If you went to college, there are chances that you sat in a contract class regardless of whatever you studied. This goes to show how important contracts are in our everyday dealings as human beings.
Contracts are carried out every day by people from all segments of our lives, and for different purposes. A marriage is a contract, a rent agreement is a contract, the purchase of a good is a contract. As long as two individuals promise each other something for something in return, a contract has been established.
However, it is not every time that a party to a contract fulfills his/her obligation and that is why there are so many court cases regarding breach of contracts today. As a result, the first aim of blockchain technology was to solve the money privacy problem and entrench decentralized finance. Aside from inventing a new currency, several brilliant developers found a way to stretch out its utility to solving several other problems. That’s how they created smart contracts. In this article, we want to look at what smart contracts are and how they are useful to us in today’s world.
What are smart contracts?
Simply put, smart contracts are self-executing contracts hosted on the blockchain and executed without the help of a third party. As you can see, the basic principle is the same for both cryptocurrencies and this type of contracts. Smart contracts between a buyer and a seller are written in lines of code and only executed when the conditions of the contract have been fulfilled, from both sides. The transactions can be easily tracked and they are irreversible. With smart contracts, you can easily agree with people you have never met before and trust that the terms of your agreement will be met. You don’t need a lawyer; you don’t need a witness and you can avoid messy court cases, which is one of the biggest benefits of this invention.
But when did this invention first appear and who was the creator? The term smart contracts was first proposed by Nick Szabo in 1994. Nick is an American scientist and he is rumored to be the infamous Satoshi Nakamoto (which he denied). For the first time, he mentioned this term in his whitepaper where he said that derivatives should be traded with complex terms. Even though he wasn’t talking about blockchain technology at the time, most of his transactions happened. This is why he is considered to be one of the founders of these contracts, or at least the founder of the very idea, since it was developed by another person, a bit later. It took a while for this idea to be implemented, but today, we have a fantastic alternative to traditional ways of doing business, as well as amazing and fresh financial tools to use.
Blockchains that support smart contracts
However, research shows that there are almost 2,000 digital currencies on the market, at this very moment. Ever since the first crypto, BTC, was invented, it seems like it was a great model for many other currencies to be created, and today, almost 13 years later, the marketplace with digital money is thriving. Or should we say – it is reaching unprecedented highs, no matter the volatility and all the ups and downs that Bitcoin is experiencing, for example. In an environment this saturated, it’s logical that not all the digital currencies can be used for smart contracts. Although they can bring amazing benefits to a huge variety of contracts, people are still not used to this technology. Here are some of the main technologies that do support them:
Even though Nick Szabo was the first person to propose smart contracts, Vitalik Buterin was the first person to build them. In 2014, Vitalik published a whitepaper and he proposed a blockchain network that could act as a foundation for DApps and execute smart contracts. This network was called Ethereum and it is the second-largest blockchain platform today (only surpassed by Bitcoin). Ethereum has grown so much that its network now faces congestion. This has led to increased gas fees and large carbon footprints.
Regardless of that, joining the ever increasing number of people who are investing and getting richer through cryptocurrency today seems like a good idea, since this is the future of doing business and investing. You need to make sure to make smart investments, and carefully pick the funnels for that. That said, by using the BitcoinUp platform, you can maximize your profits at minimal cost.
Solana is one of the newer blockchain systems and it supports smart contracts. Solana gained quick acceptance because it solves unique problems posted by the Ethereum blockchain. While Ethereum can only process about 15 to 45 transactions per second, the Solana chain can process up to 50,000 transactions every second. Solana uses proof of history to process transactions super-fast and smart contracts can be executed at a fraction of a cent. What once appeared as a response to current crypto problems, is now gaining popularity fast, providing investors with efficient solutions.
The Polkadot chain can best be described as a partner chain. It doesn’t aim to provide unique service, but rather it acts as a fork of other chains and creates para chains to make them function better. For example, Polkadot has parachains running on Ethereum and it helps to make transactions faster and less expensive. That being said, it works as a great tool that you can combine along with other cryptocurrencies, for the best outcomes and results possible. At the same time, Polka is becoming more and more powerful, and investors are aware of its importance.
This article has shown you the basics about Smart Contracts. As we’ve already mentioned, Smart contracts have multiple benefits. Not only do they allow you to enter agreements and carry out transactions with confidence, but they help automate processes and therefore eliminate potential problems that may occur in the future.
As a result, you can rely on the code to execute your contract and you don’t need a third party to bear witness, which makes the transaction trustworthy and verified even before it happens. If you are interested in smart contracts, you can carry out further research, since these contracts are somewhat new on the market.
Nonetheless, people are more and more aware of how convenient they are, especially for contracts that might turn out problematic at some point. And especially the risky ones. But this could be a fantastic tool for the majority of contracts in future, since it would help save both time and effort, and prevent potential conflicts and mistakes.