The question of the principle of smartcontract may cause obstruction even experienced cryptoendoliths. To explain the concept of technology is not easy, especially for those who have only recently in the industry. In detail and clearly about smartcontract writes Cryptovest.
What it is
Smartcontract appeared relatively recently, since they work on the blockchain. Between technology and the ordinary contract not so many differences. The latter establishes an agreement between two or more parties. Usually the conditions in the contract is guaranteed by law. Smartcontract also in a certain measure is an agreement, the implementation of which is ensured by cryptography.
Smartcontract are created exactly the same as the regular program. In other words, the programmer specifies a sequence of actions that are executed upon the occurrence of certain events.
For the entry into force of smartcontract don’t need a Central authority. The conditions recorded in the program will be executed through the mathematics and encryption. Smartcontract make intermediaries such as notaries, agents, and attorneys, in fact, useless.
How it works
The idea of smartcontract was first described in 1993 cryptographer Nick Szabo.
The main tasks smartcontract to meet the General terms and conditions (payment, Deposit, confidentiality, enforcement of anything), minimize the probability of harmful interference to the agreement and to eliminate middlemen. Among the economic tasks smartcontract it is possible to allocate the reduction in fees for cash transactions. Some existing technologies (POS-terminals and credit card) have similar functionality.
And though creating smartcontract was only possible after the invention of Bitcoin, the full potential of the new digital treaties opened the Ethereum. Platform project is specifically designed to create and store smartcontract in a decentralized blockchain. Thanks to Ethereum process of crowdfunding has reached a qualitatively new level, which led to the boom of the ICO. Many new startups focused on the still uncapped potential smartcontract.
To perform all of the digital items of the contract require confirmation of nodes in the decentralized network. To legitimate fulfillment of smartcontract don’t need a lawyer, the network itself determines the validity of the conditions clauses of the contract. It also makes the entire process of agreement is fully transparent, because each member of the chain can track execution of smartcontract.
Finally, the digital contract is a powerful tool for financial transactions. As smartcontract is stored in the blockchain, no one gets the money until all conditions of the contract will not be executed. Typically, the funds used native-specific cryptocurrency blockchain (coins ETH blockchain for Ethereum).
In theory, a digital contract can perfectly cope with all the areas that apply traditional contracts. Only now the agreement between the two parties does not require approval of the mediator. Clogs even made several predictions in his essay.
The concept smartcontract can be spread on the property. They can be embedded in physical objects which receive only their owner. His rights and tenure are spelled out in the code. For example, the machine may be blocked until the fulfillment of smartcontract, which knows only the owner. So it is possible to significantly reduce the likelihood of vehicle theft.
Another example is a loan agreement between the Bank and the client. If the latter fails to repay the loan for the car, smartcontract can automatically to block it and immediately transfer ownership to the Bank. This is much more efficient than court proceedings and the involvement of collectors.
After the drama of the US presidential elections in 2016, many politicians and experts have questioned the efficiency of the current voting system. Were they rigged or not? With smartcontract in the electoral process, it is impossible to intervene.
If all the votes were stored on the blockchain, it would have been impossible to crack and decipher. In addition, smartcontract can move expensive and time-consuming process of voting online. Now working in this direction for several startups as experiments on voting on a blockchain held in Switzerland.
Smartcontract for real estate
Imagine that you rent the apartment for a week through Airbnb. Only this version of the Airbnb is working on the blockchain and accepting bitcoins. After fees starts smartcontract, which automatically sends you the digital key to the captured room. If for any reason the network did not register a key in a certain period, your account will instantly return the paid means.
Of course, such a scenario is possible only when the physical keys are tied to the Internet. That is why the integration of IoT stuff in the blockchain would be a huge breakthrough in the future.
The difficulties of integrating smartcontract
Although new technology has huge potential, we are unlikely to witness its massive use in the next few years. First, smartcontract can be very complex, because sometimes represent a constructor from other smartcontract. Developing complicated can be a real challenge for programmers. In the future artificial intelligence will lighten their burden, but until then it is not excluded bugs and vulnerabilities in digital contracts.
Secondly, this technology works best with the Internet of things. Without it, smartcontract can’t connect with the real world. Part of the code needs a physical facility that would tell the program about performing a particular task.
Thirdly, in program code, often bugs. That if an inaccuracy in a digital contract will result in the loss of millions of dollars? By the way, in the history of cryptocurrency is already happening. Due to a bug in the code Ethereum hackers were able to steal several million dollars. The incident led to a fork of cryptocurrencies and the emergence of Ethereum Classic.
All these complications while doing the impossible adaptation smartcontract under big business. However, the developers still have time to trial and error to bring the technology to the desired form. In the end, it took a few decades to evolve to where they are today.
Why smartcontract is our future
There is no doubt that all these innovations will occupy a significant place in our lives. Even now smartcontract the advantages outweigh the disadvantages. Transparency, inalterability and resistance to hacker attacks, make digital contracts an alternative to existing business models.
The blockchain is already having an impact on companies around the world. At the same time smartcontract there’s even more potential for use in real life. Perhaps a new industry will not only take the jobs of lawyers or notaries, but also will create dozens of new high-demand professions.
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