Thursday, 20 October, 2022 UTC
Summary
A smart contract is yet another technological development that mimics part of our real-time action.
As its name implies, smart contract essentially deals with contract confirmation on a decentralized network.
When we talked about the Metaverse, we mentioned that “Metaverse is an imaginary mimic of the internet as a universal, comprehensive, yet single digital world."
Similarly, smart contracts represent a decentralized way of authorizing deals and agreements.
In today’s world, we are experiencing changes that not only make things easier for us but also save time.
With Picture-for-profile NFT avatars, individuals can exist anonymously on any platform. With a smart contract, we can finalize digitally deals from anywhere in the world.
What exactly are smart contracts and how do they work? This article will explain what you need to know about this technology and how it influences our lives and the decentralized space.
Smart Contract: An overview
Decentralization has dominated the digital space such that most financial transactions and activities don’t require any central authority before they are carried out.
Decentralization can be described as the situation whereby the control and decision-making of an entity are transferred from a central body or authority to different local authorities and agencies.
Most digital projects in the world today are built on decentralized technology. These include cryptocurrencies, blockchain, and fintech platforms, among others.
A decentralized environment implies that anyone can contribute to the platform and it doesn’t require authorization from a central body or government agencies.
With all of these going on, there is an obstacle. The issue of trust and honesty arises within concerned parties.
This gives rise to the development of Smart contracts. Simply put, a Smart contract is a decentralized system of confirmation or agreement.
The concept of “smart contracts” originated in the 1990s as used by Nick Szabo who is regarded as the father of smart contracts.
Smart contracts can be applied in borrowing, lending, investing, trading, and other financial purposes. A common example of a smart contract exists in Ethereum and vending machines.
With this technique, parties can develop a smart contract to support their project on a blockchain.
Before any action can be carried out with this project, the smart contract will request a certain number of digital signatures.
Not only does this technology eradicate third-party involvement, but it also establishes trust and security on the blockchain.
No funds or transactions will be approved until the number of signatures programmed is reached.
If this is not clear yet, let’s take a real-life example.
Assuming you are the personal assistant to the CEO working at a firm. Some investors are looking to work at your firm and the deal is already at the signatory stage.
Without your boss’s signature, as well as the investors’, no fund will be released to the financial department.
How do smart contracts work?
- Once a smart contract is deployed, it automatically has an address to it. The address is purposely for interaction with contracts and other activities.
- A smart contract takes different variables depending on what the developer stores on it.
- Once you integrate a smart contract on a blockchain, everyone on that blockchain can interact with it.
NB: Ethereum doesn’t allow modifications from outsiders.
- The first node to identify as valid with any of the Proof-based consensus like Proof-of-Stake, Proof-of-Work, etc. will be assigned as the leader of the smart contract.
- The leading node is allowed to add the results of its execution to the blockchain.
- The valid results are added to the blockchain as new blocks which modify the internal variables.
- This new variable further represents an initial value for future transactions on the blockchain (since it is immutable).
Top 10 Smart Contracts Platforms in 2022 (Apart from Ethereum)
Listed below are the top 10 smart contracts platforms other than Ethereum in 2022 as listed by Rapidinnovation.io’s Jesse Anglen.
- Cosmos Blockchain
- Near Protocol
- Elrond Protocol
- The Algorand Blockchain
- Avalanche Protocol
- Fantom Network
- Terra LUNA blockchain
- The Polkadot relay chain
- Cardano ADA smart contract platform
- Solana blockchain
Final thoughts
Smart contract is the digital way of authorizing an agreement or deal between parties by taking the signatures of the involved parties before permitting any actions on the project.
The idea originated in the early 1990s from Nick Szabo and who’s regarded as the father of smart contracts.
Apart from their uses in the financial sector, smart contracts can also be used in real estate, healthcare, gaming, and incorporation into a whole corporate structure.
More than anything, they ascertain trust and security as well as privacy of projects.
Kindly share your thoughts about smart contracts. Do you think they have come to permanently replace physical signatories?
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What are Smart Contracts and how do they work? was originally published in AR/VR Journey: Augmented & Virtual Reality Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.