What is a smart contract and what can be done with smart contracts?
One of the promises of cryptocurrency networks such as Bitcoin, Ethereum or Ripple is to enable a new transaction paradigm that goes beyond digital money transfer.. By going beyond digital money transfer, these decentralized crypto networks; is to reveal the ability to create transactions and deals that do not involve banks, courts, traditional players.
What is a smart contract?
Smart contracts are a potentially revolutionary type of application. The main idea behind smart contracts is that the software can automate most of the contracting process.. This means ensuring contract promises are fulfilled, tracked and enforced without human involvement.
Contract automation, like other types of automation, can lower a business’s costs and reduce the likelihood of errors.. Another potential benefit is to allow parties to structure their relationships more efficiently.. For example, automatic validation of the contractor’s work can result in faster payment to the contractor and avoid unnecessary delays.
The need for courts and lawyers can be eliminated
The most attractive feature of smart contracts is their ability to litigation and courts. has the potential to greatly reduce or even eliminate the need for. With a smart contract, the parties commit to abide by the rules of the underlying code.
Doing this in principle eliminates the possibility of the parties creating a dispute; both parties are subject to the outcome determined by smart contracts.
If someone who rents a car with a smart contract doesn’t pay their rent…
Law professor, computer scientist and author Nick Szabo, In an article he published in 1997, he describes what can happen to someone who rents a car with a smart contract and violates his lease: “If the owner does not pay, the smart contract calls the lien protocol, which puts the control of the car keys in the hands of the bank.”
Smart contracts; may reduce the need for litigants, judges and arbitrators. However, the need for transactional lawyers may increase due to the need for intelligent contractual relationships.. Parties probably want to specify a more detailed set of possibilities and consequences before deciding to abide by the decisions of a software-focused contract.
Companies and organizations today are developing smart contract platforms and applications.. For example, using the Counterparty platform, Swarm can share profits among a company’s executives, control executive decisions, and make decisions such as investing more when the company reaches certain milestones.
Multi-signature
One multi With the signature feature, two or more parties need to confirm a transaction before the coins are released. It is possible for a smart loan agreement to automatically deposit funds into the client’s bank account when the borrower receives information that the loan application has been approved.. Ripple’s Codius software aims to open this challenge.
Which chain and with which coin?
The main issue that is currently dividing smart contract developers is whether or not the Bitcoin network can be built on top of it. which cryptocurrency to use. Ethereum, for example, uses a different blockchain than Bitcoin. In the founding statement of Ethereum, a much more diverse application of smart contracts can be developed using Ethereum’s own blockchain than Bitcoin.
How can smart contracts be further developed?
Using crypto currency protocols smart contracts could revolutionize the contract world. However, automatic performance does not guarantee that the parties will always or mostly determine all aspects of their bargaining at the beginning of the transaction.. Unfortunately, things are not that simple in the real world.
Contracts often have uncertain and imprecise results.. This is because what will happen after the parties reach an agreement is often unpredictable.. At the same time, the parties do not have the time or attention to try to prioritize every possible eventuality.. That is, parties seek some flexibility and try to avoid imposing rigid commitments and consequences.. What smart contract developers may overlook is that both parties can benefit by renegotiating their contracts according to changing conditions.. Smart contracts should have mechanisms to allow parties to mutually change the terms of the agreement instead of getting stuck based on their old assumptions.. Commercial loans often use provisions that adjust the interest rate based on the borrower’s performance.. Especially with Asset-based loans, this is required as they automatically adjust the loan amount based on the amount of assets available to borrowers.. That is, smart contracts should be protocols that adjust the terms of a contract to the benefits of both parties.
Smart contracts implemented on an encrypted blockchain have significant advantages over currently used services.. First, they operate on a decentralized, open network where data is built using software rather than reputation or law.. In addition, a blockchain allows for easier coordination of economic activity as transactions are publicly available on a single ledger.
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