What is a smart contract
The popularity of smart contracts
Have you heard of smart contracts? Recently, everyone who is interested in blockchain, even those who don’t know much about blockchain, is talking about the term “smart contract”. The concept of smart contracts was proposed by Nick Szabo in 1994.
A smart contract is a computer-level transaction protocol that executes a series of contract items. Contracts are designed to meet some common contract conditions.
He sees this new type of contracts as “smart” because they function far beyond those of the paper counterparts. But this process does not touch the realm of artificial intelligence. A smart contract is a collection of agreements and exists in a digital format, including the various agreements that parties follow in fulfilling those agreements.
From a blockchain perspective, a smart contract is a set of digital promises, including agreements about the executor of the contract when those promises are fulfilled. Blockchain technology provides us with a decentralized, immutable, and highly reliable system, in which smart contracts play a vital role. Smart contracts are one of the most important features of blockchain technology and the reason why blockchain is called a disruptive technology. It is increasingly increasing the productive efficiency of our social fabric.
Let’s compare a smart contract to a vending machine. In real life, throw in $10, push a button, and you can get whatever you want like fries. In smart contracts, input digital currency and data, and your account will output the results you expect, such as a driver’s license. A smart contract is a contract that executes automatically and is monitored by thousands of people, making it immutable and decentralized at the same time.
Smart contracts allow us to encode events. Smart contracts are self-automated computer programs capable of executing the terms of the contract. They need to run in a virtual machine like EVM – the Ethereum Virtual Machine.
Ethereum smart contracts run on the EVM, a Turing-complete decentralized platform that runs smart contracts without the possibility of downtime, censorship, third-party intervention, or fraud. Smart contracts can be developed on multiple public and private blockchains.
Smart contracts are the enabler of any automation on the blockchain, bringing business logic to any use case, and there are numerous smart contracts. Anything you can imagine requires different actors or different business parties. Let’s take a look at 6 cool use cases!
Distributed cloud storage
SIA, Storj, FileCoin, these are all blockchain applications that allow users to rent storage capacity in their computers. You can think of it as a decentralized Dropbox.
Real estate transaction
Shelter Zoom, a New York-based technology company that develops property management software, has developed a real estate platform that simplifies the end-to-end real estate process using blockchain technology. Buyers and sellers can submit their offers in the blockchain app and simplify property transactions.
Pay wages on the blockchain
BitWage is a (large) wage provider that allows companies to pay workers in Bitcoin or other crypto assets such as stablecoins such as USD Coin (USDC). Compared to traditional banks, Bitwage can slash the fees associated with bank transfers and allow faster processing of payments. Using stablecoins to pay salaries is increasingly popular because it eliminates the risks associated with volatility compared to cryptocurrencies such as Bitcoin. It is also a great option for making payments to countries whose currencies suffer from massive inflation and devaluation, such as the Venezuelan bolivar or the Argentine peso. In these markets, paying with cryptocurrencies helps provide more stability to the local community.
Electronic voting
Blockchain seems to be the ideal technology for online voting — or at least a better method than the chaotic mail-in voting we saw during the 2020 presidential election. Blockchain, which employs cryptography, attaches only records, is auditable and immutable, is ideal for the transmission of registered ballot information over the Internet as an alternative to postal voting.
West Virginia, Utah and Denver counties have in the past allowed overseas military personnel to use blockchain to vote via cellphone. However, some security experts are less confident about voting online or on mobile, considering that users’ devices or election office computers could be infected with malware or subjected to DDoS attacks that disrupt services and potentially alter election results.
Voatz uses MFA – Multi-Factor Authentication – on top of a powerful blockchain for fingerprint and facial recognition of pre-registered users. Estonia has set an example for electronic voting. Estonia’s electronic voting system has been in place for over 10 years and covers more than 50% of the population.
Carbon credit trading
Blockchain could create a more efficient, transparent and fast system for exchanging carbon credits, certificates that incentivize the reduction of greenhouse gas emissions.
Carbon credits are issued under cap-and-trade agreements, the purpose of which is to set limits on a company’s carbon dioxide emissions.
Poseidon is an app that helps analyze and track the carbon footprint of any product or service, then assigns carbon credits to products sold at the point of sale as a fraction. This way, the buyer knows what the exact carbon footprint of the ice he is buying is. Companies use this to buy more carbon credits and effectively rebalance the climate impact of their products.
Blockchain helps to integrate a ledger linked to the point of sale. It allows the details of carbon credits to be stored and made available in an immutable blockchain ledger.
Other projects like Infinite Earth REDD+ carbon credits also use blockchain to help companies offset their carbon emissions by planting trees, which will help offset those emissions or other projects that help protect biodiversity and forests.
DeFi
DeFi stands for Decentralized Finance, an attempt to get rid of the middlemen in financial markets. DeFi applications allow anyone to take loans, use collateral, make term deposits to earn interest returns, stake money in a pool to provide market liquidity and earn interest returns… It provides a complex A financial ecosystem that lives on the Ethereum blockchain.
There are many more interesting use cases for smart contracts. It’s a good exercise to use our imaginations to imagine what else could be automated with smart contracts.
Insurance can be automated with smart contracts;
Remittances, reducing fees and facilitating cross-border payments;
Securities trading and settlement;
Decentralized exchanges;
Smart Contract Tracks Dog’s Chip ID…
Guest article written by: Boopathi Krishnan is a Digital Marketing Executive. He designs marketing strategies with the intention of using high-quality content to educate and engage audiences. His specialties include social media marketing specialist, SEO, and he works closely with B2B and B2C businesses, providing digital marketing strategies that gain social media attention and increases your search engine visibility