by Shally

America’s election is coming up next week. My mum wants Donald Barracks to win. My Dad wants Bama Trump to win. So both put $300 each into a digital wallet. We then code a contract with the following: 

If Donald Barrack’s votes > Bama Trump votes, then the digital wallet containing $600 will be given to mum. But if Bama Trump’s votes > Donald Barrack’s votes then the digital wallet containing $600 will be given to dad. The election has just been concluded. The system goes to the internet to see who wins. It says DB votes > BT votes. Hurray!!! But don’t be in haste because the system got to confirm from other source nodes like YouTube, Slack, Twitter, and Instagram to reach a concord and consensus. This was done and all proved positive that DB votes > BT votes. The smart contract or the system automatically instructs the wallet to send the $600 to mum. 

The contract was coded to run independently of any intermediary so that it can enhance transactions that are transparent and irreversible. This is just what a smart contract means in simple terms. Mum and Dad agreed that if BT wins Dad will get the money or if DB wins mum will get the money. So they made a code for it that will automatically execute once it reaches a consensus. The coded contract found out that DB had won it immediately sent 600 dollars to mum without wasting time, it was transparent. This means again that the two parties made commitments via blockchain. They were sure that if the conditions were fulfilled, the contract will be executed.

A smart contract is an agreement between buyer and seller written in an encrypted form (built on a decentralized blockchain) that executes itself (without the aid of a conventional intermediary) once the requirements have been met and completed. There’s no middleman or third party here to verify your information. The Blockchain holds every necessary and important detail.

HOW DOES THE SMART CONTRACT WORK?

Smart contracts work by simple terms. “if…..then…” statements that are encrypted into codes on the blockchain. When the conditions are written have been met and completed then the nodes or network of computers can automatically execute actions. These actions could be to release funds to the appropriate parties, make cross-border payments, issue a ticket, etc.

SMART LEGAL CONTRACT

This one is the most common type of smart contract. It works like the traditional banks where legal requirements are put in place so that both parties can be accountable. If one party fails to be accountable or to fulfill his part legal actions will be filed against such.

DECENTRALIZED AUTONOMOUS ORGANIZATIONS (DAO)

Various communities that exist in the blockchain upon which their terms and conditions are encrypted via smart contract are termed DAO. The members and team comply with the terms and conditions and if any breach or alterations should occur the system automatically penalizes the defaulter.

APPLICATION LOGIC CONTRACTS (ALCs)

Application Logic Contracts enable communication across different devices, such as the merging of the Internet of Things (IoT) with blockchain technology. They contain an application-based code that remains in step with other blockchain contracts.

Smart contracts are faultless and precise. All that is required is that they are coded correctly then execution becomes perfect.

Smart contracts accomplish tasks faster relative to the old-fashioned conventional approach

Smart contracts are powered by blockchain technology therefore intermediaries are not necessary. This has helped to reduce the cost of transactions and others.

A smart contract transaction does not require trust as its integral part. As smart contracts run on a decentralized network, this means that the whole network is trustless. There is no need to trust the parties before you carry out a transaction.