Smart contract

Introduction

A smart contract is an application or code in cryptocurrency that runs on a blockchain. It's a program that controls action according to the terms of the agreement. It can not be tampered with or changed by any parties.

What are Smart Contracts?

How can Mr. Tayo and Mr. Micheal commit to the blockchain without getting to know or trusting each other? Knowing fully well that if that commitment is not carried out, the contract won't be executed, and that is where the smart contract comes in.

Like any contract, a smart contract establishes agreement terms between twoor more people without the interference of a third party. A good businessman knows that without a contract, whatever deal he has with a fellow businessman is null and void. Such a contract keeps him from business risks and gives him more security.

Take a look at this illustration for a better understanding:

Joy is buying a house from Micheal, and immediately after the necessary payment has been made, the smart contract will trigger the next line of action to be made.

How Does Smart Contract Work?

To learn how smart contract works, check the following listed information:

Smart contracts are executed on the blockchain, meaning the terms are stored in a distributed database and cannot be changed.
Smart contracts and smart legal contracts are two different types of contracts and should not be used together. A smart contract is all about codes, while a smart legal contract is all about courts and legal matters.
People can swap cryptocurrencies, purchase collateral, and receive a loan on the exchange. Smart contracts execute these transactions and collect transaction fees; if payment is not made, smart contracts nullify it.
It executes a certain task when and if the agreed conditions are met.
You'll need to pay a gas' fee to implement a smart contract on a blockchain or Ethereum network. That is the ‘gas’ that keeps the blockchain running. It is just like you purchasing fuel to keep your car running. Imagine that!

For a better understanding, let's use our mind's eye: Joy buys a certain amount of cryptocurrency from Jude online without knowing who Jude is. How can Joy trust Jude to deliver the unit of crypto she wants? Will Jude hold the end of his bargain?

A smart contract brings trust between them so that neither of them can leave the said agreement without the knowledge of the other.

Advantages of smart contract

Here are some of the advantages. They include:

Zero middlemen: In a traditional contract, middlemen are witnesses to business transactions and can be bought by either party to favor the said party. In the case of a smart contract, no middleman is involved, which gives room to no form of fraud from any party.

Improved transparency: These contracts build trust and transparency between two parties by using blockchain. In other words, it is entirely traceable and much easier to maintain.
Reduction of cost of transaction: This allows the parties involved in the contract to save time and money for a particular transaction.Unlike traditional contracts that waste time and money.
Immediate execution: once a condition has been met, the contract terms will be executed immediately, rather than waiting around for a manual approval or execution process to be completed to complete the transaction.

Where /How It Can Be Applied.

A Smart contract is not limited to blockchain and Ethereum alone. It can be used by various institutions or programs...Read with me!

Health Care: Blockchain protects files through cryptography, which means a patient's file can't be accessed without the patient's permission, enabling easy access to such files. It makes them less helpless to external attacks or technological failure.

Businesses (investing, lending and trading): Smart contract helps keep track of every deal made between two parties. Both parties (buyer and seller) can create the smart contract that automates and execute the deal and secures it after the conditions slated by the two parties have been met.

Governance: Smart contract allows a free and fair voting system. It secures the voting process and allows for accurate data entry. And it increases the trust between a government and its citizens because it will be hard for the blockchain to be manipulated.

Conclusion

Smart Contract is a step toward becoming the next big thing in technology. It helps business interaction with people easier without coming in contact with each other and breeds trust amongst them.