Smart Contracts | A Short Guide.
Team M.A.DWhat is a Smart Contract?
A smart contract is basically a self-executing contract (software/coded program/algorithm) containing certain terms and conditions of an agreement between two parties written directly into lines of code. This code contains a set of rules under which the parties of that smart contract agree to interact with each other. If and when the predetermined rules are met, the agreement is automatically enforced, i.e. the smart contract is executed.
Okay, let’s simplify this further:
We may define a smart contract as an application or program that runs on blockchain. It is like a digital agreement, which has a set of rules defined in it.
You may take an example of a Lease and License Agreement for renting a house. The agreement has certain conditions written in it, according to which both the dealing parties need to act, i.e. they need to fulfill the conditions written in the agreement for a deal to take place. Similar is the case of smart contracts. The ‘smart contract’ is an ‘agreement’, which has a ‘set of rules’ just like ‘conditions’ in the agreement. Once those ‘conditions’ are fulfilled, the agreement is finalized; similarly, once the ‘set of rules’ (also known as predefined rules) are met, the contract is executed without any intermediary’s involvement or time loss, and the participants can be immediately certain of the outcome.
But, there are notable differences among both – physical agreements and smart contracts:
- Agreements are made on a physical medium (paper). Smart contracts are deployed on digital mediums (blockchains).
- Agreements need an intermediary (a middleman, lawyer) to go through the process. Smart contracts do not need an intermediary (a middleman/ third party).
Note: They get automatically executed as soon as the conditions/rules are met. - Agreements need a superior authority (a court) to finalize them. Smart contracts do not need one, as they run on blockchains that are decentralized.
Note: This means, you yourself are the sole executor and commander of the transaction, and once you have reached the eligibility criteria of the smart contract, your transaction will automatically take place without the meddling of any third party/higher authority. No one will be able to stop your transaction from happening. - You need to ‘wait’ for your agreement to be approved by the court, i.e. there is a time factor involved. You do not need to wait for the outcome of your smart contract as it is automated, i.e. there is no time loss.
Conclusion:
We may say that Smart Contracts are simply programs (algorithms) stored on a blockchain that run (execute the task) when predetermined conditions are met.
Why Forsage chose Smart Contracts?
- Distributed:
Smart contract data is replicated and distributed in all nodes of the blockchain network, where it cannot e falsified or deleted. Hence, it is impossible to hack or tamper with the tasks done through them. Cryptographic encryption ensures complete anonymity for all participants. - Deterministic:
Smart contracts only perform the actions they were designed to, given the requirements are met. Also, the outcome will always be the same, no matter who executes them. Hence there is no worry of any deceit or things going south. - Autonomous:
Smart contracts complete the tasks automatically, working like a self-executing program. The transactions do not require the participation of 3rd parties, or centralized bodies to get processed. - Immutable:
Smart contracts can't be changed after deployment. Thus, we may say that smart contracts can provide tamper-proof code. - Reliability:
Information that once entered the blockchain cannot be deleted or edited. Each participant of the transaction is protected from the other party’s dishonesty by the smart contract code. In addition, blockchain technology ensures that data is accurate. - Transparent:
Smart contracts are based on a public blockchain; hence their source code is not only immutable but also visible to anyone. - High transaction speed:
Unlike centralized networks, there is no need to fill in the forms, stand in a queue or wait for the transactions to be stamped. Full automation! - Lack of Human Factor:
People tend to make mistakes, but this is impractical in the financial transactions supervised by smart contracts. - Cost-effective:
There is no need to pay for the services of intermediaries/third parties, which reduces the operating costs.
How Forsage uses smart contracts?
- Smart contracts are the main software on which most of the operations of Forsage are based.
- The mandatory use of a digital signature (asked before every transaction) guarantees that the transaction is genuine and legit.
- There are no contract execution costs, as there are no intermediaries (middlemen/3rd parties) in the system.
- Smart contracts ensure strict fulfillment of obligations and the timing of events. It is technically impossible to deviate from the given scenario.
The FORSAGE smart contract makes it possible to transfer funds directly between the wallets of the community members. The smart contract balance always remains zero. Don’t take our word for it – check it using any blockchain browser. Automated payments protect members from fraud – money just can't go anywhere else but the specified wallet. In FORSAGE, the payment is sent directly to the user's wallet. The FORSAGE smart contract will work as long as computers and the Internet exist, regardless of any unforeseen circumstances.
References: