What are Smart Contract?
Introduction
Contract serves as the backbone of every successful business. If you are a business person, you'll understand that contacting a lawyer for a contract and business agreement isn't just a formality but a necessity for your business. For a business to run successfully on a long-term basis, there must have been a seller's agreement, distributors agreement, partnership agreement and all this is written on the pages of a legal paper.
To simplify business and cut down costs associated with traditional methods without compromising on authenticity and credibility of legal agreement, this article is written to explain better ways of making agreements without seeking the services of a legal practitioner.
What are smart contracts?
Contracts are pages of a legal list/document with a boring long term agreement that requires both parties to endorse their signature at the bottom.
The term smart contract is not really smart and not really contract, rather it is a computer program that digitizes agreements and turns this agreement into codes to run on a blockchain network. This self executing line of code bridges an agreement between buyers and sellers and automatically executes the action via a computer network. Smart contract purpose is to simplify business and trade between an anonymous and a known body without the need of an intermediary.
Elements of smart contract
Smart contracts, just like any other contracts or agreement are made of three essential component; They are:
Benefactors: This is described as all the signatories in this context i.e (the parties involved in the agreement). They implement the contract by imbibing their signatures in a digital format so that an agreement can be met.
The subject matter: This is the reason to which the agreement is met.
Specific terms: This explains in detail what is expected in the agreement.
How Does Smart Contracts Work?
Before we give a visible example, let's know that it works basically on an Ethereum blockchain. Ethereum is a cryptocurrency financial service where developers build blockchain applications and use ETHER as its transaction currency. Smart contracts are a type of Ethereum account, this implies that it works just like a vending machine. A vending machine gives a predetermined output when a specific command is inputted. Look at it this way: Let's say I have an agreement with my friend to buy her piece of land, we'll get a developer who forms the contract on an Ethereum blockchain. This contract contains the terms and conditions to be met.
The agreement reads: "At a three(3) month duration, "I Emuvin, will have to pay a sum of 50,000ETH to Tessy and she will give me ownership of the land". The deal is off if I'm unable to make payment before the duration of the contract.
Advantages of Smart Contract
Automatic execution: It is a self executing set of promises,specified in digital form and it allows two different parties to exchange valuables like shares,money, property etc. in a non-conflicting way without the knowledge of a third party (a lawyer, financial agency etc). Example you can write a smart contract for your children allowing them to withdraw at a specific age and date. If they go to withdraw before the speculated condition, the Smart contract won't execute payment.
Visibility: It defines a set of rules and consequences around an agreement and automatically enforces it. This action is made possible because it is deployed to run on a blockchain making the transaction transparent, traceable and irreversible.
Predictable outcomes: It removes the possibility of human errors because they are executed by codes rather than human brains and can automate many tasks that would traditionally require human interaction.
The future of smart contracts
Smart contracts have joined art and science together to make the world a better and more functional place. It can be applied in different blockchain network (Ethereum, solana, NFT etc)as well as in real-life related sectors like;
Healthcare: It is the future of genomic study, a solution that addresses DNA sequencing of an individual(s) and allows these genomic data users to have control over their data and sell access to it without the influence of a third party. During clinical examination, data sharing between health care governing bodies is important for effective clinical examination. With the idea of blockchain technology, personal health records could be conducted, encrypted and stored with a code that gives access to a specified individual.
Financial services: Human beings are one of the biggest points of failure when it comes to financing. Smart contract removes the possibility of fraud when it comes to finances because it execute precise amount based on the conditions written on the contract code.
Business management: Business owners can manage their employees' payment status. Instead of employing a financial accountant, they can create a smart contract that pays each staff a certain amount at a given date.
Conclusion
With the knowledge of smart contracts, the future of the 21st is unveiled. When you think of a world built on trust, think of smart contracts. The future of smart contracts will impact changes in certain industries and adopting it might make more sense to some sectors than others but only time will tell if its future is visible.
