Friday, March 29

Understand what Smart Contract is, the technology that is here to stay!


Traditional products and services are undergoing strong changes as a result of digital transformation, creating smart tools for companies and our daily lives.

Autonomous cars, robots that do vacuuming services and chatbots are examples of all technological change. But the innovation that has been drawing everyone’s attention is the smart contracts.

To better understand what it really is, how it works, what applications and why it will change (and is changing) paradigms, keep reading here with us!

How did it come about?

In the 1990s, jurist and cryptographer Nick Szabo theorized about the possibility of computer protocols that could autonomously execute contractual clauses, without the need for human intervention.

The idea, called smart contracts — or smart contracts, in Portuguese — aims to separate the terms “contract” and “control” when there are third-party needs.

However, despite having been conceived decades ago, this invention only made sense after the launch of cryptocurrencies, more specifically the Ethereum network blockchain — despite the fact that it already exists in several other blockchains, such as Solana and Avalanche.

But what is the smart contract anyway?

The smart contract is nothing more than a technological tool that allows the creating self-executing contracts, which cannot be lost or tampered with.

They have exactly the same function as a traditional document, that is, they establish obligations, benefits and penalties (if the established rules are not complied with by one of the parties).

However, while a standard contract describes the terms of a relationship (usually one required by law), a smart contract imposes a relationship with cryptographic code, as we can see below.

We can summarize it as follows:

  • It is a fully digital contract that is executed automatically, without the need for human intervention. Therefore, they are autonomous.
  • It works within blockchain technology, the public and distributed database of cryptocurrencies.
  • The agreement agreed between two parties has the particularity that it cannot be deleted or altered. That is, it is a permanent and immutable record.
  • Is totally impossible to prevent or censor the instructions contained in this contract.

We can compare these digital contracts with hermetically sealed boxes closed, which will only be opened with one or more keys, but which are isolated from the outside world.

The image below illustrates its basic mechanism of operation, exemplifying how an agreement between two parties is registered and carried out:

In case you haven’t noticed, the smart contract is the missing opportunity to use the advantages of blockchain’s digital security and effectiveness to improve systems that are currently very susceptible to human error and mechanical error.

What are your advantages?

A safety is one of the main benefits offered by smart contracts. Therefore, technology is able to guarantee the origin and destination of the pact, in addition to clearly identifying why and when the deal was modified.

Its ability to be used in conjunction with automated business management tools is also enormous. THE automation of a contract also offers much more precision and intelligence at the time of its execution.

With intelligently collected and structured data, a company — or even you, in your business — can have access to information, in a permanent and immutable, to create more effective strategies and improve assertiveness in decision making.

Ixi… I got lost! Can you summarize the features? Oops! Yes there is, if you connect:

In general, the characteristics of smart contracts are based on their technology:

  • They are self-executing;
  • Mutable and unobjectionable nature;
  • Decentralized character;
  • They value practicality;
  • They have significant cost reduction;
  • Guided non-anonymity;
  • Totally fast system;
  • Promotes transparency to transactions;
  • Enables a high level of control;
  • Its contractual precision is unparalleled;
  • It totally eliminates any kind of ambiguity;
  • It is highly integrable with various everyday systems.

Based on all that has been said, smart contracts can also:

    • Function as “multiple subscription” accounts, where funds are only released when a required percentage of people agree to the transaction.
    • Provide utility to other contracts, as if it were a “library of software”, that is, sequence of instructions to be followed and/or executed.
    • Store information about an application, such as domain registration information or membership records.

The figure below brings together the main attributes of the technology.

How to Create A Smart Contract in Ethereum [Development Guide]

Are there risks? Are they safe?

Risk is something intrinsic to life, it is part of our daily life. There is risk wherever there is uncertainty. But risk is not always danger.

However, when it comes to smart contracts, as they are fundamentally a computer program, are highly secure while being prone to some problems.

