If you have learned about Blockchain, you might have encountered the term ‘Smart Contracts in blockchain.’ Now, what is a smart contract? In this article, we will learn everything about smart contracts, their features, working, and applications. So, continue reading.
What are Smart Contracts in Blockchain?
Smart Contracts are self-executing codes that run when certain conditions are met. These programs work on simple ‘If’ logic. Smart contracts are deployed on a Blockchain network. Once activated, no single body can modify them. Therefore, transparency and security are ensured.
Features and Benefits of Smart Contracts
Smart contracts are similar to conventional contracts except that they work automatically without the intervention of any third party. They offer numerous features that make them more reliable and even faster.
#1. Precise – With smart contracts, transactions will be accurate. As it is a program so it will give the precise output provided that the required conditions are met. There is no intermediate body regulating the transaction. Therefore, the chances of error are minimal.
#2. Fast – It is a self-executing program that does only require input. Once started, it will continue till it finishes the transaction and this complete procedure took the minimum possible time. It is much faster than traditional contracts.
#3. Shared – Another remarkable characteristic of smart contracts is that they are shared among all the participants. Every user has a copy of this program but no single person can change it.
#4. Automated – Smart contracts are recognized as self-executing codes. It means they do not require to be activated or regulated by anyone. Once deployed they continue to run till the specific conditions are met.
#5. Transparency – Smart contracts are stored in blockchain networks so that transactions are distributed among all the participants. Therefore, data transparency is ensured, and no chance of data breach.
#6. Secure – Although distributed, blockchain records are encrypted. Only the participants have permission to access their transactions and other details. Smart contracts prevent tampering with information.
#7. Unalterable – Smart contracts programs can be altered after being deployed to the blockchain. If any modification is required, it must be made before the program is launched. Also, every transaction is linked to the previous transaction and distributed across all the nodes. Therefore, you need to change the information from all the nodes is practically impossible.
Now, you have got the answer to the query, ‘what are smart contracts in Blockchain’?
How Do Smart Contracts Work?
Smart contracts work on simple If-Then statements. It means If a particular condition is satisfied, then the specific program will be executed. The program works automatically, thus, there is no intermediate body regulating the program and conditions. A ‘When‘ constraint is also added in the program to include the time restriction.
1. Define Conditions – Before, start writing the smart contracts program, it is necessary to define the conditions. What is the smart contract meant for? It should be identified when the statement should be executed.
2. Code the Program – Now, you have the required conditions. Based on them, the smart contract is written that will be executed automatically once the condition is satisfied. The code is designed with an If-Then statement.
3. Encryption – It is necessary to add encryption to the information transmitted through smart contracts. It only lets the participants access the information.
4. Testing and Update – After completing all the above procedures, the smart contracts are tested for the specified conditions. After the evaluation is completed. These smart contracts will be updated to the blockchain network. It cannot be modified.
Real-Life Applications of Smart Contracts
Smart contracts are implemented on blockchain that has applications in almost every industry. Real Estate, Medical, Finance, etc., are some fields that are availing the benefits of Blockchain technology. It helps them to get accurate output in the minimum time without the intervention of any third party.
Bottom Line
What are smart contracts in Blockchain? Smart contracts are self-executing programs that are based on simple If-Then statements and are stored on a blockchain network. It offers numerous advantages over conventional contracts. Some of the major features are high precision and speed, no intervention of third parties, transparency, and automation.
