In today’s modern world, business people started to develop their products using blockchain technology. This technology reduces your work and increases your trust. Smart contracts used to avoid third parties in the transaction. Smart contracts are mostly used in the blockchain-based platform.
In this blog, let’s discuss what is a smart contract in blockchain in detail.
What is a smart contract?
The smart contract was founded by Nick Szabo in 1994. He is a computer scientist and a cryptographer. The smart contract is similar to the contracts in the real-world. But the smart contract is developed by the computer program inside the blockchain technology.
It stores all the rules of negotiations in terms of the agreement. Then it automatically verifies fulfillment and executes the agreed terms.
The smart contract avoids the third party intermediate during the transaction. So the parties can transact directly. Only the parties agreeing can process the transaction. It is the main concept of smart contracts.
The smart contract is implemented in decentralized platforms. Where in a centralized platform there will be intermediate. Also, they monitor your transactions. In the crowdfunding platform, startups or entrepreneurs share their projects to investors to achieve their goals.
But if you are sharing your projects in a centralized platform then you should pay a fee for intermediate. Investors also need to pay a fee to the mediator. But by using the smart contract we can avoid such third parties. We can trust the smart contract because it is distributed and immutable.
Using a smart contract, startups can directly connect and transact to investors. If the project got successful, then the raised money will automatically go to startups. If the project fails, then it automatically goes to investors. Considering the smart contract is inside the blockchain. The information or data, stored in a distributed manner.
How does it work?
(Image source: Hacker Noon)
If you want to understand how a smart contract works, let’s see with an example. If you want to sell a property, house or some other applicants. Then you should find a buyer with a third party or broker. The process of selling properties is hard. The process of paperwork and documentation takes a lot of time. Also, while selling a property you may cheat by frauds.
Currently, most of them sell their properties through real estate agents. These real estate agents take care of all the activities related to selling property. Such as paperwork, negotiations, agreement, and documentation. They act as a mediator for both the buyer and seller for selling the property.
Therefore you cannot rely on the buyer. So real estate agencies provide escrow services while transferring money from one party to the other. After finalizing the deal, the buyer and seller should pay the fees to real estate agents in the name of a commission charge. So it leads to a loss of money.
When you use a smart contract, it reduces the burden of the agent. Smart contracts designed to figure on condition-based principles. which can resolve the ownership issue by transferring it to the customer only the monetary. also, as other conditions are prescribed. smart-contract also replaces the escrow services.
All the works performed by the agent coded in a smart contract. It reduces the time and money of buyer and seller. smart contracts work on this mechanism. So smart contract development is more important to blockchain-based industries.
How blockchain technology is used in smart contracts?
There are many smart contracts implemented with blockchain technology. But bitcoin and Ethereum are the prominent blockchain technology in the smart contracts. We already know bitcoin and Ethereum is a cryptocurrency. ERC20 token also implemented by the smart contract. Let us discuss the ERC20 smart contract.
ERC20 smart contract:
Ethereum is a blockchain-based platform and a type of cryptocurrency. Ethereum blockchain is a peer to peer decentralized platform. We can avoid fraudulent activities, hacker control, and intermediate third parties by using the Ethereum smart contracts and decentralized applications.
The Ethereum blockchain stores the transaction information of the users and traders. For the transaction, it involves the source code and Ethereum smart contract.
ERC20 is a token and it is a kind of digital asset acquired from the Ethereum blockchain. ERC20 used for buying, selling and trading on the crowdfunding platform. These tokens are borrowed from the existing Ethereum blockchain. So a new blockchain is not required.
The most popular Ethereum token in the Ethereum blockchain is ERC20. In the crypto world of 2020, Ethereum smart contracts are ERC20. For developing a single ERC20 token there are certain rules and conditions for developers.
Only after satisfying conditions the developers can create an ERC20 token. Those conditions and regulations coded in a smart contract. ERC20 smart contract is used in the crowdfunding platforms.
What are the benefits of using a smart contract?
When we use smart contract in our business there are some benefits they are
- More trust
- Distributed and immutable
- Avoidance of fraudulent activities
- Record keeping
- Buyers and sellers can have a direct connection
- No need for third parties
- Storage and backup
- Resistance to failure
- Cost efficiency
- Clear communication
- Promised outcomes
Use cases of a smart contract:
As for now, many industries started to use smart contracts and blockchain technology. Some of the industries that use smart contract in blockchain technology are
- Banking & finance
- Supply chain
- Health care
- Food safety
- Identity management
- Legal issues
- Internet of things(IoT)
Where to get a smart contract development?
There are plenty of smart contract development companies available. If you are the person looking to get an ERC20 smart contract with the high secured blockchain technology. Zab Technologies Pvt Ltd is one of them delivered more than 60 blockchain products to our international clients.
Without smart contract development, we can not have any computer coded agreement or security during the transaction. We people in the Zab technologies will provide you world-class smart contract blockchain technology at an affordable price.
However, there will be a huge demand for smart contract development in the future. Now only some people are getting to know about blockchain technology and smart contracts. In the future, many industries will integrate smart contracts with blockchain technology to reduce time and to increase trust. Even many new tokens and games can be generated using smart contract development.