Some of the inherent risks are:

  • Congestion in the network delaying the sending of orders.
  • Failures in the development of the project or source code.
  • Contractual dependent quality dependent on developer quality.
  • Sequence of invalidated blocks on the blockchain network.
  • Errors, failures or delays in communicating with DeFi oracles to bring external data into the blockchain.

Even, even with the aforementioned risks, smart contracts are still much more advantageous than traditional contracts, as shown below.

However, it cannot be ignored that other technologies that are also on the rise, such as Artificial Intelligence. Artificial Intelligence can be used in the development of the source codes of these digital contracts, ensuring greater quality.

This technological union should strongly boost the creation of new intelligent contractual models that are even more assertive and reliable — and, of course, with a great impact on the business world and on our daily lives.

Where can smart contracts be used?

As blockchain technology has evolved, it has become more flexible.

As much as cryptocurrencies are accepted in various businesses, such as banks, virtual stores and commercial establishments, this does not mean that only those who use the blockchain will be affected.

In a practical way, the technology can be implemented in different situations and business sectors, such as:

  1. Online Retail – Confirmation of receipt of products, in addition to proof of transfer of financial data.

Another help is in the automatic release to the seller of the value of the product or service sold only when the buyer receives it.

  1. Legal sector – Wouldn’t it be great to cut costs in your company’s legal department? This is one of the benefits provided by technology: the reduction of expenses, through automatic monitoring.

Other advantages are to minimize the existence of possible human errors caused by intermediaries, the negligence in the fulfillment of the terms by the parties and the possible risks that can occur when it comes to contractual business.

Also, how about the practicality of automatically enforcing the terms of court settlements and judgments? No more chasing down paperwork or pretending a lawsuit didn’t happen. A great time saver, right? Sensational!

  1. Agribusiness – Monitoring and certification of the entire production chain, as well as origin, destination and type of product.

Generally, a supply chain is long and has many links. Therefore, each call must have confirmation of the previous one, carry out its part of the contract and send the information forward.

Another relevant point for agribusiness is that it will bring a lot of transparency and origin to the commodities traded.

  • Internet of Things (IoT) – The Internet of Things refers to an everyday life where everyday devices can connect to the internet.

You smart contracts will create command orders between devices, allowing you to perform command tasks. In other words, it will be possible to connect a printer via IoT or even open and close a house gate without the need for remote control or manual action.

  • Real estate market – With digital contracts, it is possible to automatically control the fulfillment of the purchase and sale of a property or the payment of rents.
  • Logistics – The idea of ​​traceability is very similar to the implementation in agribusiness, explained above.

WalMart, for example, already makes use of smart contracts to map and locate food in your supply chain.

  • Elections – Using smart contracts is much more secure than traditional methods of paper voting and electronic voting. With the smart contract, voters are protected: their data is encrypted and anonymous.

In other words, ballot box manipulation and vote buying tend to decrease dramatically. — and that must be precisely why the System turns a blind eye to implement…

  • Intellectual property – It is already widely used abroad. Generally speaking, contracts are active whenever someone violates the creator’s copyright.

With technology, it is much more assertive to know who has the right to a certain content and guarantee that it will receive royalties. With the use of non-fungible tokens (NFTs), legitimacy will be even greater.

  • Insurance and Financing – The insurance company AXA, since 2017, using blockchain technology and smart contracts, reimburses the consumer in case of flight delay or cancellation, simply, after contracting, register your flight and your account.

The future is already the present…

Technology is increasingly present in our lives and its use generates numerous advantages for the development of various businesses and the general social environment.

In short, through this technology, new forms of interaction and negotiation are emerging. The most magical thing is that all this happens without the possibility of external intervention, in a transparent, safe and efficient way.

In a few years—and it won’t be long—the smart contracts and blockchain technology will be fully embedded in our daily lives. They will be as routine as internet service and flipping a power switch.

In fact, we are in the midst of one of the greatest transformations in history. It is a path of no return. To be resistant to these innovations is to deny all the benefits provided and, in a way, to swim against the tide.





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