What is a smart contract?15 Dec, 2019 Endy Callahan
The decentralized record-keeping technology blockchain opens up new opportunities in cryptocurrency and accounting. Smart contracts is tool that helps blockchain platforms to function. Explore how they function, and what opportunities they offer.
Features of smart contracts
The goal of crypto – contracts is to provide a transparent, simple and secure exchange of assets without intermediaries. Smart contracts are programs designed to automate the transfer of property between counterparties upon the occurrence of pre-defined conditions.
Initially, smart contracts were used to simplify transactions in cryptocurrencies. Their code is a common combination in the blockchain to manage digital money in a single project. An important feature of the combination-it must be performed automatically, be irreversible, unchangeable and traceable.
Smart contract uses special code to improve classic contracts. It can be aimed at simplifying complex operations, becoming more predictable and reliable. The main difficulty is that smart contracts are not supported by the legislation of many states. Therefore, they have not yet acquired legal force.
How smart contracts work
Conventional cryptographic agreement operates as follows:
- Coding of assets
- Coding the terms of the agreement
- In the unit include assets and conditions
- When each party fulfills its obligations under the contract, the contract will be automatically executed
- The terms of the contract are the basis for the transfer of assets
Advantages of smart contracts
With the help of crypto-agreements, it is possible to automate and optimize various transactions occurring in professional spheres. Thanks to them, companies can build trust with customers and increase the transparency of transactions. A smart contract cannot be changed after it has been drawn up. These advantages make smart contracts indispensable in public administration and finance.
The decentralized nature of crypto-agreements poses challenges to data privacy. Smart transactions require trusted parties to enter information into the chain.
Cryptocurrencies have a serious problem. Networks that do not support a large number of transactions and are not scalable will not be able to support smart contract execution well.
The advantages of using smart contracts in e-business are undeniable. They can be used in almost all areas of services and production activities, so the implementation is only a matter of time. Many experts say that smart contracts will support the global economy in the future, and consumers will actively use them every day.
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