How are you? By Allah's grace, I'm doing very well.

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Smart Contract : Automated Contract

A smart contract is a type of computer program that is stored on the blockchain and automatically fulfills any contract or condition. It is a digital contract, where the terms of a transaction or agreement are enforced between two parties without the intervention of a third party (such as a lawyer or bank). Smart contracts are called Code is Law, because their rules are written in code and once placed on the blockchain, they cannot be changed.

How do smart contracts work?

Smart contracts basically work on two main components.

Blockchain : Smart contracts run on a blockchain network. The Ethereum blockchain is the best known for this type of contract. Once a smart contract is placed on the blockchain, it is stored as an immutable digital data.

Automatic conditions : Smart contracts have some predefined conditions in their code that are automatically executed, these conditions are usually written based on an "if-then" structure. For example: "If a buyer deposits a certain amount of cryptocurrency into an account, the seller's digital asset (e.g. an NFT) will be automatically transferred to the buyer's account.". Smart contracts do not require a person to be active. When a condition is met, the smart contract executes automatically.

Benefits and Uses of Smart Contracts

Smart contracts are making the conventional contract system more efficient and secure in various sectors.

Automation : It can complete the contract without any human intervention. This saves both time and cost.

Trust and Transparency : Since the contract is written in code and stored on the blockchain, no one has any doubt about its validity. This creates trust between the two parties without the need for an intermediary.

Security : Once deployed on the blockchain, it is impossible to change the smart contract. This reduces the risk of data fraud and contract violations.

Cost savings : Smart contracts help reduce costs by eliminating intermediaries (such as banks or lawyers).

Smart Contracts in Different Areas

Decentralized Finance (DeFi) : Smart contracts are the backbone of DeFi. Here, all financial transactions such as borrowing, lending, and cryptocurrency trading are completed automatically.

Real Estate : The process of transferring ownership of land or a house can be simplified using smart contracts. Ownership documents can be automatically transferred through smart contracts when the buyer pays.

Supply Chain : Smart contracts can be used to automatically make payments when a product reaches a certain stage in the supply chain. This makes the entire process more efficient and transparent.

Limitations and Risks of Smart Contracts

Code Errors : If there is an error in the smart contract code, it can cause major problems. Because once it is placed on the blockchain, it cannot be changed. Hackers can take advantage of such errors.

Legal Complexity : There is still no clarity on the legal recognition of smart contracts in many countries. It can be difficult to get legal help if there is a problem.

References : Smart contracts may require external data to function. If this data is incorrect, the functionality of the smart contract will also be incorrect.

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Conclusion

While smart contracts are still in their early stages of development, they have the potential to completely change the way we make contracts. This will open up new horizons for business, law, and the financial system in the future. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.

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