DeFi
September 28, 2022
What is Token Burn and it's effects on price
An A-Z guide on token burning and how it is largely impacting the cryptocurrency industry.
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The Internet has brought the world closer than before, eliminating geographical boundaries. People across the world are interacting, sharing, and collaborating. However, there is one thing that hasn't changed much and that is banking.
If you are currently planning to do an international transaction, the banks will easily charge a commission of 2-5 %. There is always a middleman involved not just in terms of international transactions but in pretty much every sector.
If you too are frustrated with this middleman economy and looking for a way out, smart contacts have a solution for you. In this article, we are going to understand what smart contracts are and how you can actually make use of them.
The adjective “smart” before any traditional term indicates that the concerned system provides some extra features and is mostly connected to the internet. Take an example of phones. Smartphones provide much more functionality than the older generation phones and are connected to the internet.
The same applies to smart contracts. You must be familiar with the Ethereum blockchain. It’s a programmable blockchain, which means that you can write codes and run them on the Ethereum blockchain to execute certain functions.
If you write a code that is based on an "if/when...then" structure and designed to work as a contract, we will call it a smart contract. But you might wonder how it is different from traditional contracts and what functionality it provides.
Smart contracts primarily focus on two major factors, first and the most important "trust" and second "functionality". Let's try to understand how smart contracts work.
Smart contracts are at the very basic level just contracts. They are based on the fundamental structure of what will happen if a certain scenario comes to be. You can summarize them in the "if/when...then" structure. Smart contracts are such statements that are written and integrated into the code of a blockchain.
Whenever a transaction occurs, it meets certain scenarios that the smart contracts are used to verify their authenticity by the blockchain network. Smart contracts can be utilized in anything ranging from a transaction of cryptocurrency to the buying of tickets online.
When a certain smart contract is utilized, the blockchain gets updated with the correspondent data. This also ensures that no transaction that is already completed can be undone or erased. It also makes sure that the only people made privy to this can view the transaction information.
Smart contracts can include an infinite number of "if/when...then" conditions. It can inhibit all the conditions set forth by a party involved in a transaction. Anyone utilizing a smart contract has to establish terms and define the structure that helps in preventing and solving any disputes.
As mentioned before, smart contracts come with a number of advantages over the traditional contracts, these advantages make it easier for any number of parties involved to complete a transaction without hitting any bumps.
Smart Contracts provide total transparency among users, the term transparency states that there will be no involvement of a third party. But the catch is encrypted information among the users; mostly transaction records are shared, so anyone can easily trust the process as no transaction can be altered.
A smart contract is completed or processed automatically. This process is done or performed by the network. This factor is the reason for not involving a third party, as the system automatically manages the transactions.
The efficiency of the smart contract is reliable, once you are done with fulfilling the condition, your process will be executed from that moment. As the process is performed automatically, no paperwork is needed.
Blockchain is said to be a more secure and reliable system, and the transactions performed on the blockchain are encrypted. The encryption is not easy to hack, hackers have to alter the entire chain to change a particular record or transaction. This makes hackers more disinterested.
Hackers have to alter the whole chain because every record is connected to the previous record and this forms a long chain of blocks, all of these records are present on a distributed ledger. Thus, the chain can’t be altered.
A highlighted feature of Smart contracts is that it eliminates the third party. Eliminating the third party itself saves a lot. On the other hand, it is the system that is automated, this automation saves many operational expenses. Apart from all these savings, it does save many resources.
A smart contract at its bases is just a form of technology and it comes with certain limitations if not disadvantages.
A smart contract once made is difficult to change. After all, it’s a program and changing a specific part of the code (contract) or debugging can be a time-consuming task. On the other hand, traditional contracts do not face any of these issues.
The smart contract will be made by a developer and he needs to understand all the terms and conditions of the contract accurately to make a correct and valid smart contract. Moreover, there might be some conditions which will be difficult or sometimes impossible to code.
Smart contracts can be utilized in various ways. It depends on the person how they want to make use of it. Smart contracts can be applied in various fields other than the Crypto world as well, let us have a look.
Companies like IBM and Sonoco work in reducing the various issues that are faced when transporting medicines and other health equipment. They do this by increasing the supply chain transparency of the medicines and a lot of people benefit from that.
Pharma portal is a platform that is based on a blockchain. It tracks the temperature-controlled pharmaceuticals with the help of the supply chain to give reliable and accurate data to all the parties involved. Smart contracts play a major role in making the supply chain transparent. So basically, smart contracts safeguard the efficacy of medicines and pharmaceuticals.
In the traditional world, the supplier-retailer relationship worked on word-of-mouth and on-paper contracts. Now a lot of businesses in the world use a smart-contract based supplier chain which helps them in better communication along with more transparency. This helps in building better relationships and helps resolve disputes very quickly.
Like with the supplier-retailer relationships, smart contracts can be applied in each aspect of the trade to standardize the process and simplify trading. For the same reason, smart contracts can help in improving the efficiency of international trade.
Winding up this article, that was all about the smart contract. We hope you understood most of the topics that we shared. The information shared above is mostly simplified so a beginner can easily follow it. We know it might be a tough or twisted topic to understand, if you face any difficulties you can reach out to us.
It would be great if you do your own research before performing any transaction or purchase. After doing this you can easily understand where to invest. If you have any doubt feel free to reach out to us. If you have anything to share with us please comment down below.
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