Smart Contracts or smart contracts offer a series of advantages as they are based on blockchain technology. They provide greater security and compliance with the agreements established between more than two parties to carry out transactions or operations of any kind.
They are increasingly used in everyday activities and are one of the keys to Web 3.0, where security, decentralized operation and transparent validation are fundamental factors for the autonomy of users in this new Internet browsing paradigm.
What are Smart Contracts?
The term “Smart Contracts” was first mentioned at the end of the 20th century, specifically by Nick Szabo, who defined them as a tool capable of establishing and protecting computer networks through protocols.
Szabo, a computer scientist and cryptographer, defined and studied some potential uses of Smart Contracts, among which he highlighted copyright management, lending systems and payment processing.
Today, and almost 30 years later, Smart Contracts can be defined as a computer algorithm that runs on a blockchain and allows the execution of formal agreements. This according to Binace Academy.
Smart contracts require a set of pre-established rules within the code. These are executed on the various nodes of a network.
Like a traditional legal contract, Smart Contracts require the compliance of two parties. Failure to comply with any of the devised rules generates consequences or cancellations.
The Bitcoin network has admitted the use of Smart Contracts for some years, but it was Vitalik Buterin who popularized them in the Ethereum network, a project of which he is the creator and co-founder.
Advantages of using Smart Contracts
The use of these smart contracts offers a number of advantages mentioned below:
Unlike traditional legal contracts, where the interested parties need to compulsorily go for review and signature, Smart Contracts allow their implementation, signing and execution instantly through the web.
Although it may seem complex from a legal point of view, this type of agreement can be enforced from anywhere in the world.
Transparent and auditable by the community
Thanks to the transparency offered by this type of instruments, the entire community obtains constancy and public verification through the records that support the operations on a network or blockchain.
All contracts, being made in a customized manner can be designed under various criteria, adjusting to specific goods, services and solutions. Basically, no contract is identical to another.
Lower implementation cost
Regularly, legal commercial agreements require going through several stages of approval that become tedious and even costly bureaucratic processes.
The premise of this type of contract is to be self-executing, decentralized and transparent, which can lead to lower transaction costs.
Ideal for payments and fund transfers
Thanks to the blockchain, Smart Contracts offer a simple and auditable transfer of funds, leaving a support of any operation regardless of the day or time it is executed.
Additionally, thanks to Web 3.0 technology, these funds based on cryptographic processes can be traced, which represents an undoubted identification of their purpose in a relatively simple way.
Although the end user does not directly interact with the creation of Smart Contracts, they enjoy the benefits that Smart Contracts bring.
Smart contracts are the best way to make complicated processes simpler and to ensure automated engagement between the parties to an agreement.
The future of how common services will be handled is already showing the first clues with smart contracts and BitCoins. For this reason, being aware of how they work is essential to avoid being left behind.
New platforms are beginning to be added to make the most complex processes much simpler and the options are opening up in various areas of users’ daily lives.
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