In blockchain technology, there is a program namely Smart Contract. Is it a contract that is made for blockchain users or something? Well, if you want to know more about it, it seems you need to understand blockchain technology more.
A Brief Explanation of the Blockchain Technology
For some people, the term blockchain may sound strange. Yes, except you have been in activities like digital money trade and investment, you may not deal with this technology. Generally, blockchain is an information database type that is saved in the computer network.
Different from most databases that use a centralized system, blockchain works with decentralized ones. It means that there is no side that saves all the data unilaterally. This way, the system is considered safer, fairer, and more transparent for all the parties involved.
The decentralized system in blockchain works by saving data in nodes that are distributed to thousands or even million networks. Each of the nodes functions as the cross-reference when there is a change of data. As the data are very complex, the smart complex is needed to facilitate them.
The Definition of Smart Contract in Blockchain
A smart Contract is an automatic contract or agreement where all the terms and conditions of transactions are directly submitted in the form of codes. The code is saved in every node available in all the blockchain networks. With the smart contract, every transaction with blockchain technology will be controlled more transparently.
The codes are not only decentralized but also distributed to the network. It enables you to track every transaction you make by yourself. In other words, you have control over every move in the system without any involvement of a third party. In addition, the system also brings you more optimal security. Even you can create a more trusted agreement anonymously without being bound by a certain law and regulation from the government and other controllers.
How Smart Contract Works
Although it looks very complex, Smart Contract is actually developed with some simple rules that are directly written in the form of codes in blockchain technology. Next, the blockchain network determines whether the condition in the Smart Contract is ideal enough for the agreement. If it has been ideal, the condition is verified and the parties involved can just do the transaction based on the condition.
After the transaction has been done, automatically, the blockchain system renews itself. The cycle is repeated when the data are directly sent to all the nodes in the system. This way, the transaction data can no longer be changed. The data also tend to be safer from actions like hacking.
Even the rules of Smart Contract are designed simply, it includes many terms and conditions. Yes, there are so many conditions that need to fulfill before a contract is finished with maximal and satisfying services to the users. Besides, a user must first determine how the transaction is conducted. All the parties in the transaction, such as the seller and buyer, must agree with the rules made in the Smart Contract.
So, make sure to learn deeply about the agreement as well as think about all the possibilities to happen in the future. Therefore, if there is a problem or something that makes the transaction cannot be done as successful as how it should be, there has been a solution provided.
After the deal of the agreement, Smart Contract starts to be implemented. There is a special coding to make it work. Interestingly, along with the development of the blockchain technology, Smart Contract is widely used mainly by companies and organizations. They even provided their own templates to make Smart Contract easier to understand and more accessible.
Benefits of the Smart Contract Implementation
Every technology or system must have its own pros and cons. It is including Smart Contract in the Blockchain technology that is designed to work automatically. Therefore, you need to learn about the benefits and lacks Smart Contract before deciding to use it.
For the benefits, first, Smart Contract operates transparently so that users can trust and rely on their transactions completely in it. The transparency is based on the main principle of blockchain anyway and Smart Contract just makes it better.
Second, it also has a high level of accuracy. This feature is designed in such a way to make sure all the agreement details are written well in the form of codes. Besides, the automation process of Smart Contract also supports accuracy improvement.
Third, Smart Contract is also designed to be very safe and secure. Data security is more guaranteed for the implementation of the decentralized system. While Smart Contract is secure, it is also very transparent. Everyone who involves in the transaction can just know how the contract is made, the points included, and how it works in the end.
Fourth, it is cheaper. Conventional transactions with a bank as the third party requires you to pay the distribution or administrative fee. The number may not be too much. But still, you must spend your money on this. In Smart Contract or the Blockchain system in general, there is no such thing. Yes, you don’t need to pay for the transaction payment which means it is cheaper and more economically friendly.
Fifth, a Smart Contract also brings a guarantee for speed and efficiency. The entire process is done using sophisticated technology. There is no manual process and data writing. So, the transaction can be done faster as well.
Lacks of the Implementation of Smart Contract
Aside from some benefits, you may get from Smart Contract in Blockchain technology, there are still lacks for sure. Indeed, the lacks are only a few but they are very important to acknowledge. Therefore, you can prevent any disadvantages caused by those lacks. So, what are they?
First, the code of Smart Contract is still new even for programmers. It means that the possibility of human errors is still high, no matter how accurate it should be.
Second, no regulation manages it. It is beneficial for some reasons for sure. But at the same time, nothing guarantees your rights if a bad thing happens like being the victim of fraud. This way, make sure to learn more about Smart Contract first along with your transaction partner to avoid such a thing to experience.