With the development of blockchain, more and more companies are interested in the opportunities offered by the new technology. One of the most promising is the use of smart contracts-algorithms that ensure automatic fulfillment of the terms of commercial transactions. We have considered this technology, smart contract platforms, as well as areas of activity that can apply them.
How to work smart contracts
Smart contract or a smart contract is a special Protocol that is used for the conclusion and fulfilment of commercial transactions of transactions and the exchange of assets between parties without the involvement of third parties. Smart contracts automatically fulfill all the conditions of the agreement and also contain information about the obligations of the parties and sanctions for their violation.
For the first time the idea of a smart contract was described in 1994 by the well-known scientist in the field of computer science and cryptography Nick Sabo, but it received practical application only 14 years later with the advent of blockchain. Even then, the Bitcoin blockchain algorithm incorporated the principles of smart contracts execution, but they were not implemented in the client software for security reasons.
Smart contracts were widely used with the launch of Ethereum blockchain in 2015. Today, this blockchain is considered to be the most convenient for the implementation of not only smart contracts, but also DApps-decentralized applications. Prerequisites for a smart contract:
Decentralized distributed registry is a blockchain platform on which a smart contract will be executed.
Parties with electronic signatures-the parties to the contract, which confirm their participation and acceptance of the terms of the contract by electronic signature.
The object of the contract is the object that is inside the environment of the smart contract, i.e. the blockchain. Such objects can be cryptocurrency, which provide direct access to the smart contract to the subject matter hereof without human intervention.
Conditions-an algorithm that describes the logic of execution of the points of the subject of the contract by mathematical means.
Ethereum allows developers to program smart contracts thanks to a JavaScript-like Solidity programming language that was created specifically for writing self-fulfilling contracts. Solidity is a complete cross — platform Turing programming language, but in practice it is used primarily on the Ethereum platform.
Platform for smart contracts
In addition to Ethereum, the implementation of smart contracts is offered:
Ethereum Classic-the network was formed in July 2016 as a result of the Ethereum network hard fork. This hard fork was the solution to the problems that arose due to the hacker attack on the "subsidiary" project DAO, from whose accounts more than 36 million esters were stolen. To return the depositors ' funds, members of the Ethereum Foundation organization decided to roll back the entire network to a certain point before attacking the DAO and start recording the blockchain again. However, this decision did not support a certain part of the Ethereum community, considering hard fork an unacceptable solution. The resulting hard forks, became the Ethereum, and the old blockchain continued existence under the name Ethereum Classic. Both versions of blockchain support the development and launch of smart contracts written on Solidarity.
NEO-this non-profit blockchain project was launched in China in 2014 to develop a decentralized "smart economy". Many experts say that NEO is superior to the Ethereum blockchain is in many respects, including the principles of working with smart contracts. In the NEO network to perform specified conditions smart contracts using a virtual machine (VM) that automatically optimize the code of the smart contract before you run it, organizing it so that it worked with high efficiency. In the long run, this approach will be more efficient, even though code reorganization requires more time to run and execute than Ethereum.
Nxt is a decentralized open source platform for launching secure DApps: electronic payment systems, messengers and trading platforms. The platform was launched in November 2013 to generate its own tokens on the NXT blockchain with unlimited usage. The NXT platform also contains a limited set of templates for smart contracts, but users do not have the ability to run their own smart contracts.
Jincor is a blockchain platform that allows any business to work with smart contracts and cryptocurrency payments without any legal, technical or financial costs. The platform closed the ICO in November 2017, and the launch of the alpha version of the smart contract designer is scheduled for the end of 2018. This smart contract Builder will be applicable in various areas of business and jurisdictions, providing convenient cryptocurrency payments and a decentralized arbitration system to resolve disputes related to the execution of smart contracts.
Qtum is a Chinese hybrid blockchain platform that was launched in may 2017 with the goal of combining Turing-complete smart contracts and DApps for convenient business use. Cryptocurrency platform combines the capabilities of the Bitcoin blockchain with Ethereum virtual machine and is compatible with both ecosystems. Within the framework of the platform, there are smart contracts of the new formation — master contracts, the peculiarity of which is that control over the termination of the contract or its signing is completely in the hands of the participants themselves. Also, the developers have provided for the launch of the mobile version of the platform, which opens up the possibilities of blockchain technology for a wider range of users.
Ubiq is a decentralized open source platform for launching and implementing smart contracts and dapps running in automatic mode. The platform was launched in September 2014, and in January 2017, it replaced the jumbucks blockchain with the UBIQ blockchain, which is based on Ethereum. The project Ubiq is focused on providing automated smart contracts with high capacity for business, while the developers have positioned the platform as a supercomputer to work with bloccano.
Urbit is a network of personal cloud p2p servers, launched in 2016 to store data, run programs and connect to other users. In September 2017, the Urbit project added support for Ethereum smart contracts. According to the company's blog, smart contracts will be based on THE erc20 standard to allow Urbit cloud real estate owners to cryptologically protect their assets. Thus, smart contracts, Ethereum will perform the function of protecting the user.
Practical application of smart contracts
The use of smart contracts simplifies work in many areas, increasing trust between business partners and the level of security of transactions, as well as significantly reducing costs.
Thus, according to the research of Accenture consulting company, the banking sector alone can save up to $12 billion annually, using smart contracts and blockchain. Also, one of the potential directions of smart contracts development is the electoral system: they allow to completely exclude the possibility of interference and manipulation in the voting system. And in logistics, where a complex supply chain is used, in which each link must coordinate its actions with other participants in the process, the use of smart contracts will save time and allow you to monitor the operation of the system in real time. In addition, in the management, the use of smart contracts will allow payments to employees and customers on reaching certain conditions described in smart contracts.
The drawbacks of smart contracts
Among the disadvantages of smart contracts, experts note:
The costs and complexity of implementing the new technology — to implement smart contracts, you need an understanding of programming, and to make a reliable smart contract that reflects the needs of the company, it is desirable to have an experienced developer in the state. Moreover, the majority of users do not yet understand how the algorithms on which smart contracts are built work.
Human factor - since a smart contract is a complex algorithm that must take into account a variety of factors and conditions of the transaction, for its preparation it is necessary to prescribe a variety of development options. The harder the process, the harder it is to create a smart contract, and the higher the chance of making a mistake. According to the evaluation of Motherboard, at the moment more than 34,000 smart contracts with errors in the code operate on the crypto market, which exposes the company to huge potential risks.
Legal status-cryptocurrencies are used for smart contracts, the legal status of which is not defined in all countries. Moreover, if the state authorities decide to create a separate legislative framework for smart contracts, entrepreneurs may face a number of new problems.