Different Types of Smart Contracts in the Blockchain

Smart contracts are an important facility for the blockchain. They enable the automatic process of agreements and transactions. While using the smart contracts we do not need any third party in order to proceed the agreement. It is a good way to proceed the agreements on the blockchain.

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There are different types of smart contracts. Some of them are given below:

Basic Smart Contracts

These are the most simple types of smart contracts. They involve a simple agreement between different parties. Basic smart contracts are often used for basic transactions. These are used to send tokens from one address to another according to the agreement. These are also used for the token swaps.

Complex Smart Contracts

Complex smart contracts have multiple conditions. They can perform more complex transactions. They can facilitate different processes like auctions and decentralized exchanges. They also support multi step transactions. The solidity language of Ethereum allows developers to create complex smart contracts.

Self Executing Wills and Testaments

Smart contracts can also be used for inheritance. They also play a role in planning purposes. Self executing wills and testaments smart contracts ensure that assets are automatically distributed. They ensure the transactions according to predefined conditions. These smart contracts remove the third parties. And they offer transparency and efficiency in the execution of wills.

Multi Signature Smart Contracts

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Multi signature smart contracts are also known as multi sig contracts. In these smart contracts multiple parties are involved for signing a transaction. And it is done before it is executed. This type of smart contract adds an extra layer of security. These multi signature smart contracts are commonly used for joint accounts or shared ownership.

Oracle Smart Contracts

Oracle smart contracts interact with external data sources. They are used to trigger actions on the blockchain. They serve as a bridge between the blockchain and real world. These smart contracts are used to take decisions on the basis of the external data. We use these smart contracts in the applications which work in real time.

Token Smart Contracts

Token smart contracts are very unique smart contracts. They are used to create and manage tokens on the blockchain. These contracts define the rules for token creation. They also define conditions for the distribution and transfer of tokens. They allow the creation of various types of digital assets on the blockchain.

Escrow Smart Contracts

Escrow smart contracts hold funds or assets. And they hold them until specific conditions are met. Escrow binance account also does the same thing by holding the assets. They are commonly used in transactions where trust is required. They ensure that both parties fulfill their obligations before the funds are released.

While doing P2P trading in any exchange and escrow smart contract is initiated. In this way when we go to sell our assets to the buyers and we place the order at that time our funds are held in the escrow smart contract. And when the buyer of our assets pay us money and then mark the order as paid. Then we check and see if we have received the required amount then we just click on release the payment. So it is just an example of an escrow smart contract.

Regulatory Smart Contracts

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Regulatory smart contracts are used in the legal and regulatory frameworks within blockchain ecosystems. These contracts satisfy the legal parameters and regulatory requirements. The developers define all the regulatory and legal requirements in the code of the smart contracts. They play a crucial role in industries where strict regulations are required to be followed. By using these smart contracts only those transactions will be executed which satisfy the legal requirements.

Privacy Preserving Smart Contracts

Privacy-preserving smart contracts use cryptographic techniques to save the sensitive information. While providing privacy they still allow transparency in the transactions. These contracts protect the privacy of users by encrypting data. These smart contracts reveal information only to authorized parties. They are often used in healthcare systems.

Conclusion

Smart contracts are very versatile. They are a powerful tool in the blockchain. There are different types of smart contracts. Each type is specific with its work. There are basic as well as complex smart contracts which handle different types of transactions in the blockchain by following the certain conditions set by the developer while preparing the smart contract. Smart contracts reduces the human cost and they catalyse the transactions. They are used in different fields such as in finance, defi, healthcare and much more. On the whole smart contracts have revolutionized blockchain working.