Business Logic of Smart Contracts
What exactly are smart contracts? You may have seen some use of them in video games and movies but what exactly are they? Imagine that you have to sell a property to another person. It s a fairly daunting and complicated process that involves a lot of paperwork, regular communication with other parties involved in the transaction as well as high levels of financial risks.
Smart contract technology
can be used to automate certain business processes. It works by providing a standardized interface to a network of interacting parties which allows them to make authorized, repeatable transactions. These transactions can involve anything from real estate sales to insurance policy sales to online auctions. The distributed ledger that underlies the transaction costs is maintained via the protocol that smart contracts are designed to use.
are established using computer protocols and smart contracts can facilitate the distribution of these data too. For example, an intermediary can submit orders to buyers using an application programming interface (API). The API then submits the order to a trading server, which verifies the order using smart contract technology and a digital signature. This way orders are distributed without manually involving middlemen or brokers.
How does the system work?
A smart contract creates a virtual contract between two independent parties. It is programmed such that each party is assumed to have agreed to its terms beforehand. In contrast to traditional contracts, smart contracts do not assume that each party is capable of understanding the language or the legal implications of the agreement. This eliminates a major drawback of traditional contract systems, namely third parties involved in the execution of the agreement. The system also reduces the chances of executing the agreement into termination of the project.
The distributed nature of smart contracts
results in its being highly flexible. The system can be modified at any time by adding new modules. This means third-party involvement is not required in all areas. A module could for example be developed to exchange the tokens on a decentralized basis. Business logic can be used to allow payment to micro-bids instead of issuing a new product to customers.
On top of all this,
smart contracts work well with a decentralized model because they eliminate the use of intermediaries. These intermediaries may charge fees and provide marketing advice. On the other hand, smart contracts work perfectly well if distributed on a horizontal distribution. By providing an online transaction solution, they make it possible to complete global sales transactions at a fraction of the cost when compared to traditional business logic.