What Are Smart Contracts? Guide for Beginners

Getting an exposure to smart contracts by understanding it completely


In this complicated world, it is very difficult to buy or sell huge assets such as a house or a farm which generally requires a large amount of money and a lot of paperwork.  Hence an estate agency is used as a middleman in order to make sure that the transaction is secure and safe and there is no betrayal from any side. They also act as an escrow which is a very crucial thing when large amounts of money are involved. The seller may not completely sell the property once he has received the money and the buyer also can betray the seller and therefore the agency makes sure that there is no betrayal, by charging some amount of fee on the transaction. This fee can be a huge amount for larger transactions. This problem is effectively solved by the usage of smart contract, a small contract act as a middleman and is a self-evaluating digital contract. Here it is completely similar to the agency which we discussed earlier but doesn’t charge that significant amount of fee and is also very trust-able. The transaction is done when certain conditions are met which is specified in the smart contract. Also, the transaction is witnessed by a large number of people and hence fault in the transaction is just Impossible. Here the functions of an estate agency are pre-programmed into the smart contract which then automatically execute by itself and it cannot be stopped until the transaction is completed.

A smart contract is basically like a vending machine where you put a certain amount of cryptocurrency and a respective item which is chosen is dropped into your account. all the rules and regulations are not only predefined but also enforced by the smart contact effectively.

There can also be interdependence between two or more smart contracts where the completion of one of the conditions in a particular smart contract can trigger an action in another smart contract and vice versa. Therefore any number of smart contracts can be chained in order to provide a proper functioning of a particular organization or any field for that matter.

 

  • Objects of a smart contract.

 

There are particularly three basic objects which are present in any smart contract:

 

    • Signatories.

The signatory is referred to as two or more parties which are going to use the smart contract on agreeing to the legal terms and conditions of the digital smart contract.

 

    • Subject.

This refers to the subject of the agreement and is probably the only object which stays completely within the smart contract’s environment. A smart contract is necessary to have direct and uninterrupted access to this particular object.

 

    • Specific terms.

All the possible specific terms and conditions must be specified in a particular smart contract, in the form of codes, depending on the environment which the smart contact is using. The terms include rules and regulations the punishment and reward conditions and all the possibilities. This part is very important as if there is any specific term or condition which is not specified here the smart contract might come to a grinding hold blocking the resources from both the parties.

 

  • Environment.

The most important feature in an environment that a smart contract should possess is the usage of the public key cryptography which is used by both the parties in order to sign off a transaction on the contract.

The next most important feature that a smart contract needs to possess is a completely decentralized automated database which all the parties of the smart contract can trust and witness the transaction.

 

And finally the source of the digital data that the smart contract is getting. This included the extreme usage of the root SSL Security certificates, https and all the other similar criteria required for an increased security.

 

  • How is it important

The smart contract gives the uses and number of powers and significant features which is not provided by any other existing Technology. Some If they are.

 

    • Autonomy.

It effectively eradicates the need for a third party and hence giving the users a complete autonomy.

 

    • Trust.

All the documents and the money which is entered into a smart contract can be played with or stolen by others. They are completely secure by its distributed ledger technology. Moreover, we need not worry about trusting the other party as the smart contract intelligently replaces the trust.

 

    • Savings.

By the traditional method of enforcing an agreement, a number of notaries are developed, Advisors and lawmakers have their own set of fees excluding the corruption required to get your work done. Smart contracts are effectively eliminating all of these saving you a lot of money.

 

    • Efficiency.

The usage of smart contracts in contrast to the traditional method a lot of time is being saved by preventing the lot of paperwork and their transfers that is to be done from authority to authority.

Smart contacts are really the future of enforcing an agreement in this revolutionizing digital world.

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