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March 02, 2018, 04:06:45 AM |
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This is the theory based on my experience:
1. Smart contract?
A smart contract is a set of contract management rules.
A smart contract is a special set of protocols that aim to contribute, validate, or negotiate and execute a contract. Smart contract allows us to execute transactions without a third party. These transactions are easily traced and can not be tampered with or reversed. Intelligent contracts contain in their entirety the details of the terms and perform them automatically.
2. Smart contract appearance?
This idea was originally presented by computer scientist and mathematician Nick Szabo in 1994.
He pointed out the main operational principles, but at the time there was not enough means and environment to realize all. But things have changed with the birth and development of Blockchain technology. Bitcoin has laid the foundations for building contracts on Blockchain. However, it is still not enough to satisfy all requirements. Only when Ethereum appeared, the idea of a new smart contract was made available to all users, providing a new way to set up a contract.
How does Smart Contract work?
The operating principle of a smart contract can be compared to a vending machine.
They only execute commands that have been pre-programmed.
First, assets and terms of contract are encrypted and transferred to a Blockchain block. This smart contract will then be distributed and copied by the nodes that operate on that platform. Once the order has been received, the contract will be implemented in accordance with the predefined terms. At the same time, the smart contract will also automatically check the implementation of contractual commitments
4. What do I need to do to be able to set up a smart contract?
To set up a smart contract, you need:
• Subcontractor: The program must be given access to the product / service listed in the contract so that it can be automatically locked or unlocked.
• E-signatures: All parties agree to implement the agreement by their private key.
• Terms of Contract: The terms of a smart contract form a series of activities. The parties to the contract must sign to accept it.
• Distributed Platform: Smart contract upon completion will be uploaded to Blockchain of the corresponding distribution platform and distributed to the node of the platform.
5. How to implement smart contract in real life?
Smart contracts can be integrated into many areas.
• Election: The ballot results will be sent to Blockchain and distributed to the nodes in the network. All data will be encrypted and completely anonymous. This method can eliminate conspiracy to manipulate the election.
Logistics: As we all know, the supply chain where a system extends and consists of many different links. Each affiliate needs to be confirmed by the former to be eligible to perform part of their work under the contract. This is a long and inefficient process, but with a smart contract, each participating unit can track workflows to complete tasks on time. Smart contract guarantees transparency in terms of contracts, fraud prevention. It can also provide us with the ability to monitor the delivery process if it is integrated with the Internet of Things.
There are countless other applications, such as management, banking, insurance, real estate, and so on.
6. What are the benefits of Smart contract?
Smart contract uses all the strengths of Blockchain technology.
• Security: Smart contracts are encrypted and distributed to nodes. This ensures that it will not be lost or modified without your permission.
• Economical and quick: Most stages are automated, and almost completely eliminated by intermediaries.
• Standardization: There are now a number of different types of smart contracts. Users can choose a style and change to best suit their needs.
7. What is a Smart Contract limitation?
Intelligence is not perfect.
Here are some of the outstanding defects of the smart contract:
Human Factors: Because the entire code is written by humans, they can still make mistakes. If a smart contract has been uploaded to Blockchain, developers will not be able to change it. A well-known example of the human factor is the DAO event. The development team's programming error was discovered and exploited by some hackers, which plundered up to $ 60 million of user funds.
• Unclear legal status: Currently, the smart contract has not been managed by any government. Therefore, there is potential for contradictions if management institutions decide to set up a new legal framework for this form of intelligent contract.
• Cost of implementation: Smart contract can not be created without the need for programming. It is therefore essential to have a seasoned programmer in the development team to minimize potential contract mistakes and secure the company's infrastructure. Enjoy with Blockchain technology.
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