Smart Contract and BlockChain
Imagine a world where trust is given—a world where we can unleash the creativity of this planet. Smart contracts are here to do just that! But, before we indulge in the practicalities of smart contracts, skimming through the basics would be a smarter idea.
The story of smart contracts begins with the birth of blockchain technology. So, what is 'blockchain'?
For all of you whose ears have been inundated lately with the term 'blockchain' but still don't exactly know what it means, blockchains are 'immutable distributed ledgers'— ‘immutable’ indicates the fact that any alteration in the state is impossible after something is created, it is permanent; ‘distributed’ denotes the decentralisation of data(no one computer is central); ‘ledger’ resembles a record (like an excel sheet).
Technically, the immutability of blockchains comes from the use of cryptographic hashes that store any input and always display it in the form of a unique string of characters. Cryptographic hashes are considered immutable because they can't be reverse-engineered to obtain the original input. Our online passwords are also made secure by a similar method called password hashing.
What are Smart Contracts?
Smart contracts are quintessentially decentralised applications (dApps) which in turn are a set of codes or applications that exist and run on a blockchain or peer-to-peer (P2P) network of computers. Such applications are often built on the Ethereum platform and can be developed for a number of purposes, like gaming, finance, and social media.
Smart Contracts are by no means "contracts" if you imagine scores of legal papers but a set of codes fed into a blockchain. These codes codify business-logic and facilitate three functions:
- They store rules.
- They verify the rules each time an input is received.
- They are self executables.
They are like those vending machines that take your dollar bill, verify it with the pre-fed rules with your snack of choice, and only when the verification is done do you instantly get your snack of choice.
Advantages of Smart Contracts
- Eliminates Intermediaries: Smart contracts require no third-party intermediaries or brokers to come into effect. They eliminate the chances of malicious manipulation by a third party. Also, they save money.
- Incorruptible: As explained earlier, smart contracts run on blockchain technology which makes the rules in the contract immune from any distortion.
- Backup: The smart contract is not stored on a single computer but duplicated throughout the distributed ledger. So, the original contract can always be recovered if lost.
- Swift Execution: Smart contracts self-execute and extremely fast.
Avenues of Application of Smart Contracts
- Financial services: Smart contracts will help bring transparency and simplicity to the realm of financial services. For instance, smart contracts can be used to objectify terms of liability in insurances and spare the claimant and insurance company of unceasing disputes when a claim is made.
- Protecting Farmers' Rights: Recently, India saw the withdrawal of the new farm bills after incessant opposition from farmers. A key bill among them was pertaining to contract farming. The farmers were naturally in opposition to such an idea because, in case of disputes with MNCs and prominent businessmen, they won't be able to match the legal tools that the latter would have at their disposal. Smart contracts can come to the farmers' rescue by outlining clear terms agreeable to both parties. It would also eliminate the role of lawyers and save poor farmers from legal quagmires.
- Intellectual Property Rights: Intellectual Property Rights are the exclusive rights that creators have on the creations of their minds. The creation could be an art form, a scientific discovery, or a trade secret, etc. Presently, legal and institutional devices such as patents, copyrights, and trademarks are used to give such rights. Unfortunately, IPRs have been susceptible to disputes when there is a lack of clarity or contentious claims over similar creations. More recently, blockchain-based solutions such as non-fungible tokens (NFTs) and smart contracts are being pitched as a more efficient and transparent way of protecting IPRs.
Shortcomings of Smart Contracts
Their immutability can sometimes cause trouble as they don't allow further modifications if and when required.
Also, smart contracts could sometimes end up being vague, as they are basically written in programming languages, and parties could fall out with each other due to unequivocal interpretations.
Concluding lines…
We don't think about smart contracts or blockchain when we think about a better world. While it's partially because these technologies are not understood, complex terminologies and even more complex maths behind them do the rest. But, once we can realize how efficient and revolutionary the concept of smart contracts can be in solving long-standing ideas, there will be no limitation to its applications.
About the Creator
Syed Anees
Hi, dear readers. Thanks for reading!
I write on Digital Marketing. Lifestyles. Career. Finance. Tech
Let's Talk- linkedin.com/in/aneesthesis | [email protected] | www.facebook.com/aneesthesis
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