In recent years, smart contracts are being used by many organizations. But there are many people who confuse it with traditional contracts. Below, I will provide useful information about smart contracts
What is a Smart Contract?
Smart Contract is a term that describes a special set of protocols capable of automatically implementing terms and agreements between contracting parties (in this case, computer systems) thanks to the support. of Blockchain technology. The entire operation of Smart Contract is done automatically and without outside interference, or through an intermediary third party. Transactions made with smart contracts are transparent, easily accessible and cannot be tampered with or reversed. The terms in Smart Contract are equivalent to a legally binding contract and are recorded in the programming language.
How does Smart Contract work?
The mechanism of operation of Smart Contracts can be said to be similar to that of a vending machine. This means that they will only automatically execute terms that have been preprogrammed before they are met.
First, the terms of the contract will be written in a programming language, then encrypted and transferred into a block of Blockchain. Once transferred into the block, this Smart Contract will be distributed and reproduced by the nodes operating on that platform.
After receiving the deployment order, the contract will be implemented in accordance with the predefined terms. At the same time, Smart Contract will automatically check the process of fulfilling the commitments and terms stated in the contract.
The power of smart contract
Along with cryptocurrencies, smart contracts are an interesting product of Blockchain technology. Not as prominent as Bitcoin, smart contracts exist quietly but persistently.
The nature of a smart contract is similar to the nature of a normal contract. This means that no third party will be involved in this process
Blockchain technology creates immutable ledgers. Therefore, it provides accurate and transparent evidence of transactions. It also relies on encryption to ensure safety when peering transactions
These contracts are made based on software code and directly on the internet. Therefore, users can make quick transactions. This speed can save hours for many traditional business processes.
One of the main requirements of a smart contract is explicitly detailed terms. Even a small flaw can cause great damage, while a human is at fault, a smart contract is not. It works based on pre-set commands. This will minimize unnecessary errors.
Perhaps one of the most important advantages of automated contracts is the elimination of unnecessary in a chain of operations. Plus there’s no need for a lawyer, witness, banker or other intermediary. Automated processes help users reduce costs significantly.