Blockchain technology operates on the concept of recording transactions digitally to enable an interlinked, trackable, and non-editable ledger of transactions. By being completely transparent, blockchain technology has widely gained popularity in recent years. Its biggest value-addition comes from the fact that it eliminates the need for an expensive intermediary who controls the flow of transactions.
How does blockchain ensure transparent and safe transactions?
The answer: through Smart Contracts.
What are Blockchain Smart Contracts?
Smart Contracts are lines of code stringed together to create an agreement between the parties entering a transaction. These codes are spread across the blockchain network as smart contracts. It has a wide reach, thereby making it impenetrable, irreversible, and fully trackable.
What’s more, users don’t necessarily have to bombard their personal details or link their personal accounts to access the benefits of blockchain technology through smart contracts.
The smart contracts enable the programs to run when the predetermined condition as per the code is met. Smart Contracts create a seamless process on the blockchain, whereby it automates the flow of a transaction and triggers the next event when the conditions are met.
What makes Smart Contracts on Blockchains so reliable?
Unlike physical documentation, smart contracts are fully automated and error-free since it follows a set code.
Encrypted transaction records keep your personal information safe while creating a track record of transactions that are open for all to see and vet.
The encryption makes it hard to hack smart contracts making its safety feature the most prominent one.
The benefits and use cases of smart contracts on the blockchain are expanding daily. Since its inception, smart contracts have revolutionised the digital currency space.
The History of Smart Contracts
Nick Szabo was the first to invent a virtual currency back in 1998 called the Bit Gold. He also described smart contracts, ten years before Bitcoin was invented, as computerised protocols used to digitally execute a contract’s terms.
How do smart contracts work now?
When a code is written to create a smart contract, a network of computers runs the commands to execute the actions listed based on predetermined conditions. The fulfillment of the conditions is verified before processing the next action based on the code. Once a transaction is completed as per the smart contract, it is updated onto the blockchain. At this point, the transaction cannot be changed and can be only viewed by users who have access to it.
This code can be personalised in many ways to facilitate different kinds of transactions, from the sale of NFTs with royalty benefits to crypto lending. The ERC standards are smart contracts created on the Ethereum blockchain, which follows one of the highest levels of safety for smart contracts.
Different Use Cases of Smart Contracts
Crowdfunding/voting by using blockchain-enabled smart contracts
By removing intermediaries, voting can be carried out using blockchain-enabled smart contracts in such a way that the identity of the voter is never collected or disclosed. The results cannot be tampered with owing to the encrypted smart contract. Even for crowd-funding, there is no need to divulge important bank account details or pay an additional platform fee by using blockchain-enabled smart contracts.
Gone are the days when excessive documentation, credit checks, processing fees, and other requirements made it hard for people to access borrowed capital. Crypto lending through smart contracts on the blockchain makes it extremely simple for individuals to access capital against interest or a fee. Using highly secure smart contracts, both the lender and the borrower remain protected throughout the transaction.
The creation of digital assets is built on the concept of smart contracts. Assets are turned into a piece of code and secured using smart contracts, which can then be sold across the globe. Purchase from anywhere in the world will trigger the smart contract and transfer the benefits from such sale as per what has been mentioned in the smart contract, be it direct sale, lease, or royalty-backed payments.
Smart Contracts are the foundation on which blockchain technology is built. Blockchain and Smart Contracts go hand-in-hand to create a decentralised ecosystem, open for all. Stay tuned to ZebPay to learn more about how smart contracts on blockchains can help redefine how transactions are processed in today’s world.