Tokoin.io – The decentralized aspect of a blockchain, which is its effectiveness in the assets distribution system, has always become its spotlight among Industry 4.0 technology enthusiasts. It is said that the decentralized system can revolutionize the ineffective conventional banking system and is likely to disrupt the existing economic landscape, enabling financial inclusion.
Given the decentralized system between all permitted participants, there is no need to pay intermediaries or middlemen for distributing assets, thus saving time and putting away conflicts. Thanks to the invention of Smart Contract, peer-to-peer transactions can now be supported by a highly secure system.
Back in 1994, a legal scholar named Nick Szabo pitched the concept of smart contracts for the first time. This was followed by the invention of digital currency called ‘Bit Gold’ later in 1998, way before Bitcoin existed. The contracts were self-executing and converted into codes to perform tasks.
Unlike the famous Satoshi Nakamoto or Vitalik Butterin, not much information about that man went viral back in those days. Nick Szabo certainly enjoyed privacy although his Smart Contract invention indisputably became the groundwork for the present decentralized security system.
So, what exactly is the Smart Contract?
In general, the Smart Contract is similar to the usual contracts when exchanging property, money, shares, or anything valuable in a secure and transparent way, but with a little twist: This invention let you transact efficiently by removing the necessity for middlemen.
The Smart Contract is created between two parties that are transacting on a blockchain platform. Both parties remain anonymous. After it is created, the contract is stored in a public ledger, and the system will analyze the contract. Once the triggering events are set, i.e. deadlines, the contract will self-execute as per the written codes. Regulators and users are allowed to analyze all the activities and predict market anomalies and trends.
To put it simply, think of the Smart Contract as an agreement. For example, John wants to buy a car from Wayne. He can easily pay Wayne through a blockchain network using cryptocurrency. John will get a virtual receipt, and it will get included in the Smart Contract.
After Wayne gives the car key to within a specified date, John releases the payment. If Wayne doesn’t give the key, then the network will call in a refund. However, if Wayne gives the key within a specified time, then both the key and the fee will be held up until the specified date.
Once the network has all the components to be released, it will discharge the key to John and the fee to Wayne. If anyone tries to get access to the code, every party linked to the contract will get alerted immediately.
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