Understanding Smart Contracts: The Future of Transactions

Smart contracts are central to almost everything in the crypto space, and they were popularized in 2017 by the Ethereum blockchain. In this video, we explore the world of smart contracts and learn about what they are, what they can do, and why they are one of the most important technological advances of the 2020s.

Section 1: What Are Smart Contracts?

1. Smart contracts are self-executing or automatic contracts, where the contract's terms are embedded into a computer code.
2. Once created, no one can alter the terms of the contract.
3. Smart contracts are digitized terms and conditions of crypto-based transactions.
4. Smart contracts confirm fulfillment automatically and execute the contract's terms instinctively.
5. Smart contracts operate without the need for a third party, guaranteeing a more transparent and secure performance and execution of the contract's terms.

Section 2: Types of Smart Contracts

1. Smart legal contracts: Parties are held accountable to keep their end of the agreement, and failure to do so can trigger legal action against them.
2. Decentralized autonomous organizations (DAOs): Blockchain communities defined by a set of rules that are coded via smart contracts.
3. Application logic contracts (ALCs): Contracts that contain application-based codes linked with other blockchain contracts.

Section 3: Differences between Traditional and Smart Contracts

• Time: Traditional contracts take anywhere from one to several days or weeks to formulate, while smart contracts can be instantaneous.
• Execution and Remittance: Traditional contracts require manual effort for payment, while smart contracts execute automatically as soon as certain preset conditions are met.
• Cost: Traditional contracts usually involve fees payable to third parties, while executing a smart contract is usually cheaper since you only pay the transaction price without intermediaries.
• Data Security and Protection: Traditional contracts are almost always written on paper and can easily get lost, while smart contract codes are performed between synonymous parties on a ledger, offering more security and confidentiality.
• Archiving: Archiving a traditional contract requires time, space, administration, and supervision, while archiving a smart contract takes place automatically and securely.

Section 4: Challenges of Smart Contracts

• Reduced flexibility of the smart contract's terms and conditions.
• Difficulty reading the contracts by anyone who lacks specific background knowledge and qualifications.

Conclusion:

Understanding smart contracts is essential if you're operating in the crypto space. Smart contracts are central to the crypto space, and being able to read them is an essential skill. Smart contracts details can be found on Etherscan, a blockchain explorer for the Ethereum network that enables users to search through transactions, blocks, wallet addresses, smart contracts, and other on-chain data. Using Etherscan can help you understand how you interact with the blockchain, smart contracts, and DApps, and help you stay safe and spot suspicious behavior.