Blockchain technology has fundamentally altered how business processes are executed, thanks to its immutability, transparency and decentralization features that eliminate intermediaries while saving both time and money for businesses.
One of the key applications of blockchain technology is smart contracts – pieces of computer code which allow two parties to form agreements between themselves and then automatically execute when certain conditions are fulfilled.
Definition
Smart contract code allows transactions to occur automatically when their terms have been fulfilled, using programming languages like Solidity for transparency and security purposes.
As is the case with vending machines, when certain conditions are fulfilled, contracts automatically dispensing snacks (in this case funds from one account to another) is automated to eliminate human error and cut costs while speeding settlement times and expanding financial inclusion by eliminating intermediaries.
Nick Szabo first proposed the idea of smart contracts in the early nineties, though due to limited computer programs and no blockchain technology or distributed ledgers available at that time he could not test out his theory.
Solidity is a computer language that provides syntax for creating these components of smart contracts, including state variables (data), functions (blocks of code), and events (log entries). Solidity provides syntax to declare these components; for instance, using “uint storedData;” declares a state variable of type uint (16-bit value that does not allow arithmetic operations), providing access via functions get and set; additionally using pragmas allows the compiler to interpret code either as function code or not as such; alternatively use “n” when instructing it when interpreting code from within this language if any specific directive should be interpreted differently by telling it which compiler version of it should be treated.
Purpose
Smart contracts are computer codes that define an agreement between parties and automatically execute it when certain conditions are fulfilled. By eliminating subjective interpretation and guaranteeing adherence to agreed upon terms, smart contracts provide a revolutionary alternative to traditional contracts.
Smart contracts can be created using programming languages like Solidity, Rust and Vyper. Once coded they can be deployed on blockchain networks to provide transparency, immutability and resistance against changes from third parties.
At present, Ethereum stands as the go-to blockchain platform for smart contracts due to its vibrant developer community and extensive learning resources. Other platforms such as EOS, Hedera Hashgraph, and Tron also support them.
Smart contracts present several hurdles when implemented; their digital nature making it hard for them to link with real world assets and processes is one such challenge; to address this situation oracles have been implemented which retrieve information off-chain then push it onto blockchains at predetermined times.
Advantages
Smart contracts are digital agreements enacted on blockchain that automatically enforce their terms when certain predetermined conditions have been fulfilled, offering an efficient method of reaching agreements without third party intermediaries.
Smart contracts reduce both costs and time required to execute agreements, while their immutability offers another key benefit; unlike paper contracts that can be changed once signed, deployed smart contracts cannot be changed once placed on the blockchain.
Smart contracts were first proposed by cryptographer Nick Szabo in 1994 as an electronic protocol designed to execute contract terms, similar to vending machines in which customers can purchase products by tapping their phone on the screen.
Smart contracts can simplify payment processes by automating the transfer of funds between parties. For instance, freelance designers working on projects for clients could use stablecoin to receive instantaneous payment from them without waiting for banks or clients to transfer the funds themselves – this would save transaction costs, processing fees and promote financial inclusion among underbanked people.