What are Smart Contracts?
Simply put, smart contracts are distributed blockchain applications that store logic and execute actions when the conditions of a particular agreement are met.
Ex: Imagine you owned a marketplace platform that allows individuals to list items for other users to purchase, but you are tired of having to manually address fraud claims when users purchase items that are not sent. You could code a smart contract that records payment from a buyer, and distributes payment to a seller once a receipt of successful delivery is reflected on the blockchain. In cases where sellers do not meet their obligation to ship within a stated time period, payment can automatically be returned to a user without the time, hassle, or costs of authorizing fraud claims yourself.
Smart contracts, as we understand the term today, originated on the Ethereum network. Ethereum (not to be confused with its cryptocurrency, Ether) is a worldwide blockchain network that allows developers to deploy decentralized applications.
When we say that these applications are “decentralized”, that means that the application, as well as all of the information it receives and outputs, are represented and recorded across a massive network of “nodes” or computers that simultaneously record information. The information is unchangeable, fully transparent, and accessible by all parties involved in the transaction, be it financial or otherwise. This promotes security, automation, and accurate record keeping for both developers and users.
Though we have only just begun to exercise the capabilities of smart contracts, many are currently being used to automate interest payments for lenders, simplify and secure the crowdfunding process, and otherwise circumvent third party service providers that either process payments, or verify contracts on behalf of two or more parties.
However, smart contracts have the potential to replace a number of financial and administrative processes that organizations currently outsource, manually process, or process using centralized applications and web architectures that often rely on third-party APIs anyway, and often lack comparable security, speed, and fraud protection.
Deploying Your First Smart Contracts
Deploying your first smart contracts is a critical step towards preparing your development infrastructure to compete in the modern digital marketplace. Teams should take advantage of this period of technological development to create simple smart contracts that demonstrate the advantages of leveraging these revolutionary applications within their organizations.
For example, you could start by creating an employee survey application which anonymously records responses, and waits for a particular volume of responses before distributing them to the department which oversees these surveys. Or, you can create a charitable fundraiser which automatically matches employee contributions up to a certain threshold without ever needing to oversee these payments, or involve a third party financial institution.
We’re Excited to Hear What You Have In Store!
Do you have an idea for a game-changing smart contract, but need some extra help developing and deploying it? Reach out to This Dot Labs for a consultation, and we will be thrilled to help you see just how easily you can begin executing business logic on the blockchain!
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