~ SMART CONTRACTS~
Understanding the World of Decentralized Finance, we need to go back to its roots which are Smart Contracts
A thread 👇🏾
Understanding the World of Decentralized Finance, we need to go back to its roots which are Smart Contracts
A thread 👇🏾
Before now, when I see the term “Smart Contracts”, I find it very distressing to read about it; majorly cos I used to feel I wouldn’t understand so there’s no point trying to.
This thread is curated to break down Smart contracts as simple as it can be
This thread is curated to break down Smart contracts as simple as it can be
Smart Contracts are akin to our IRL(in real life) contracts. The only difference is they are completely digital.
Smart contract is an agreement between two individuals in the form of a computer code.
Smart contract is an agreement between two individuals in the form of a computer code.
They are sets of codes that are stored and executed inside a #blockchain
The gig with smart contract is or rather why smart contract was created is solely to cancel/remove the third-party factor
The gig with smart contract is or rather why smart contract was created is solely to cancel/remove the third-party factor
How does Smart Contract work?
♦️ Everyone being connected to a particular blockchain
♦️ Supporters of a project can transfer their money to the smart contract stored on that blockchain
♦️ Everyone being connected to a particular blockchain
♦️ Supporters of a project can transfer their money to the smart contract stored on that blockchain
♦️ If the project gets fully funded, the contract automatically passes the money to the creator of that project
♦️ If the project fails to meet the afore stated goals on the contract, then the money automatically goes back to it’s supporters
♦️ If the project fails to meet the afore stated goals on the contract, then the money automatically goes back to it’s supporters
♦️ The transactions that happen in a smart contract are processed by the blockchain
A relatable example explaining smart contract would be this scenario 👇🏾, walk with me 🪜
A relatable example explaining smart contract would be this scenario 👇🏾, walk with me 🪜
Let’s imagine David wants to buy Sam’s Land and this agreement is formed on the Cardano blockchain using a #smartcontract . That is, the Smart Contract contains an agreement between David and Sam - 2 people
Now, the agreement will be encrypted on the contract like this “ When David pays Sam 4000 ADA, = David will receive ownership of the Land”
Once the smart Contract has been deployed, it can’t be changed or modified
Once the smart Contract has been deployed, it can’t be changed or modified
Without the use of smart contract in this scenario, both David and Sam will have to pay extra fees to third party intermediaries which may include the bank, the agent fees and also security in some irl cases.
Now you see how Smart contract has in this case solved two major problems which are
I) Time: no delays in meeting up with these intermediaries
II) Extra fees: gas fees on smart contracts are way cheaper than the fees paid to these intermediaries as commissions etc
I) Time: no delays in meeting up with these intermediaries
II) Extra fees: gas fees on smart contracts are way cheaper than the fees paid to these intermediaries as commissions etc
Smart Contracts has some interesting properties
1.Immutable:
As shown in my above example ; Once smart contracts are registered, it can’t be tampered with. This means no one can go behind your back to tamper with the code of your contract.
1.Immutable:
As shown in my above example ; Once smart contracts are registered, it can’t be tampered with. This means no one can go behind your back to tamper with the code of your contract.
2. Decentralized
Smart Contracts are decentralized. I believe, without smart contracts there wouldn’t be ✨Decentralized Finance✨
Smart Contracts are decentralized. I believe, without smart contracts there wouldn’t be ✨Decentralized Finance✨
Smart contracts aims at removing the human factor from decision making. Smart contract is deployed to remove the “trust-with-intermediaries”. With Smart contracts, blockchain plays a vital role in execution.
With blockchain technology, Smart contracts are decentralize to be transparent and secure. Decentralizing as used here means they are not controlled by a central entity.
There are a handful of blockchains that supports smart contracts. The biggest most popular one is @ethereum
There are a handful of blockchains that supports smart contracts. The biggest most popular one is @ethereum
Ethereum was specifically created and designed to support smart contract. It is also worth noting that Bitcoin also has support for smart contracts but it is a little limited compared to that of ETH
Smart Contract Utility /Benefits 🍁🥬
🥬 Because Smart contracts are written in codes, transactions are trackable and irreversible which leads to more transparency and security
🥬 Because Smart contracts are written in codes, transactions are trackable and irreversible which leads to more transparency and security
🥬 SC on blockchains such as Ethereum provides the infrastructure developers need to easily build transaction based applications
🥬 SC can be built on top of blockchains which help create decentralized platforms that helps in reducing the reliance on a central entity
🥬 SC can be built on top of blockchains which help create decentralized platforms that helps in reducing the reliance on a central entity
🥬 Smart contracts allows you create a trust less environment where you can conduct transactions with anyone in the world
Smart Contract Risks 🚩
🧨 Software Bugs
Buggy smart contracts simply refers to a smart contract that has been affected by Viruses, hacks etc
The DAO hack on Ethereum made Eth come up with a lot of extra security measures
🧨 Software Bugs
Buggy smart contracts simply refers to a smart contract that has been affected by Viruses, hacks etc
The DAO hack on Ethereum made Eth come up with a lot of extra security measures
One of these measures is a Security Audit
An audit system is an official inspection of a project, typically by an independent body
If smart contracts are not audited, they can have bugs which are viruses that could siphon or divert funds from the smart contract
An audit system is an official inspection of a project, typically by an independent body
If smart contracts are not audited, they can have bugs which are viruses that could siphon or divert funds from the smart contract
And once funds are diverted or siphoned.... you wouldn’t have funds to call yours‼️
🧨 Real world issues
Even after confirming if the smart contract has been audited, we cannot still guarantee per- adventure change on the platform level will not cause any problem. Also Just one question. When IRL accidents happen, how can it be visible to smart contracts?....
Even after confirming if the smart contract has been audited, we cannot still guarantee per- adventure change on the platform level will not cause any problem. Also Just one question. When IRL accidents happen, how can it be visible to smart contracts?....
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