What are Blockchain-based Smart Contracts?
Smart
contracts can be used in a variety of areas- this is a blockchain-based
integrated circuit (IC) supply chain traceability method. Smart contracts allow
supply chain participants to verify, track, trace, analyze and deliver chips
throughout their lives.
Since the launch of Ethereum-blockchain in 2015, the term "smart contract" has specifically applied to the concept of general-purpose counting, which applies to blockchain or distributed ledger. The US National Institute of Standards and Technology describes a "smart contract" as a collection of "code and data (sometimes called functions and state) that encrypt transactions signed on a blockchain network." Is deployed using ". In this interpretation, used by the Ethereum Foundation or IBM, for example, a smart contract does not necessarily relate to the classic concept of a contract, but it can be any kind of computer program. A smart contract can also be regarded as a secure stored procedure because its implementation and codified effects such as transfer of some value between the parties are strictly enforced and transactions with specific contract details Cannot be manipulated once stored in a blockchain or distributed ledger. This is because contract implementation is controlled and audited through the platform, not through the server-side programs attached to the platform.
For
more than a decade, blockchain has been established as a technology where a
distributed database records all transactions that have taken place in a
peer-to-peer network. It is considered as a distributed computing paradigm that
successfully overcomes the issue of trust of a central party. Thus, in a
blockchain network, many nodes collaborate between them to secure and maintain
shared transaction records in a distributed manner without relying on any
trusted party. In 2008, Satoshi Nakamoto introduced Bitcoin, the first proposed
cryptocurrency to introduce blockchain as a distributed infrastructure
technology. It allows users to securely transfer cryptocurrencies, called
"bitcoins" without a central regulator. In addition, Ethereum, NXT,
and Hyperledger Fabric were proposed as blockchain-based systems for
cryptocurrency. Unlike Bitcoin, they can use Smart Contracts (SC). Blockchain
technology overlaps traditional agreements by adding the terms of agreements
between two or more parties, but when the conditions are met, automating the
execution of agreements in a distributed environment leads to smart agreements.
It
is a blockchain based solution for efficient management of the supply chain
consisting of items shipped via smart containers. Smart contracts are used to
manage shipment conditions, automate payments, legalize recipients, and issue
refunds in the event of breach of preconditions. In recent years, the rapid
development of blockchain technology and cryptocurrencies has affected the
financial industry by creating a new crypto economy. Then, next-generation
decentralized applications without the involvement of a trusted third party
have emerged thanks to smart agreements, which are computer protocols that
automatically facilitate, verify and enforce negotiations and agreements
between multiple unreliable parties. Despite the bright side of smart contracts,
many concerns are weakening their adoption, such as security risks,
vulnerabilities, and legal issues.
A
specific set of secure programs in a blockchain is known as a smart contract.
These programs run on default requirements. Smart contracts help automate
contract execution by informing participants of immediate results, without the
involvement of a mediator to waste time. In addition, virtual currencies such
as Cardano, Solana, etc., and smart contracts work on the same technology.
How they work?
I
think "smart contracts" may seem confusing at first. Once I explain
them, you will realize that they are much easier than you think. How smart
contracts work - a smart contract is just a digital agreement with blockchain
security coding. Smart contracts contain details and permissions written in the
code that require the correct sequence of events to trigger the agreement of
the terms set out in the smart contract. This may include time constraints that
may set a deadline in the agreement.
Transactions
that comply with these requirements provide smart contracts in the blockchain,
where new blocks are added to them from traditional mining sources. The code
then opens itself and the contract is added to the blockchain in its entirety.
And
what is the working principle of smart contracts? First the assets and the
terms of the contract are coded and put into a blockchain block, then a
contract is stored with a distribution on a large number of nodes and when the
terms are activated it is fulfilled ۔ The fulfillment of obligations by the
parties is automatically verified.
They
are practically unchangeable. Whenever there is a change that has to be
included in the agreement, a new agreement has to be made and implemented in
the blockchain. This agreement is embedded in the blockchain which makes it
transparent, unchangeable, cheap and decentralized. Every smart contract is
known in blockchain. The agreement can be negotiated using the address that the
agreement was broadcast on the network.
What are the Advantages and Disadvantages?
There are several potential
business benefits to using smart contracts. Smart contracts can be used in a
variety of areas. Flexibility is an advantage of blockchain technology that is
incorporated into smart contracts. Developers can store almost any type of data
in the blockchain, and they have a variety of transaction options to choose
from.
It also saves money and
resources. The application of smart contracts eliminates the need for
intermediaries (brokers, lawyers, notaries, witnesses, etc.) which reduces
costs. It also eliminates paperwork which saves paper and money. It's a faster,
cheaper and more secure way to implement and manage contracts. The use of smart
contracts eliminates errors caused by manually filling out multiple forms.
Despite the benefits of
blockchain and smart contracts in a variety of industries, namely supply chain,
insurance and charity reform, there are still some challenges to their
widespread adoption. These challenges include legal issues, lack of standards
and protocols, privacy issues and intolerance of error. Arguments that smart
contracts are not a cure for all financial use issues as far as the type and
scale of the contract are concerned, the applicability of smart contracts in
certain circumstances is doubtful.
Conclusion
Finally, smart
contract is a blockchain-based integrated circuit (IC) supply chain
traceability method. Smart contracts allow supply chain participants to verify,
track, trace, analyze and deliver chips throughout their lives. We discuss the future
trends of smart contracts and explain how they provide better solutions to open
research challenges.
The application of smart
contracts eliminates the need for intermediaries (brokers, lawyers, notaries, witnesses,
etc.) which reduces costs. It also eliminates paperwork which saves paper and
money. It's a faster, cheaper and more secure way to implement and manage
contracts.
Blockchain technology has
both advantages and disadvantages, like two sides of the same coin. Many
mainstream sectors are still enjoying the benefits of such robust and reliable
technology. But some are considering the ups and downs of technology and
thinking about implementing technology. In the end, it's all up to you.
If you want to learn more about this topic, feel free to leave your
valuable comments. We are happy to assist you. All the best for your future.
(All the material
in this article is only the author's opinion, and could not be considered as
"Financial Advice")
Key Words: Blockchain
Technology
Smart Contracts
Blockchain-based
Smart Contracts
Smart Contracts
Dapps
Smart Contracts in
Ethereum
Smart Contracts on
Solana
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