Once completed, the smart contract will be uploaded to the Blockchain of the respective decentralized platform, and then distributed to the nodes of that platform.
Pros and cons of Smart Contracts
Cost savings: Just pay a very small fee to the blockchain network, save on fees for
Flexibility: Contract provisions are handled flexibly and efficiently for users.
Transparency, clarity: The origin of all transactions can be traced, but transactions are completely irreversible and every transaction will be recorded on the blockchain with extreme clarity.
High confidence: After the contract is completed, no one or a party can interfere in the execution process as well as the agreement of the contract.
Fast and convenient: Can set up and execute a contract in seconds, set up for many people at the same time and use it again and again.
Legality: Smart Contract has not been managed by the Law, so when an error occurs, your rights will not be protected.
Risks from the internet: If you reveal some “confidential” information or get noticed by hackers, you may face problems.
Human factor: Code is written by the programmer so it can make mistakes, and once uploaded to the Blockchain, it cannot be changed.
Smart contract execution steps
Like encrypted computer programs, smart contracts exactly enforce the parties’ agreements on the “if-then” principle.
2. Smart contracts sent through distributed ledger
The smart contract will be sent to other computers through a distributed ledger network after the terms of the contract are encrypted.
3. Contract performance
Once submitted to the distributed ledger network, the contract is monitored for compliance with the terms.
Challenges faced by smart contracts
Many Smart Contract vulnerabilities are caused by misunderstandings about scripting languages. Therefore, to enhance security, attention should be paid to improving the existing smart contract language and developing new languages.
Smart contracts are currently not recognized by the government or the law, so there are no legal regulations and policies.
Applications of smart contracts
1. Use in Elections
The smart contract will help the voting not be manipulated because the votes are protected by the ledger, to access it, it needs to be decrypted and needs to have a strong enough access, ie this will not be done by anyone. can do.
2. Use in Logistics (Supply Chain)
Smart Contract helps all participating departments to track the work progress to complete tasks on time, ensuring transparency and anti-fraud.
In addition, Smart Contract also provides the ability to monitor the supply process when integrated with the Internet of Things.
3. Use in management
Smart contracts eliminate risks thanks to an automated, transparent and accurate system that is all stored in a trusted ledger. Blockchain ledger will solve external and internal problems synchronously and quickly.
4. Medical use
Medical records are encrypted and stored on the Blockchain via a key, only those who have that key can access the records. In addition, bills for surgeries are stored on the Blockchain and automatically transferred to the insurer.
The above article has just provided you with information about what a Smart Contract is, its advantages and disadvantages, and its applications. In the future, with Smart Contracts, this can be the basis for a wide range of applications, from financial services to supply chain management.