A Smart Contract is a computer protocol that digitally enables, verifies, and enforces contract negotiation and results. Smart contracts enable credible transactions to be carried out without third parties.
On top of the blockchain, benefits are the absence of intermediaries, which saves you time and tension because it is a decentralized network between all parties. Blockchains are unquestionably quicker, simpler, and safer than conventional networks, and banks and governments are turning to them.
Nick Szabo first used the term "Smart Contract" in 1997 long before bitcoin was created. He is a computer scientist, law scholar & all above a cryptographer. So let us spare you his exact words. In simple, he wanted to use a distributed ledger to store contracts. Smart Contracts are just like contracts in the real world, but the main difference is that they are entirely digital. A smart contract is a lightweight, blockchain-based computer program.
Why Smart Contracts?
The introduction of smart contracts and the technology that supports them removes the dependency on third parties and automates the execution of such smart contracts. Smart Contracts involve no other third party, and it can be executed in minutes and has an automatic process with 100% transparency between the parties.
Anyone can go online and can review audit and validate the transactions executed by the smart contract. Security, which is one of the most critical concerns, is maintained through cryptography, mainly using public-key cryptography infrastructure. All the transactions in smart contracts are digitally signed using the private keys of the participating entities.
Smart Contract Real-Life Examples
Consider that you are taking out a chocolate bar from a vending machine where you deposited a $2 note. After that, you hit the button assigned to the choco bar that you want to get. So as a result the lever in the vending machine moves and pushes out the chocolate. The button is programmed to activate the lever to move the choco bar out of the machine.
A smart contract is very similar to a vending machine. It eliminated the need for a middle person. The vending machine is replacing the seller and enabling you to make a direct purchase without anyone involved. It eliminates the need for escrow services.
Smart contracts are self-executing contracts. They contain the terms and conditions of the agreement between the peers who are involved in the process. Those terms and conditions are written in a code that is then executed on a blockchain-based decentralized platform. Usually, the agreements are designed to facilitate the exchange of money, property, and shares.
Imagine that you are at the airport, and your flight is delayed. Still, the inconvenience you're covered with insurance that will compensate you if the flight is delayed. For just a moment imagine that there is a smart contract which the insurance company has already deployed and is monitoring the flight delayed. As soon as the condition of delay for flight met above the X amount of hours, the insurance company will automatically get a trigger and you'll be getting that amount of money agreed with the company.
Smart Contracts can have their issues, but they are undeniably faster, cheaper, and more secure than other traditional methods. Its built-in efficiency and security are why large banks and governments are turning slowly to them.
Self-executing models, and Smart Contracts, can be quickly developed through the clever use of cryptography digital signatures and secured computation. Nick Szabo realized, at the time, that the vast potential of Smart Contracts could be created and executed digitally. We're just starting to see the beginning of how today's smart contracts can help exchange money property or anything else of value in a transparent conflict-free, all while avoiding the services of a middle man.
Some Other Real-Life Applications
The insurance policy is a contract between the insurance company and a consumer. You may use smart contracts to simplify the policy terms execution if you are an insurance company. The smart contract can be programmed to include all the insurance policy clauses. The customer checks the terms and consents and digitally signs the deal. While the policyholder meets the conditions, such as paying a monthly premium, the smart contract enforces the policy agreed. In the case that something goes wrong, and the policy owner needs to pay for his policy, the contract is paid off immediately until the policy owner provides the necessary paperwork to show the harm done to his property.
It speeds up the payment process for insurance, automates, and makes the entire system functionality. Policyholders and insurance providers are no longer forced to build piles of paperwork if an insurance premium is made. Check this post to read about more Smart Contracts use cases.
Smart Contract Tools and Languages
Blockchain technologies support more and more advanced computing platforms and tools to develop smart contracts. These tools must have the highest standards of security and data protection since a Smart Contract manages money or, at least, a token representing some kind of property.
The discovery and extended use of all these tools are critical areas for the production of high-level applications that have resulted in new research areas in which researchers suggest ways to improve safety and security (see the Haskell/Plutus programming language). Some other tools and languages for Smart Contracts are mentioned below.
Smart Contract Languages
Solidity supports, among others, the heritage, libraries, and diverse user styles. With Solidity, contracts for voting, crowdfunding, blind auctions, and multi-signature wallets are available for you. Since Solidity is a work in progress, it is best to have the latest version before implementing a Smart Contract. Every Solidity upgrade brings new features and bug fixes.
Vyper is a smart contract language deriving from Python 3 and targeting the EVM. When we enter the code, it is necessary to bear in mind that all syntax of Vyper is valid Python 3 syntax, but not all functionalities of Python3 are provided for Vyper. A key difference with Solidity is that Vyper does away with inheritance. Vyper tries to keep all the relevant code in one file to make things easier for the programmer and for the software maintainers.
Smart Contract Development Platforms
Truffle is one of Ethereum's most robust programming development systems. This development environment provides developers with a configurable, user-friendly service pipeline. Truffer makes easier the management of all the Smart Contract life cycle. It has an automated contract testing suite which, as we mentioned earlier, is a critical aspect of Smart Contract development. Compiling, linking, deploying, and handling binaries is much simpler for Ethereum developers. Additional features include the automated Mocha and Chai contract check, scriptable deployment and migration System, and a direct contract communication interactive console.