What is a Smart Contract and How does it work?

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A Smart Contract is an important technology used in cryptocurrency, which works on Blockchain. It is generally used to automate the execution of an agreement.

This was the basic information about smart contracts. If you want to know more about them in detail, then keep reading this article because in today’s article we will know in detail what is a smart contract. How does it work, and how is it used?

What is a Smart Contract?

A smart contract is a type of computer program. It is made through programming or coding, in which all types of contracts, agreements, terms, conditions, etc. are made with the help of coding or programming.

Whenever you make a deal with any person, there is an agreement or contract between the two parties. And you can do the same agreement through computer technology through a smart contract. It is also called a digital contract.

Smart Contracts work completely on Blockchain technology. It is used so that a third party can be removed from the middle.

For example, if any kind of terms and conditions are made through coding through smart contract technology, then they can never be changed in the future. These are controlled through Smart Contracts only.

How Do Smart Contracts Work?

If we talk about the history of this technology, then it was first introduced in the year 1996 when a computer scientist and cryptographer named Nick Szabo created his own cryptocurrency using this technology, which was named Bitgold. However, at that time, this cryptocurrency could not last long, as it was quite new to the people at that time.

Subsequently, smart contract technology was used by the founder of the Ethereum cryptocurrency in 2013. Today, ethereum is the world’s largest cryptocurrency and its value is very high.

The Solidity programming language is mainly used for smart contract communication. This programming language is very similar to JavaScript. If you understand JavaScript, then you can easily understand this Solidity programming language, and you can also make this Smart Contract.

Whenever we sign any contract, we require a third party. If it is understood through an example, then if you want to send any of your props, first of all you need a dealer.

After this, you need a lawyer to prepare the document, so if you sign any contract in this way, other people also get involved. In today’s time, it is very difficult to trust such people because they can cheat you at anytime. Any contract you have signed can be tampered with.

In addition, if you sign a contract using Smart Contract technology, you do not need a third party. Apart from this, all the processes are completed very fast, and whatever contract is signed, it can never be changed in the future.

So, if you sign any contract using Smart Contract technology, your chances of future fraud are extremely low.Apart from this, this technology works on the blockchain, so it is impossible to hack it.

Whenever you sign a contract using this technology, all your information is stored on the blockchain. With whom no one can be tampered with. Apart from this, it can be easily traced, through blockchain, who is the owner of any property.

Uses of Smart Contracts in Cryptocurrencies

As you would know, even under crypto currency today, Smart Contract technology is used most of the time. Whenever there is a process of transaction of bitcoin or any cryptocurrency between two people, smart contract technology is used.

In this, the person who buys bitcoin first transfers money to the smart contract, then the person who sells the bitcoin transfers his bitcoin to the smart contract.

The money is given to the person who buys the bitcoin, and the person who sells the bitcoin is paid through the smart contract. So this is how this technology works under bitcoin or any other crypto currency.

Apart from this, when you do any transaction through this technology, its process is stored under the blockchain, and all the terms and conditions that were created at the time of the transaction are stored on the blockchain.

How to Create a Smart Contract?

If you want to create a smart contract for yourself, then Ethereum is the best platform right now.

Whenever you create a smart contract through Ethereum, you need to be familiar with the Solidity programming language. You can easily create your own smart contacts using Ethereum, the programming language. Although this technology is not completely secure, some bugs keep coming into it from time to time, which can be a security threat.

When you create a smart contract through Ethereum, under it you have to pay a higher fee than on other crypto currency platforms. So you can also use the platforms of other cryptocurrencies like Hyperledger Fabric, Nem, Stellar, and Cardano.

Benefits of Smart Contract

If you use this technology, you get the following benefits:

  • If you sign any contract through a Smart Contract, then the third party is completely removed from it. If you use this technology, you do not need any third party.
  • If you have signed any contract through smart contract technology, the terms and conditions created by you can not be changed at any time.
  • With this technology, the whole process is done very quickly.
  • There is no chance of any fraud with you under smart contract. Even if you have any contact with a person from any other country, that person cannot commit any fraud against you.

Disadvantages of Smart Contract

Smart contract technology has many advantages, but along with it, there are some disadvantages to this technology, about which you have been given information below: –

  • With this technology, you get to see many bugs from time to time. Although these bugs are seen in the biggest internet companies, they can threaten your security.
  • If you sign a contract using this technology and you make a mistake in it, you can never correct it in the future.

Read Also: What is Ethereum and What will Ethereum be in the future?

Cryptocurrencies : How its Works


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