Smart Contracts Blockchain Explained
Smart contracts are a decentralized ledger. With cryptocurrency, the contracts are converted to computer code, kept and replicated on the ledger system which is also supervised by the computer's network that operates the blockchain. For instance, you mined and were awarded, Bitcoins. The transaction would be recorded in the public ledger with proof of work and the minder. Smart contracts also record the transferring of money and having received the service or product.
Smart contracts are designed to help cryptocurrency holders to exchange money, shares, property or anything with value in a manner that is problem free as there is no go-between involved.
Smart contracts are a technology. While the complexity of the technology is more than most understand, in simple layman’s terms it would be something like getting a piece of bubble gum from a gumball machine; however, while anonymous, you have the security of the transaction being recorded on the ledger. You have a coin, and you insert it into the machine, and a gumball comes out. Now, the difference with cryptocurrency is it is currency in the virtual world; but, your smart contracts exist. You use your currency such as a Bitcoin for the exchange of property or merchandise or services, and the ledger records the transaction, and your goods are received.
With the sore of Bitcoin, many things can now be purchased with the currency. Contracts can be encoded on any blockchain. Smart contracts provide:
Users have autonomy. You agree, and there is no need for a middleman like a broker to confirm the agreement. You also have the trust of an encrypted public ledger, so your transaction is recorded. Currency holders also have a backup, as documents are duplicated many times. There is also the issue of safety, as encryption keeps the documents safe from hacking.
Smart contracts also eliminate the paperwork involved in some transactions, using a software code to automate tasks. The contracts are also considered accurate, which eliminates human error.
There are negatives associated with smart contracts. For instance, if bugs get into the code, what happens, just as how do governments regulate the contracts, or tax the transactions. There is a great deal of debate in regards to smart, contracts. Some think that they are the wave of the future and enter into everyday life with some lawyers agreeing and showing concerns as they research the matter.
Smart contracts are a wave of the future, only present-day technology. Certain industries may be impacted by the contracts. For instance, law. Lawyers with their mounds of documents will replace the writing of contracts to producing standardized smart contract templates.
Blockchains are where smart contacts are processed. The entire concept is a bit confusing, especially if you are new to cryptocurrency. So, let’s go over it a bit more.
Smart contracts are:
- Computer code (pre-written logic)
- Store and replicated on a blockchain / distributed storage platform
- Operated by a network of computers
- Include ledger updates when transactions are made
As for the thought of smart contracts entering everyday life, in some ways they already have. For instance, bank accounts. It is said that some elements of bank accounts behave like smart contracts.