Are Ethereum Smart Contracts the future of blockchain?
In 1994, Nick Szabo, a legal expert and cryptographer, saw the potential for smart contracts, also known as self-executing contracts, blockchain contracts, or digital contracts. Contracts of this type might be transformed to computer code, saved and duplicated on the system, and overseen by the blockchain’s network of computers. This would also entail ledger feedback, such as transferring money and receiving goods or services.
While many people associate smart contracts with code that maintains balances and can transmit multiple transactions via a network, their applications extend beyond this. Apart from Ethereum, smart contracts are not frequently used, and some are doubtful they will ever reach widespread adoption as a method of managing transactions. However, advocates of Ethereum contend it has the potential to become the de facto standard for performing and safeguarding online partnerships. According to Verified Market Research, the Global Smart Contracts Market was worth USD 144.95 million in 2020, being projected to grow to USD 770.52 million by 2028, which entails a 24.55 % compound annual growth rate between 2021 and 2028.
Understanding the Ethereum Smart Contract
With Ethereum being the most popular choice, smart contracts create a wide range and use cases of the initial Bitcoin blockchain. As of January 5th 2021, Ethereum has the second biggest market capitalization with 452$ billion. Simply said, a “smart contract” is a collection of codes (its functions) and data (its state) that is stored on the Ethereum blockchain at a particular address. Data may be queried using functions that vary according to the smart contract’s implementation, such as determining if an account has access to the cash to be transferred
Benefits of the Ethereum Smart Contract
Smart contracts automate activities via computer protocols, resulting in significant time savings in a variety of business procedures. Automated agreements reduce the likelihood of third-party manipulation by removing the obligation for brokers or other intermediaries to certify previously signed legal contracts.
Since blockchain transaction records are encoded, they are very difficult to hack. Additionally, since each record on a distributed ledger is tied to the previous and subsequent entries, hackers would have to manipulate the entire chain to change a single record. Smart contracts on Ethereum are self-executing, immutable contracts encoded in computer code. They are self-contained, precise, and unchangeable. Ethereum is the preferred platform for application development, rather than Bitcoin, due to Bitcoin’s weak scripting capability.
Additionally, the absence of a middleman in smart contracts results in cost savings. Therefor, all relevant parties have total visibility and access to the contract terms and conditions. Because no third party is involved, and because participants exchange encrypted records of transactions, there is no reason to suspect that information has been changed for personal gain. This provides complete transparency for all parties involved. Furthermore, all documents stored on the blockchain are replicated several times, which enables the recovery of originals in the case of data loss. Smart contracts are encrypted, and cryptography ensures the integrity of all papers. Finally, smart contracts minimize mistakes when many forms are manually filled out.
Use cases Ethereum Smart Contract
Ethereum smart contracts offer several advantageous applications in the banking and financial industries. The notion of smart contracts may be used broadly in various contexts, including mortgages, payments, national bonds, and insurance claims, to streamline the process and make transactions more transparent. When a bond is due to mature, for example, if it is written as a smart contract, the money is transferred right away to the bearer’s account without the participation of a third party. This ensures that the process is clear and efficient.
Initial Coin Offerings (ICOs) or Decentralized Initial Coin Offerings (DAICOs)
Under the utilization of an Ethereum smart contract, initial coin offerings (ICOs) or token sales may be made considerably more successful. It improves the selling process by making it more open and equitable. According to Vitalik Butetrin, the DAICO model is a hybrid of the DAO and ICO models. The development team uses the DAICO variable ‘tap’ in conjunction with a DAICO smart contract to create a DAICO model. It begins in ‘contribution mode,’ similar to previous ICO contracts, in which investors were free to give Ether per the ICO’s guidelines.
Among the most exciting real-world applications of smart contracts is their ability to serve as legally enforceable contracts — the type that governs most of today’s commercial interactions. Technology has fueled innovation in the legal business, most recently introducing electronic signatures for legally binding agreements. Smart contracts are another emerging technology in this sector, and may soon be available to parties to legal agreements, possibly reducing the expenses associated with the use of attorneys and other intermediaries.
How Ethereum Smart Contract paves the way for the future
While there is still much space for improvement and innovation, the rapid acceptance of smart contracts demonstrates their intended openness, accountability, and efficiency.