As a business professional, it’s important to stay up-to-date on the latest technology trends. One of the most talked-about topics in the business world right now is blockchain technology and smart contracts. But what are smart contracts? And why are they so important? In this blog post, we will answer those questions and provide a guide to blockchain technology for business professionals. Stay ahead of the curve and learn everything you need to know about smart contracts!
What are Smart Contracts?
A smart contract is a term used to describe computer code that can facilitate the exchange of money, content, property, shares, or anything that holds value. When running on the blockchain a smart contract becomes like a self-operating computer program that automatically executes when specific conditions are met. Because smart contracts run on top of decentralized networks and operate with a set of regulations and rules being enforced across the network by every node participating in it, they become ‘trustless’: allowing two anonymous parties to trade and do business with each other without ever having to trust one another or any third party to complete their end of the bargain first.
This saves both parties time and money while providing an added layer of security that the other party will follow through with their end of the trade. These computer programs can be set to run indefinitely or even be designed to stop running when a particular event occurs. Either way, once an Ethereum smart contract has been initiated it cannot be stopped unless specific conditions have been programmed in from the start that allows for this possibility.
Advantages
One of the smart contracts’ biggest advantages is that they are designed to be transparent and easily verifiable by both humans and computers. This makes it possible for smart contracts to provide security that’s superior to traditional contract law and reduce the risk of fraud, especially within industries where supply chains are long or business partners may not always act honestly. Furthermore, smart contracts can save companies large sums of money over time because smart contracts provide security without requiring additional third-party services or fees (like lawyers).
This transparency also provides an incentive for greater personal responsibility since smart contracts will automatically execute once certain conditions have been met; this makes it easier to hold individuals accountable for their actions since smart contracts do not require high costs associated with human oversight.
Smart Contracts can:
– Eliminate inefficiencies and problems associated with traditional legal procedures (e.g. smart contracts’ automation eliminates issues like extremely high transaction costs, lack of trust in contractual agreements due to intermediaries not enforcing terms and conditions, etc.)
– Reduce business overhead costs by simplifying financial transactions – for example, smart contracts could potentially replace escrow services with smart contract’s ability to pay out funds when certain conditions are met
– Execute all sorts of transactions without human oversight due to smart contracts’ autonomous nature – smart contracts can be designed to operate in various applications, including smart property (e.g. self-enforcing rental agreements), smart financial instruments, etc.
Smart Contracts vs Traditional Contracts:
The terms ‘smart contracts’ and ‘traditional contracts’ are often used interchangeably by people who don’t understand what a smart contract really is. That’s because today we still use traditional methods of handling all sorts of transactions between two parties, including everything from signing a physical piece of paper to just providing verbal confirmation over a phone call that something shall be done to transferring money electronically. However, many people don’t know that these traditional methods of exchanging and verifying information and value aren’t perfect and aren’t always treated as legally binding in a court of law.
This means that all sorts of shady business might go down without the possibility of repercussion because we simply trust one another to do the right thing (or at least expect punishment for not following through with our end of an agreement) when it comes to handling money between one another; even though we really shouldn’t – especially now that advanced technology has made things like cryptocurrency possible now more than ever before.
Blockchains can handle smart contracts because smart contracts’ codebase is designed to be public and easily verifiable by both humans and computers alike. This ensures that smart contracts will always function as intended because the rules of smart contracts are programmed into them; which means that smart contracts can’t be manipulated or changed once they’ve been initiated (which only open-source smart contract platforms like Ethereum provide).
Concerns
Notwithstanding all of the beneficial applications a smart contract can have, smart contracts are also a privacy concern for a few reasons:
1. Unlike Bitcoin transactions, smart contracts exist on a shared processing environment which makes them subject to inspection by any other participant in that same processing environment
2. Smart contracts operate as autonomous agents which means they need to be able to carry out tasks without necessarily being monitored e.g. an encrypted messaging service operated via smart contract rather than directly from Alice to Bob
3. Smart contracts carry an identifier that allows participants to interact with the smart contract – this carries some risk as it would allow a smart contract to be correlated with a participant e.g. smart contracts can hold assets on their own, and this fact could be used in smart contract interaction analysis to discover who the smart contract is interacting with
These privacy concerns are somewhat mitigated by two factors:
1. Smart contracts tend to operate on a relatively small scale when compared to Bitcoin transactions
2. Smart contract interaction is typically intramural since they’re designed to interact exclusively within an application rather than between applications
Blockchain technology is a complicated topic, and it’s easy to get lost in jargon. But if you want to stay ahead of the curve as a business professional or entrepreneur, it’s important that you understand what blockchain technology and smart contracts are all about. In this blog post, we provided an introduction for those who may be unfamiliar with these concepts and explained why they could change our lives by making transactions more secure. That being said, keep your eyes peeled as we continue on with our series on cryptocurrency providing more information on how blockchains work and their potential impact on businesses today.