What is a Smart Contract?
Smart Contracts are also known as crypto contracts. If it is interpreted into Indonesian, a smart contract is a smart contract. Smart contracts are computer programs that directly control the transfer of digital currencies or assets between parties under certain conditions.
Smart contracts not only notify the rules and penalties associated with the agreement that has been agreed, but also can automatically enforce these obligations. The contract will be stored on Blockchain technology.
Who created the Smart Contract?
The words "smart contract" were created by Nick Szabo and the purpose of the smart contract is to make a contract that is like a lawyer in the internet.
In 1998, Nick Szabo designed a mechanism for decentralized digital currency called "Bit-Gold." Although this coin never happened, he was arguably the pioneer of Bitcoin. Many people say that Szabo is Nakamoto Satoshi, father of Bitcoin, but there is no strong evidence of this statement.
Many platforms now allow the use of smart contracts, including Ethereum, Bitcoin and Nxt. Today, with more and more people using Bitcoin and Blockchain technology, smart contracts are increasingly popular. Almost all cryptocurrency has a smart contract to reduce fraud.
How does a smart contract work?
Blockchain is ideal for storing smart contracts because of security and technological provisions. The smart contract data is encrypted in the shared ledger, so that information stored in blocks cannot be lost or engineered by one side.
Another advantage of blockchain technology that is included in the smart contract is flexibility. Developers can store almost all types of data on the blockchain, and they have various transaction options that can be selected during the smart contract implementation.
Blockchain-based smart contracts help businesses become more efficient, cost-effective and safe.
For example: initial (A) rent a house to initial (B). (A) pay to (B) with crypto money and the receipt will be stored on the blockchain, (A) will get a special electronic code to enter the house. If next year (A) does not pay (B) on the designated day, this special code will change and (A) can no longer live in the house until (A) pay.
You might be confused as to why renting a house is so complicated, but abroad, if you want to rent a house, you have to go through a middle person like Century 21. Because of using a middle-man, then there is a transaction fee, too much time will be wasted.
By using the smart contract, transaction fees, admin and time will be deleted because this passes the internet. This contract also remains legal in the eyes of the law.
Not only in property, smart contracts can be done anywhere and for anything like the police, the company, the government to banking. Time is money and using a smart contract will save a lot of time.
The advantage of using a smart contract
- Cost savings: Smart contracts do not require operational costs and save human resources, including employees needed to monitor their work.
- Autonomy: Smart contracts run on automatic processes and, in many cases, can eliminate human involvement, increase the speed of business transactions specified in the contract.
- Trust: Data entered on the blockchain cannot be changed or deleted. If one party does not complete its obligations, the other is protected by the provisions recorded in the smart contract. Automatic transactions also eliminate the potential for human error and ensure accuracy when executing contracts.
Losses using a smart contract:
- Human-error: Although using a smart contract will reduce human error during execution, but humans write code from the smart contract. A good example is The DAO, developers make mistakes when writing code and hackers exploit errors and steal about $ 60 million.
- Legal status is unclear: At present, there is no government that regulates the smart contract. As a result, there is a potential problem if government agencies decide to create a legislative framework for smart contracts.
- Implementation costs: Smart contracts cannot be made without a programmer. It is very important for a programmer who understands a little law who is experienced when making a smart contract.