Suppose you own an apartment, but you have to sell it as you are being promoted and have to move to a different city. So, rather than looking door-to-door to sell your space, you look for the broker and pay him some part as fees to find the buyer for your property. Then you find a buyer, but somehow he is unable to pay the required amount and you need to run for paperwork and packing and so much other stuff. Now, take a breath and think if you just need to fill the terms and conditions, some ifs and when on the digital network to sell your apartment, that would have been much more hassle-free exercise. This is possible by deploying the smart contracts with the help of blockchain technology. Payment completion, ownership transfer, and compliance of obligations, all can be done through smart contracts. In this article, let us learn about smart contracts and also get the basics of- how does blockchain smart contract work.
What Is Blockchain Smart Contract?
You must have landed on this article after asking yourself- What is Blockchain smart contract? Nick Szabo, came with the unique concept of smart contracts on a distributed ledger in 1994. He advocated that smart contracts can be written digitally in codes, stored and supervised by the number of computers connected to a network. Thus, it can be understood as the traditional contract written digitally and controls the transfer of digital assets under the conditions mentioned in the contract. So, in a way smart contracts are enforced by codes.
There are some of the features which make the digital smart contracts adaptable in the present world. Being embedded in the blockchain, smart contracts are highly trustworthy as they are non-immutable with the best backup available. Without an intermediary, two parties can directly communicate with a smooth, accurate, and speedy transfer of assets. Smart contracts not only save time, but also a huge amount of money and also the pain to draw money from banks (online transfer is available)
How Does Blockchain Smart Contract Work?
Developers and newbies might be curious to know- How does Blockchain Smart Contract work? Is some rocket science or Hi-fi programming involved for executing contracts? In a simpler way, you can understand that smart contracts work on the principle of “If-Then” that means a deal will strike if the conditions mentioned by the developer of the smart contract are agreed upon by the other party. And the automatic transfer of digital assets will take place.
Let us try to clarify the principle in more simpler way:
IF you sell the particular object X, THEN the sum of money in the form of cryptocurrency will be automatically transferred to your account.
IF you transfer a certain amount of cryptocurrency to my account, THEN I will send the particular object to you in automated form.
So if someone asks you- how are smart contracts executed?, you can explain them like:
It is like in early childhood when your mother used to say that she will buy you a bicycle only when you get certain grades in your school (sometimes even bicycles get replaced even if you get good grades!). But in the form of a smart contract, it is like a bicycle will be soon transferred to your home as soon as your result is out.
Thus, a smart contract is like a digital contract written in cryptography codes with details and permissions chronologically arranged working in automated form as per the order of obligations are getting fulfilled. The contract which involves complete transparency, guarantee of non-alteration without prior information and inexpensive without any middleman.
How To Create Smart Contract In Blockchain?
Are your coding skills trying to nerve out? Or Do you wish to ease out your tasks through smart contracts? Because then only you would be interested in know-How to create smart contract in Blockchain?
The Bitcoin network was the first one to deploy the smart contracts for easy transactions after the completion of the conditions mentioned. Only the basics of digital contracts were introduced in the Bitcoin network before the advent of Ethereum in 2017. The platform of Ethereum exclusively facilitates the developer and programs with standards and open-source protocols to develop smart contracts for various purposes. Many of the other platforms like NEO, Nxt. Today and many more are also available for the purpose of creating smart contracts only.
To create a contract, you can log in onto a particular website. Then you need to find the open-source of the contract you need to customize. (Like a solidity contract on Ethereum network). After that, you need to define an abstract token and store it on the open-source code. Following the approach of Test Driven Development (TDD), you can further complete the coding process. For the final step, you have to compile, test, and scale your smart contract so that it can be launched in the mainstream.
Initially the crypto community was thankful to Blockchain technology for introducing the concept of smart contracts but now various other sectors are exploring the benefits of them. Smart contracts without Blockchain is an unimaginable concept as the decentralized technology is the one that gives up the shape to contracts. Smart contracts easily help in the record-keeping process, direct dealing between parties, detecting fraudulent activities, saving resources, and also enhancing the trust between parties. Smart contracts can be proved as the future for various industries which would not only ease their supply chain management process but can help in improving the customers’ experience at large. Just a simple logic and the customized coding of conditions of contract can offer you the way to automated transfer of digital assets after the conditions get fulfilled.
I hope this article has cleared the concept related to- how does blockchain smart contract work and gave you more clarity about Blockchain technology-based smart contracts. So, next time just remember the concept of “If-Then” when you come across smart contracts and relate to the examples mentioned.