All About Smart Contracts

Smart Contracts have been described as computer protocols that were designed mainly for the facilitation, verification and general performance of contracts. These smart contracts ensure that transactions are carried out without the interference of any third party. The term "Smart Contracts" was coined by Nick Szabo in 1994.

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All transactions that are carried out with the help of smart contracts are irreversible and traceable. Smart contracts can be used to exchange, properties, money and other valuable items in a conflict-free, transparent, reliable and secure environment. While doing this, smart contracts ensure that all middlemen or third parties are eliminated.

To better understand how smart contracts work, we will liken it to a vending machine. Traditionally, an individual will have to go to either a notary or a lawyer, pay them and wait for some documents. Using the smart contracts, individuals will just have to put either a BTC or Ether token into it and get relevant documents. One interesting fact about smart contracts is the fact they do not only set the rules and consequences that surround a transaction or agreement, they ensure that these rules that are stated are enforced.

As explained by Ethereum founder Vitalik Buterin, the smart contract is an approach where either a currency or digital asset which is transferred in a program. This program continuously runs the code and in no time, a condition is automatically validated and the system decides if the supposed digital currency or asset should be sent to one person or if it should be immediately sent back to the person who sent it.

Functions of Smart Contracts

There are certain functions of smart contracts that this article will discuss. They include:

• Smart contracts can be used to save information about various applications. Some of this information include; domain registration, membership records, and other relevant information.
• Smart contracts provide relevance and usefulness to other contracts.
• Smart contracts can also be used to manage various agreements or transactions between multiple users.
• Smart contracts can also be used as a multiple-signature account. This means that funds or tokens that are saved in an account will only be released if a required number of people duly sign.

Practical Uses of Smart Contracts

Smart contracts can be applied in various fields and industries. Smart Contracts can be used in elections. Results from elections conducted can be put on the blockchain and have it distributed to all nodes on the network. All the data that will be put on the blockchain will be anonymous and will further eliminate any inappropriate actions.

Smart Contracts also serves as a fraud protection and this is done by ensuring transparency in all agreements and transactions.

Pros and Cons of Smart Contracts

Pros:

• Smart Contracts are secure. All data is encrypted ensuring that no information is changed without the permission of users.
• It is fast and all third parties are eliminated.
• There are multiple types of smart contracts meaning that users can choose whichever they want.

Cons:

• The legal status of smart contracts is not certain
• It is expensive.