How do Crypto Smart Contracts Work?
Smart contracts are self-executing contracts that exist on the blockchain. It enables transactions and agreements to be carried out among disparate, anonymous parties without a central authority, legal system, or external enforcement mechanism.
A smart contract automatically verifies and enforces the performance of obligations in an agreement, including implementing appropriate payments. Besides that, smart contracts also store and transmit value between parties.
How do smart contracts work?
Smart contracts run on a decentralized digital ledger known as the blockchain. Once deployed on this ledger, any changes made to it are recorded permanently in encrypted form using cryptographic algorithms.
The terms of a smart contract can be written in any programming language and stored on an immutable blockchain for demonstration purposes – or future reference should dispute arise about its implementation (for example: Who has actually paid their bills?).
In this way, smart contract technology ensures that only one party can fulfill its obligations under any given agreement at any given time. This ensures that both parties receive what was promised without having to trust anyone else involved with executing those promises correctly (e.g., banks).
What can smart contracts do?
It’s important to note that smart contracts are not just limited to financial transactions. These contracts are used in situations where there is a contractual relationship between two parties and where the execution of that contract could benefit from automation or streamlining.
Here, we take a look at 2 examples of smart contracts in action:
Smart contracts in voting
Consider the case of an automated voting system. A government may want its citizens to vote on issues related to taxation policy or public health policy or perhaps even on whether or not their country should go to war with a neighboring country.
So, it can then create smart contracts that allow voters access only if they have registered their votes ahead of time (to ensure fairness). Once cast, those votes would be counted automatically through an algorithm (to ensure accuracy).
This is a potential game changer for countries where democratic elections are impossible for several factors, i.e., corrupt governments, vote buying, etc. An entirely objective and automated voting system brings about a new level of fairness and transparency.
Smart contracts for record-keeping
Sensitive data storage is another area in which smart contracts can make a significant difference. Medical records and their associated data are susceptible and confidential. And in the case of specific individuals, such as government leaders, their medical information may be highly sought after by outside parties.
SingHealth’s data breach, which resulted in hackers stealing the medical information of millions of Singaporeans, including the country’s prime minister Lee Hsien Loong is one relevant example.
Using smart contracts allows sensitive data to be stored and analyzed safely while still being easily accessible by authorized personnel at various facilities, i.e., hospitals.
Cryptocurrencies that support intelligent contracts
Currently, several cryptocurrencies support the implementation of smart contracts; these are:
1. Ethereum (ETH)
2. Solana (SOL)
3. Cardano (ADA)
4. Avalanche (AVAX)
5. Cosmos (ATOM)
But the most popular and widely supported one is Ethereum; it’s easy to see why, as it’s the second oldest crypto in circulation. Ethereum smart contracts are backend code running on the Ethereum blockchain executing commands exactly as they were programmed to.
If you want to find a wallet that supports more than one of these currencies at one check this article from Tezro: https://blog.tezro.com/best-multi-cryptocurrency-wallets/
This allows contracts to hold funds and exchange them between different people. Additionally, it can store information about an application, trigger other smart contracts, or even create new tokens.
Conclusion
To sum up, smart contracts are a new way to build software. They run on a blockchain network and can be used for anything from tracking digital assets to running entire companies.
Besides that, smart contracts help you exchange money, property, shares, or anything of value transparently while avoiding the services of a middleman.
