General Overview
The idea of smart contracts is a logical extension of the blockchain idea and its self-regulating nature. Smart Contracts are the digitization of contracts, i.e. the conversion into program code. The advantage of these so-called smart contracts is, in the truest sense of the word, automatic execution as soon as one or more conditions are met.
Idea Behind it, Business- and Use Cases
The idea of smart contracts was discussed as early as the 1990s. One of the initiators was the U.S. lawyer Nick Szabo
A key advantage of smart contracts, it makes the involvement of third parties in contracting obsolete. It does not require a lawyer or a notary public. Just imagine that a transaction can be executed legally and securely without the need for a third party to check the contract for its correctness. For corresponding security, you pay a lot of money today. Lawyers and notaries are expensive. With the help of a smart contract, you save resources, money, and time.
There are many use cases that come into question so far with the help of smart contracts based on the blockchain. The possibilities are very diverse, only a few will be mentioned here below.
- Purchase contracts
- Trade & Finance
- Credit contracts
- Insurance contracts
- Government offices (taxes, land registry,…)
- Supply Chain
- Environment protection
- …
Pros
In addition to the above-mentioned advantages is also the public visibility of such a contract. It is not possible to add additional clauses or amendments without anyone noticing. Each adjustment in the contract is stored transparently and is validated beforehand by the majority in the corresponding network. Thus, manipulation, forgery and fraud are excluded. Even the loss of a contract and its documentation can not be lost. Automation allows avoidance of errors and loss of time.
Cons
One of the disadvantages is that the program is not able to perform any manual intervention, which may be necessary to undo something (due to error or mistake). Smart contracts can currently still be hacked, as the system still has vulnerabilities and bugs that can be exploited. Vetragsfähigkeit is not tested at present. However, depending on the business transaction, this can become a bigger problem if one only thinks of the conditions that are linked to the capacity to contract depending on the case (e.g. age of majority, maturity, capacity to act, etc.). see also
- Car leasing
- Finance
- …
Top Smart Contract Projects
- Ethereum, ETH
- Cardano, ADA
- Solana, SOL
- Polkadot, DOT
- Terra, LUNA
- Avalanche, AVAX
- Algorand, ALGO
- Cosmos, ATOM
- Internet Computer, ICP
- VeChain, VET
