HOW DOES A SMART CONTRACT WORK
The operation of a smart contract is similar to other blockchain transfers. These are the necessary steps:
1. A user initiates a transaction from their blockchain wallet.
2. The transaction arrives at the distributed database, where the identity is confirmed.
3. The transaction, which may be a transfer of funds, is approved.
4. The transaction includes the code that defines what type of transaction is to be executed.
5. The transactions are added as a block within the blockchain.
6. Any change in contract status follows the same process to be updated.
SMART CONTRACTS PLATFORMS
Below, we review some of the most widely used platforms to develop and execute smart contracts on blockchain:
- Ethereum: smart contracts are written in a programming language called Solidity and executed by the Ethereum virtual machine. It is currently the most popular.
- Hyperledger: an open source system developed by the Linux Foundation that is not a cryptocurrency, but a flexible platform on which smart contracts can be developed.
- Counterparty: this platform incorporates data into Bitcoin transactions, i.e. it uses the cryptocurrency's blockchain and allows contracts to be developed on it.
- Polkadot: it is an alternative to blockchain and is famous for its ability to host parachains, chains within chains, allowing more transactions than usual.
SMART CONTRACT APPLICATIONS (EXAMPLES)
Smart contracts have applications in all areas where traditional contracts are currently signed:
Smart contracts will facilitate the storage and maintenance of records. For example, the millions of confidential patient records that need to be securely stored and updated.
Most commercial activities depend on the approval of their funding, which is a time-consuming and resource-intensive process. Thanks to smart contracts, this time can be dramatically reduced.
Internet of Things devices can be used throughout the supply chain to record every step of a product and improve its traceability. In this way, errors, theft and loss can be eliminated.
Mortgage transactions based on smart contracts will be cheaper, faster and safer. This will allow buyers to access the property earlier and update the records automatically.