What is a Smart Contract?

Sean Lund-Brown

Smart contracts are part of the cryptocurrency market, essentially self-executing to ensure that the terms of the agreement are met. This works by having the contract directly written into the lines of code in the blockchain network. They are designed to execute contracts and offer traceable, transparent, and irreversible solutions for those who want to do business in the world of virtual currency. 

The idea behind a smart contract, or a line of code that is used as an agreement, is that otherwise anonymous parties will be able to conduct business and execute contracts in a way that is safe for everyone. These contracts will lay out the terms of a deal or agreement, but they don’t do it by just listing the details. They are executed as code on the blockchain network, which means that people will be able to use those electronic contracts to send and receive money as part of various deals and transactions. 

The other big feature of these contracts is that because they run on the blockchain, they are secure, reliable, and have worldwide accessibility. 

The importance of smart contracts

These contracts allow developers to build a wide selection of apps and tokens that are decentralized. They are used in all types of things, from financial logistics and tools to game experiences and more. Typically, once one of these apps has been added to the blockchain network, it won’t be able to be changed or reversed. There are exceptions, here, of course, as is the case with anything. 

Smart contracts are changing the way that people do business digitally. These contracts offer a much more secure option, among other perks. Here’s an example of what happens when a smart contract is engaged:

  • Step One: Businesses collaborate to define the smart contract
  • Step Two: Conditions like utility meter readings, payment authorization, or shipment receipt will be assigned so that once they are executed, the contract will engage. 
  • Step Three: The value of the financial instrument, releasing an insurance payment, and other complex operations will be encoded with more sophisticated coding. 
  • Step Four: Developers will create and test the logic of the contract using a smart contract platform. Then, a separate security team or expert will review the contract. 
  • Step Five: The contract is executed on the blockchain once it has been tested and verified. 
  • Step Six: It is configured to listen for “events” that occur that would cause the smart contract to execute its terms. 
  • Step Seven: Once the necessary combination of events occurs, the smart contract executes and the rest, as they say, is history. 

Essentially, technology does all the hard work here, which is what makes smart contracts such a valuable resource. Now that you know more about how they work, let’s take a look at the benefits that they offer. 

The benefits of smart contracts

Smart contracts are preferred because they offer several perks. They are accurate, efficient, and quick. Plus, they offer trust and ensure that everyone is held accountable. Some of the reasons that people love using smart contracts include:

  • Contracts are immediately executed if conditions are met.
  • Smart contracts are digital, which means there’s no paperwork to deal with.
  • There is no risk of handwritten or digital documents being filled out in error, because the digital contract will be 100% accurate. 
  • There’s also no third party involved so people don’t have to worry about information being mishandled or tampered with for personal or professional gain. 
  • Encrypted logs are given to everyone attached to the smart contract so that no one is left out. 
  • These transactions and records are encrypted with the same heavy tools used on the blockchain network, which means it’s difficult to hack. 
  • The transactions are also “chained” together, which means that if a hacker did get in, they would have to change the whole chain to affect the single record they have in mind. 
  • Smart contracts also eliminate time delays, fees, and other costs that come from other contract execution methods. 

The future is digital and the future is now. As we get further into the blockchain and cryptocurrency worlds, more people will continue to look for solutions that deliver everything that they need. 

The limits of a smart contract

While smart contracts are a great resource, they’re not all-encompassing. In fact, smart contracts are unable to send HTTP inquiries, which means they cannot get information about events happening in the real world. This was by design because external data could jeopardize the consensus and the security of the contract in the first place. 

There are several use cases for smart contracts, but you do have to remember that they might not be able to do it all. The best option is to work with someone who understands how to create and execute smart contracts so that they can deliver the results that you desire. 

Another smart choice is to contract Smith.ai for all of your admin and communication needs

If you like things taking over and happening without having to micromanage every detail, you’ll love working with Smith.ai. Our team of dedicated receptionists offers solutions for all types of business needs, from 24/7 answering services to live website chat, appointment scheduling, lead intake, and so much more. While you’re working on the “smart” aspects of your business, we’ll handle the rest. Plus, we’ll even help you create a strategy to manage it all, no matter what you have in mind. 

Keeping in touch and streamlining your communications is what we do best. Plus, our team can even assist you in managing outbound sales or setting up outreach campaigns so that we can help generate leads in the first place. If you’re looking for someone to partner with that will revolutionize your operations the way that smart contracts are changing the cryptocurrency world, we’ve got what you need. 

To learn more, schedule a consultation to discuss what the 24/7 virtual receptionists at Smith.ai can do for your business. You can also reach us at hello@smith.ai or (650) 727-6484. 

Sean Lund-Brown

Sean Lund-Brown is a current Marketing Assistant for Smith.ai. A graduate from Metropolitan State University of Denver, Sean graduated with a BA in Music and an individualized degree in Teaching Vocal Pedagogy.

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