Smart Contracts in Blockchain Explained

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Smart Contracts in Blockchain Explained

Smart contracts is a feature that is mentioned in almost every blockchain-related discussion. Indeed, the technology turned out to be extremely handy for many influential institutions and is widely considered to be the future of day to day transactions. However, it still produces a certain amount of confusion. In this article, we will tell everything important about smart contracts.

What is a smart contract?

A smart contract is a protocol that enforces the performance of a deal by adding the terms of the agreement into the code of a program executing it. Smart contracts as a concept were developed in 1994 by Nick Szabo – an American computer scientist and cryptographer. Smart contracts are used to exclude a possibility of third party intervention to transaction execution and to ensure that every party of the arrangement intends to act as it requires. Its implementation also makes prices of transactions and contracts lower, as they need no validation.

Smart contracts gained massive attention after they were implemented in cryptocurrencies to control the transfers of digital currency, to govern a blockchain and to maintain some other processes. However, they have a much wider range of possible implementations. Smart contracts may be used in real-life governmental or private voting, machine-to-machine interactions in the IoT (Internet-of-Things), real estate deals and data management. Yet self-executing contracts are not perfect and should be treated with caution as they don’t exclude execution of fraudulent contracts and the possibility of bugs. They also have no way of changing rules of agreement post-factum, which may be necessary in some cases.

Ethereum and first smart contracts implementations.

Ethereum and first smart contracts implementations.

Despite not being ideal, smart contracts gained huge popularity in the blockchain and cryptocurrency industry, especially after their implementation in Ethereum by Vitalik Buterin. Ethereum’s programming language called Solidity is domain-specific that means it was designed specifically for the creation of smart contracts. To this day, Ethereum is the largest platform for building self-executing contracts. Multiple decentralized applications (dApps) based on Ethereum are building their features and overall functional around smart contracts.

Ethereum competitors.

Ethereum competitors.

However, Ethereum is not the only platform that allows the performance of advanced smart contracts. Chinese blockchain project called NEO is often stated is one of the most promising Ethereum competitors. Main advantages of NEO are advanced scalability (up to 1000 transactions per second according to the NEO development team) and availability of writing smart contracts with multiple popular programming languages like C#, Java and some other.

Another smart contract-compatible platform is a Delegated-Proof-of-Stake (DPOS) cryptocurrency called Lisk. It was developed to involve more developers into blockchain industry and for that purpose Lisk allows writing and execution of programs developed using Node.js or JavaScript. Smart contracts developed using those languages can be used in various Lisk-based dApps for internal transactions within the dApps or used to verify the terms of transactions of Lisk blockchain itself.

EOS is also a Delegated-Proof-of-Stake blockchain that supports smart contracts programming. EOS is a platform strongly aimed at becoming the main platform for the development of decentralized applications. Its main advantage is a democratic voting system that is inherent for DPOS-based blockchains and makes it possible for EOS users to choose necessary updates that can make the platform better for developers. Another advantage of EOS is its scaling that is close to be infinite as DPOS blockchains demand almost no computational or electric power to perform transaction verification.  

Bitcoin for smart contracts.

Bitcoin for smart contracts.

Bitcoin core didn’t allow smart contracts function at its start but had included some solutions for it over time. Current Bitcoin scripting language provides an opportunity for the development of smart contracts, but its function is not as advanced as Ethereum’s and its strongest competitors in terms of extensibility and flexibility. If you plan to use Bitcoin’s with smart contracts and need an extended functional, you can use third-party solutions. One of those solutions is provided by Counterparty project. Counterparty does not have its own blockchain and aims to expand Bitcoin functionality by including new operations on top of regular Bitcoin transactions. In addition to smart contracts, Counterparty allows the development and usage of digital Bitcoin-based tokens and writing programs and protocols with its own scripting programming language.

Conclusion.

Smart contracts technology is one of the most important features that were brought to massive attention by blockchain and cryptocurrency industry. Despite being relatively new, smart contracts are headily invading both classic institutions and modern IT-startups of various branches of production. As a promising and rapidly developing technology, smart contracts can easily become an integral part of the modern world, so everyone should keep a close eye on platforms, providing it.

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