Complex contracts on Ethereum are leading in a way that will take over the traditional transactions sooner or later. Through past outcomes data has proven that Ethereum might be overtaking Bitcoin in this endeavor. But all in all, smart contract development has made a great impact on many companies and worldwide organizations, and they are not stopping anytime soon. This article will discuss the security features of smart contracts, along with the bitcoin smart contract, and examples of Ethereum smart contracts.
What is a Smart Contract?
A smart contract can be defined as a system that can hold a complex code that allows the execution of virtual obligations by building assurance, safety, computerization, and trust. The most popular attraction in the blockchain space is their affiliation with ledgers that are located in many different places. The basic purpose of a smart contract is to execute those tasks which would normally require the involvement of a third person. The tasks are fulfilled on the basis of predefined terms through smart contracts, eliminating the role of any intermediaries. The two most prominent smart contracts that we will discuss in this article are Ethereum and bitcoin smart contracts.
Security of Smart Contracts with Blockchain
A smart contract can be planned out and processed via a blockchain-less medium for real-time purposes. There was no mention of a compulsory layer in Nick Szabo’s initial draft of the concept. In actuality, that would have been detrimental to all the possibilities that are achievable through the integration of a smart contract and blockchain. Once these two are connected and affiliated, it becomes impossible to pose a threat to them. Hence why a smart contract having no blockchain layer will make it lose some of the most important features which interfere with the contract’s authenticity. Having a blockchain layer is very important since it gives people a reason to put their trust in it. Having no established set of rules for trust and security will put the other party in a doubtful state of mind.
People consider blockchains to be invariable, distrustful, and responsible. A typical digitized contract has none of the mentioned traits that open it for interference from threats and suspicious activities. On the contrary, a blockchain integrated with a smart contract on any other DLT (Distributed Ledger Technology) is capable of achieving consensus instantly.
Real-life use cases
There has been a rapid increase in smart contract development. Major companies have incorporated them into the inner workings because of their increasing fame and usability. Some of them are mentioned below.
- Augur Prediction Platform
Augur is based on an Ethereum dApp (Decentralized Application) which works like a prediction stage per the “wisdom of the crowd” theory. It has a solution for every problem regarding the different prediction markets which include, censorship, mediation, arbitrator, and so on. How this works is that any trader can ask a question which will then be betted on according to the outcome. It increases the possibilities of the right answer as more and more people participate. This is the perfect example of an Ethereum smart contract explained. This platform makes use of the Ethereum blockchain feature to pay the rewards right after the expiration of a contract.
- ICO/IEO/STO platforms
An Initial Coin Offering (ICO), Initial Exchange Offering (IEO), or Security Token Offering (STO) are placed equally against the usual traditional financial system. ICOs/IEOs/STOs are much better as compared to the IPO system. They are capable of processing a large and hefty amount of computerization which then makes the task much more efficient. This helps in enhancing the workings of Capital Accumulation. The majority uses the ERC 20 feature of the Ethereum blockchain of receiving their capital off of crypto. It helps in the immediate transaction between digitized assets. Multiple companies have made their billions off of ICO. ICO provides people an opportunity to grow and broaden their horizons however this also attracts those scammers who want to earn fast money. As of now, IEOs and STOs are more used than ICOs.
- Escrow Management
It is a very common practice to build trust amongst the people sitting abroad. Hence why we use banks, brokers, arbitrators, etc. They are responsible for carrying the obligation and transaction of value. When using a third-party system, a lot of money has to be spent. Which, consequently, adds to the customer’s burden. This is not the case with escrow management as it only makes life much easier for the users. This works by running a simple code on an integrated blockchain that will cover all the requirements of a user. Additionally, it can also be customized according to time and number of users, etc.