What is a Smart Contract? Applications of Smart Contract

Smart Contract is version 3.0 of Blockchain. It can be said that the rapid development of Blockchain technology is the foundation that helps Smart Contracts become more and more popular and play an important role in the cryptocurrency market. In this article, let's find out with Market247.io what is a Smart Contract? Advantages and disadvantages, applications of Smart Contract.

What is a Smart Contract?

First, let’s explore What is a Smart Contract on Blockchain. Smart Contract is a computer program or a transaction protocol with the purpose of automatic execution, control and storage of legally related events and actions based on the terms of the contract.

In simple terms, a Smart Contract is a digital contract consisting of predefined rules by computer code, where all nodes in the network must copy and follow these rules.

In essence, a smart contract consists of a piece of code that runs on the blockchain, allowing the creation of Permissionless protocols.

The two parties to the contract have the right to make commitments through the blockchain without knowing the identity or trusting each other
The two parties can ensure that if the contract's conditions are not satisfied, the smart contract will not be executed. Since then, the application of smart contracts will help eliminate the middlemen, increase security, anonymity and reduce operating costs.

How does Smart Contract work?

To understand about what is a Smart Contract deeply, let's learn how does smart contract work. It can be considered that the way Smart Contract works is similar to that of a vending machine. That is, Smart Contract will operate based on the necessary terms that are updated in advance.

Smart contracts will be responsible for executing and managing operations on the blockchain when there is user interaction. On the blockchain platform, all addresses that are not smart contracts are independent accounts (EOA). Smart Contracts are controlled by the computer, while EOAs are controlled by the user.

When there is an order to execute, the contract will automatically execute according to the pre-programmed terms. A special feature is that the contracts will constantly be checked to ensure they match the terms. Therefore, when using smart contracts, users can be assured of the accuracy and transparency.

What are the advantages and disadvantages of Smart Contract?

Smart contracts are one of the most popular applications of Blockchain and are used more and more. However, it also has certain limitations and problems that still exist. Let's explore what are advantages and disadvantages of Smart Contract.

Advantages

Highly customizable: Smart Contract can be designed in many different ways, thereby providing a variety of services and solutions.
Ensure transparency: Smart Contract includes decentralized and fully automated programs. This helps smart contracts increase transparency and reduce operational costs because it eliminates middleman steps
Security Guarantee: Blockchain always ensures the safety and immutability of smart contracts. In addition, Smart Contracts are encrypted and distributed to the nodes, which makes them secure and cannot be lost or modified.

Disadvantages

Legality: At present, smart contracts are not recognized by many governments.
People: Smart Contracts are pre-programmed pieces of code on the blockchain. They are written only, not activity-based. Therefore, making mistakes is inevitable. If you want to change, the only way is to write a new contract. In this case, immutability is both an advantage and a major drawback.

What are the risks of Smart Contract?

Despite many outstanding advantages, Smart Contracts still have certain risks. Let's find out what are the risks of Smart Contract?

As mentioned above, Smart Contracts are human-written pieces of code that run on the blockchain platform, they operate according to the way the application developers create, not the way they think they will. work. It is for this reason that Smart Contracts can be risky because the encoder can be hacked and have system failures.

Also, since it's not modifiable, if the developers misspelled any of the terms, they'd have to rewrite it from scratch.

Application of Smart Contract

Smart Contracts are increasingly used and have many applications. In particular, it has many useful applications for the cryptocurrency market. Specifically, the outstanding applications of Smart Contract include:

Bitcoin is the currency that lays the basic foundation for the creation of smart contracts on the blockchain. Smart Contract supports applications that operate correctly, without interruptions or tampering by third parties. Eliminate intermediaries from transactions, thereby overcoming security, legal, fraud, censorship issues... Saves time and human resources compared to traditional transactions. Smart Contract system along with blockchain with decentralization improve transparency, contributing to promoting the development of the DeFi ecosystem.

Conclusion

Above is all information about the overview of what is a Smart Contract, the advantages and disadvantages as well as the application of Smart Contract. Market247.io believes that this article has provided you with a lot of useful information. If you have any questions about what is a Smart Contract, don't forget to send it to us for a timely response.

FAQs - What is a Smart Contract?

Do banks use Smart Contracts?

Smart contracts are continuing to revolutionize the financial industry. As blockchain continues to disrupt traditional banking models, new uptake in smart contracts among several global banking institutions is enabling greater transparency between consumers and their money movements.

Ethereum-only smart contracts?

A "smart contract" is simply a program that runs on the Ethereum blockchain. It is a collection of code and data at a specific address on the Ethereum blockchain. A smart contract is a type of Ethereum account.

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What is a Smart Contract? Applications of Smart Contract - Market247.io