What is a SmartContract? In relation to Cryptocurrencies like Ethereum, EOS or NEO
You most likely heard of the words ''Bitcoin, Blockchain & Cryptocurrencies'', then you perhaps may have encountered the word ; SmartContract? Now, you must be wondering what Smartcontracts have in relation to Cryptocurrencies, like how Ethereum, EOS or Neo provide the fundamental protocol that is encoded to digitally facilitate, verify, or enforce the negotiation or performance of a contract.
There is no day when we do not find news and advances in the world of blockchain technology, it's clear that there has been a rise in digital currencies that offer SmartContract functionality as they are marketed and promoted to be truly disruptive Cryptocurrencies that are going to revolutionize several industries like Digital Identity, Banking, Tax Records, Insurance, Real Estate, Supply Chain, IoT, Gaming & Gambling, Intellectual Property Rights & even Health Care. A blockchain that enforces SmartContracts as part of its own Network, is likely to have captured the interest of the general public, who are eager to explore the vast opportunities that this innovative technology has to offer
The reclamation of a hopeful revolution of the financial industry has served so that the generalist press does not separate the mediatic eye of cryptocurrencies like the Bitcoin or the Ether. Nowadays, the term cryptocurrency is not unknown to the general public.
We usually hear about Bitcoin as a currency, which, in conjunction with the technology that supports its operation (Blockchain), allows you to send money quickly, efficiently and cheaply. Nothing is further from reality, this technology also has other uses, such as the one we are going to introduce in this article: Smartcontracts, that can modulate transactions according to the levels of trust of the parties involved.
What is a Smartcontract?
An intelligent contract or Smartcontract is a computer code or protocol that facilitates verifying and enforcing a contract automatically. Although, there is a discussion about the need or not to go to external agents to execute the planned condition, what is clear is that SmartContract will provide an additional solution to existing Businesses. These contracts work in the chain of blocks and, a priori, they do not need the intervention of the people to verify and execute their compliance.
As an example, it is customary to explain the case of a betting house.
Suppose we want to bet an amount of money X that a football team will win. For this, we should create a neutral account controlled by a smart contract, to which each of the parties should pay X cryptocurrencies. Once the game is over and the team wins, the deal itself will access an official database, check the winner of the football league and automatically send the funds to the winner of the bet.
This would eliminate the middleman that is suppose to be in charge of distributing the payouts among bettors and also charges a fee for doing so, with Blockchain technology a gambler would essentially place trust in a Smartcontract using a protocol like Ethereum to determine the outcome of the match to specifically reward the winner without the need of a centralized system to facilitate this process
What are some other advantages of Smartcontracts?
One that has recently captured our attention was the Beer Vending Machine that was showcased at Consensus 2018 conference that uses Civic Smartcontract functionality as an identity management service to determine & verify the identity of an individual to prove that they are old enough to purchase alcoholic beverages. Civic is basically an identity management service that allows you to protect and authorize the use of your identity in real time. There are many more use cases for Smartcontracts but this is just to give you an idea as to some of the development happening in the Cryptospace, with the idea of integrating the technology to be practical for real-life implications
Or let’s imagine for a moment that we go to a vending machine to buy a soda. It is a contract in which we exchange cash (€ 1) for a good (soda). The machine is responsible for checking the validity of the funds introduced, being not a human, but software which is responsible for verifying the process and is the same who validates or cancels the transaction. Despite this, it is possible that the machine fails, and because the product is stuck, we receive neither the good nor our money.
The main advantage of a Smartcontract is that the use of protocol as being a digital intermediary that gives us is the speed (by trusting that intermediary, the transaction becomes instantaneous), as well as; evidently, security in certain occasions where the level of uncertainty is lower, as demonstrated by Civic identity management service that allows any vending machine directly connected to a network that facilitates the proof of identity & transaction that is encoded & stored data part of a Blockchain
The main reason for the expectation generated by Smartcontracts application in the world of cryptocurrencies is due to the possibility offered by blockchain to allow people, by themselves, to enforce contracts in the real world without the need of a physical intermediary, that is, without the need for a judge or a referee.