With the success of cryptocurrencies, another most demanding application using blockchain technology is the smart contracts. They have found their best applications in the central banks as these banks are interested in digital currency in the inevitable future. Some of the banks that are testing in this technology are National Bank of Cambodia and Bank of France that are trying to incorporate blockchain technology in their payment system.
Definition of Contract?
Contract by definition is an agreement between two parties creating a legal obligation to do specific acts between the two parties. Both parties are legally bound to perform that specified task like payment, delivering goods, sales of assets, goods and services etc.
Contracts can be oral or written, although written agreements are preferred by the court.
By definition, it is a protocol facilitating, verifying and enforcing the performance of a contract. They help you to exchange money, shares, property or anything of value in a non-conflicting way. It was introduced in the early 1990s by a scientist, lawyer and cryptographer named Nick Szabo. A US Senate reported that while the concept may sound new, but it follows the basic nature of a contract. The first-ever country to legalize it was Belarus implementing the Decree on Development of Digital Economy and Denis Alienikov was considered to be its author.
Steps for processing
The six steps for its process are given below:
: Verification of the smart contract.
- Encrypting the agreement.
- Applying the conditions on the agreement.
- Identifying the agreement between the two parties.
- Implementing the business logic into the software.
- Update the nodes of this new contract.
Its most common security issue is that it is visible to all of the users of the said blockchain leading to the situation of security loopholes and bugs which are very difficult to fix. For example, Ethereum contracts are most vulnerable to integer overflow in which an integer variable attempts to store a value exceeding its limits. The bug was used by attackers to manipulate the ethereum contracts to generate the inappropriate number of tokens which was a very big issue.
Smart contracts can find applications in regular agreements and the agreements including the government, enterprises etc. Its basis is data, interfaces and business rules. With changing time, it will also be updated in order to eliminate any compatibility issues regarding the operating systems and perform its task correctly. While they are still in their developing phase, they might face certain vulnerability attacks. In order to make it as a part of our day to day life, both platforms, as well as cybersecurity to create it, need to be updated from time to time. Blockchain magazine suggests that they can save our money by excluding the intermediaries because the third-parties like government bodies, lawyers etc. generally make a demand for a large number of fees for making such agreements and can also provide us with an opportunity to make our routine transactions and processes and automated more streamlined.