Did you know that blockchain technology was first outlined in 1991 but its first real-world application was not until 2009? If you are new to the world of cryptocurrency and are a bit confused by the lingo, you are not alone. We have put together this short guide to share all about smart contracts in the virtual currency world.
Keep reading to learn what is a smart contract and its benefits.
What Does Smart Contract Mean?
In lamest terms, smart contracts are programs that are stored on a blockchain network and they run whenever the predetermined conditions that were originally set are met. Usually, they are used to automate the execution of an agreement. With automatic execution, all of the participants do not have to worry about time loss or about having intermediary involvement.
How Do They Work?
The contracts follow “if/when…then” statements that are saved in code on a blockchain. Once the conditions from the code are met then a network of computers will execute the action.
The actions can be anything from issuing a ticket to registering a vehicle to releasing funds to sending notifications, etc. Once the transaction is executed and completed the blockchain is updated. The great thing is that the transaction can never be changed and the only people that can see the results are the parties that are granted permission.
An example of using smart contracts in the real world is for dispute resolutions. Smart contracts can identify discrepancies, settle transactions, and resolve disputes.
One of the benefits is how efficient and accurate smart contracts are. Once the condition is met the contract is executed right away without a wait. They are also very efficient because since they are digital and automated you do not have to deal with the hassle of paperwork in order to process anything.
Another main benefit is transparency and trust because there is no third party involved. You never have to question if the information has been altered for someone’s personal benefit because the records of transactions are encrypted and shared across participants.
The fact that the transaction records are encrypted makes them very hard to hack which gives everyone involved peace of mind when it comes to security. A hacker would have to alter the entire chain in order to change a single record.
You will also benefit from saving money when you adopt the use of smart contracts. They remove the need for middlemen which eliminates fees and time delays. For example, you can buy ethereum and not have to worry about paying a ton of fees.
Feeling Like a Smart Contract Pro?
We hope that now that you have learned the ins and outs of a smart contract, you are feeling better informed in the world of crypto.
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