Smart contract overview. What is a smart contract? | by ether crisis | Coins | November 2023
What is a smart contract?
Smart contracts are essentially digital contracts, but based on coding to perform specific tasks. They can conduct trading of money, stocks, cryptocurrencies, etc. These transactions are traceable but irreversible.
Smart contracts are used in blockchain for transaction functions. It runs on a decentralized and decentralized blockchain, meaning smart contracts are stored across multiple nodes, making them secure and tamper-resistant.
Smart contract in-depth analysis
Smart contract is a term coined by Nick Szabo in the 1990s. It represents a piece of code that performs a specific task and is executed in a deterministic manner. That is, failing a criterion will result in a certain outcome, while passing all criteria will result in a different outcome. For example, a vending machine requires $1 to buy a snack, if you pay less than $1, the vending machine will give you your money back, if you pay exactly $1, the vending machine will give you a snack, and if you pay more than $1, the vending machine will give you the snack. Gives snacks. Pay $1 and they’ll give you snacks and change. Likewise, smart contracts have these inputs and outputs.
Smart contracts, especially blockchain contracts, are coded in Solidity, a coding platform designed specifically for smart contract coding. These contracts are coded in an immutable and deterministic way. This means that once written and run, they cannot be changed and give fixed results. It is also decentralized, meaning the output of a smart contract is verified by everyone on the network.
strength and weakness
Advantages
- Speed — Smart contracts perform at high speeds. As soon as a contract is concluded, the contract immediately carries out its consequences.
- Cost — Compared to regular contracts, smart contracts do not require high fees and reduce the risk of hidden costs.
- Reusability — An important aspect of smart contracts is that they can be used over and over again. These contracts can be used over and over again, but can also be written differently depending on the purpose.
- Fraud — The way smart contracts are designed helps prevent fraud because the results occur in a deterministic manner.
disadvantage
- Software bugs — Smart contracts are vulnerable to bugs, which can be exploited by malicious users.
- Immutable Nature — Smart contracts are immutable, meaning that once uploaded to the blockchain they cannot be changed, even if there are errors.
- Unclear legal status — The legal and regulatory status of smart contracts is controversial and enforcement is difficult.
Smart contract example
Ethereum: Ethereum staking is done through smart contracts. These smart contracts can operate based on the rules of the blockchain. In this smart contract, Ether is held as collateral. Some of the results or actions that a smart contract performs is that it can hold money that is given to the user as a reward, and if the user does something illegal, it can take the money from the collateral. These agreements help with execution. Ethereum staking system.
Bitcoin: Bitcoin likewise uses smart contracts and is used for a variety of purposes. The main use of smart contracts is transactions. One party waits for the transaction to fill and then receives the corresponding amount. Another example is betting and fantasy sports pools, where you can bet Bitcoin on these sports platforms. Smart contracts have been seen to be more widely used in Bitcoin, especially since the Taproot upgrade.
The future of smart contracts
Smart contracts have great potential and may even eliminate the need for regular contracts. Smart contracts provide a path for secure and transparent transactions that regular systems cannot provide.
“Smart contracts on blockchain represent a groundbreaking change in the way we transact, eliminating the need for intermediaries and fostering a new era of trust, transparency and efficiency in digital interactions.” — Andreas M. Antonopoulos, Bitcoin advocate and author.
Thanks for reading
If you liked this article, please read my other articles.
References:
https://pixelplex.io/blog/bitcoin-smart-contracts/