Contracts were created to serve as legal agreement between two or more parties involved in the same deal, work, business or any sort of collaborative operation. Contracts protect all parties included, so if one party claims that the other one is violating terms of contract in any way, it can be terminated or revised by a court of law in order to find the best possible legal solution to the problem. In the modern era, it is almost impossible to imagine any area of business without a contract.
There are numerous types of contracts such as employment contracts, loan contracts, lease contracts, delivery contracts and many more. Writing and signing a contract depends largely on the jurisdiction, because each has its own specific norms. In general, traditional contracts require a lot of human involvement in creating it, and also, after they are signed, ensuring that everything is according to the terms and conditions that are set.
Smart Contracts Development
Generally speaking, smart contracts are a type of digital, computerized traditional contracts. The original idea of smart contracts comes from a computer scientist, Nick Szabo, who started developing them in 1996. In modern days, there are numerous new ideas in the Blockchain industry that are quite confusing to new users, and one of those innovations is smart contract. Even though smart contracts mostly follow the terms of a relationship that is enforceable by law, these relationships are enforced with cryptographic code, which is a totally new element.
What makes smart contracts so different to traditional ones is that they are actually programs that operate exactly as they are set up to by their developers. When they were first made more than 20 years ago, they were supposed to serve as some sort of a digital vending machine. The goal was to allow users to insert data or some other values and receive items from the machine. The good example would be Ethereum users. They can choose to send 20 Ethereum coins to another person on a specific date using a smart contract. In order to execute this operation, users must create a contract and put the data into it. Ethereum is actually the platform that was created specifically for making smart contracts.
How Do Smart Contracts work?
In order to understand how smart contracts work and their main characteristics, It's important to learn more about their features and advantages.
Smart contract features
- They are immutable – once they are created, they cannot be tampered by anyone - They are indestructible – traditional contracts are mainly made and stored in paper and they can be easily damaged, destroyed or unreadable after longer period of time. The smart contracts are very hard to destroy or damage, as they are implemented in digital platforms. - The code is law – all possible conflicts are dealt by smart contracts themselves, meaning that no human intervention is needed to resolve problems.
Smart contracts advantages
- It can operate as multi-signature accounts, meaning that funds are spent only when a required percentage of people agree on it - It can manage agreements between users. For example, it is possible if someone buys insurance from the other person - It can provide utility to other contracts - Finally, it stores information about an application, such as domain registration information or membership records.
Smart Contract Language Code
Bitcoin was actually the first cryptocurrency to support the basic smart contract technology. This means that the BTC network was able to transfer the currency from one user to another. Once all the necessary conditions are met, the network of nodes validates the transaction. The problem with Bitcoin itself is that it's limited to the currency use case. On the other hand, Ethereum has the potential to replace Bitcoin's restrictive language, which is a scripting language of hundred scripts. This new language allows developers to make their own programs, their own smart contracts, which are known as "autonomous agents". There are many Blockchain platforms for smart contracts, but the most notable ones are NEO (often called Chinese Ethereum), Lisk, Bytom, and NEM.
As there are no certain restrictions, anybody can create a smart contract on Ethereum. When it comes to languages, a programming language quite similar to JavaScript, called Solidity, is made for developing smart contracts. EtherEcash is created on top of the Ethereum Blockchain using the platform's smart contract technology. The main characteristic of EtherEcash network is that it makes the process of borrowing funds as simple as using instant messaging. Whenever a certain loan is granted, a smart contract is created on the terms mutually agreed by both parties.
Conclusion
As smart contracts depend entirely on the source code, a badly written code could lead to a catastrophe. A well written smart contract can only cut the costs and save time to both parties. This doesn't mean that traditional lawyers are no more included. Moreover, it is expected that lawyers and developers work together in order to make smart contracts a reliable technology which would replace traditional contracts once for all.