The Ultimate Guide to Smart Contracts and their Applications in Real-Life
April 8, 2022
Faster, cheaper, and more reliable than traditional methods with untapped potential and an exciting future, enter the smart contract.
What are Smart Contracts?
A smart contract is a computer protocol that executes the terms of an agreement or transaction as specified by its programming code. Essentially, it's a simple business transaction that can be programmed to automatically execute the exchange of money, content, property, shares, or anything of value.
A smart contract usually has the following characteristics:
- It's self-executing.
- It's transparent.
- It can trigger events based on predetermined conditions.
- It can store information about agreements in the blockchain.
Who Uses Smart Contracts?
Smart contracts are rules that define the terms of an agreement between two parties.
The two parties do not need to know or trust each other to enter into the agreement. The smart contract will execute the terms of the agreement and will also enforce penalties for any party that does not uphold their obligations.
Smart contracts have many potential applications, such as in financial services, supply chain management, healthcare, and real estate.
How Do Smart Contracts Work?
Smart contract code ensures that both parties meet all the contract terms and eliminate any need for a third party to oversee the agreement. It works by ensuring that both parties' specific rules and conditions are recorded on the blockchain. A smart contract will then only execute if these conditions are met, and it will only use what has been agreed upon to enforce this agreement.
Smart contracts are able to operate this way because the underlying blockchain networks are trusless and immutable in nature. That means that nobody can alter the data and that no central party has authority over the contract. These features ensure that people that don’t know each other at all can enter digital high value contracts safely.
What Can You Do With Smart Contract Technology?
Smart contracts can change how we do business by removing the need for a lot of overhead costs in financial, business and consumer processes. Many tasks, like loan payments and loan issuance can be fully automated in a secure way, decreasing the time and costs needed to deliver those services. They also have the potential to change how we enforce agreements by removing the need for expensive legal proceedings.
In business and legal settings, smart contracts can help with anything from employee benefits to shareholder agreements. They can also be used for escrow services or for enforcing arbitration clauses.
In the cryptocurrency industry, smart contracts are also used to create tokens that have a functional use. These tokens are often used to incentivize the usage of new innovations, such as web3 browsers or decentralized applications (Dapps).
The Advantages of Using a Smart Contract
A smart contract is a protocol that facilitates, verifies, and enforces the negotiation or performance of an agreement. It is a digital protocol that runs on blockchain technology and has the following benefits;
1) Transparent - All information pertaining to the agreement can be shared with all parties involved in the transaction.
2) Tamper-proof - The data cannot be changed once it has been written onto the blockchain.
3) Self-executing - The terms of the agreement are enforced by code and cannot be violated by either party.
4) Immutable - The data in a block cannot be changed, and any new blocks that are added to it must refer back to and agree with all previous blocks
Smart Contracts ultimately help reduce fraud, increase transparency in transactions and reduce transaction costs.
Where Have You Seen Smart Contracts Used in the Real World?
The use cases for smart contracts are endless, they can be applied in any industry where there is an agreement between two or more parties that needs to be enforced. Smart contracts are a way of using blockchain technology to make an agreement, or a contract, that is self-executing and cannot be changed.
Some examples of how smart contracts are being used in the real world include:
- In the agricultural industry, smart contracts are used to track food products from farm to table.
- In the music industry, smart contracts can be used to distribute royalties automatically and fairly.
- In healthcare, smart contracts can be used for patients with chronic conditions who need regular prescriptions.
How is Zinnia using smart contract?
The Zinnia network is currently using smart contracts in the same way as the industry standard in the blockchain industry. However, to deal with the high cost and low throughput of smart contracts, Zinnia is implementing a native second layer which ensures higher throughput and stable transaction fees.
Anybody can build smart contracts on Zinnia because the network is completely open and decentralized. Nonetheless, the focus of the Zinnia network lies on developing smart contracts that improve individual data ownership, data security, web3 applications and enterprise business solutions based on NFT technology.
