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What are Smart Contracts Complete Guide

There are many technologies that will change and will completely change our world, and among these technologies is the blockchain technology that opened the door to digital currencies, such as; Bitcoin and Ethereum to change our lives for the better, and the blockchain technology has also opened the door to another powerful technology that we will talk about in this article, which is smart contract technology.

Define smart contracts

Smart contracts are a technology built using the blockchain, through which you can create an automated or auto-executing legal contract that is held in a chain of blocks.

This contract contains all the agreements between the two parties, and the necessary penalties in the event of a defect in the implementation, and you can customize it as you like, and add terms and conditions in an unlimited way, without talking about the flexibility and super speed with which you will be able to automate your contracts and be assured of your deals that you make. Smart is impervious to fraud or hacking.

Smart contracts are very promising in the world of money and business, and this is because they are not adjustable as long as you sign and put them on the blockchain, and they are effective, and you cannot hack them, or not implement the conditions within them.

For example, in the case of an agreement between a seller and a buyer to pay after the buyer receives the goods, here the buyer cannot refrain from paying, because the smart contract is already holding his money from the beginning of the transaction contract.

In the same way, the seller cannot refuse to take back the goods in case they are defective, because the smart contract is then programmed to receive confirmation of the safety of the goods before payment, and this is in the event that the contract is programmed in this way.

To understand this technology in more depth, we must first address its mother technology, which is the blockchain, which is one of the most important, powerful and most influential technologies in the current period.

It contributes to the development of all fields, such as: health, transportation, tourism, government administration and copyright, and not only the fields of business and finance, as many entrepreneurs such as Elon Musk and Gary believe that it is the most important emerging technology in the world.

The blockchain has a decentralized feature, which means that it is secure and protected and it is impossible to be hacked or tampered with. Decentralization is done through the fact that the data you upload on the blockchain is distributed to a huge number of computers, not just your computer.

This makes it impossible for this hacker to manipulate or alter anything on the blockchain, and this is done through hashing algorithms.

Cryptocurrencies are also built on blockchain technology, so they are a great addition to smart contracts… where you can easily transact in your transactions through digital currencies such as Bitcoin and Ethereum.

This will help you to make your financial transactions very fast and efficient with very little commission or transfer fees, or even zero, in addition to being safe and no one but you or the other party can see its details.

Smart contracts, like traditional legal contracts, consist of almost the same components. They contain the signatories or parties to the smart contract, in addition to the subject of the agreement, its nature, and certainly the most important part, which is the terms of the agreement that are programmed and developed according to the terms that are agreed upon between the parties to the agreement.

The history of smart contracts

Believe it or not, these smart contracts were discovered and talked about before there was even such a thing as Bitcoin. It is known in specialized circles; That the term smart contracts appeared in 1994 by the American computer scientist Nick Szabo, who defined them as a computerized transaction protocol to implement its terms and financial transactions automatically and without human intervention.

There were many other points that Nick Szabo talked about in his famous paper, which, after nearly twenty years, has turned many of its provisions into reality, and is dealt with in many deals and agreements around the world, and those smart contracts are developing greatly as they enjoy Many characteristics and features that Szabo did not talk about.

It is worth noting that the term smart contracts is not accurate enough. Contracts are not smart, as they do not make decisions on their own, but implement what they have been programmed on… as they are a set of codes programmed in order to implement certain cases and conditions.

Example: If the goods are received, the dues are completed, and if the shipment is delayed, this amount is paid for each day of delay, and other items that are usually written in paper form through a lawyer.

Trust and reliability

Smart contracts provide a secure environment in order to make agreements and complete deals without fear of any manipulation or fraud. Once the contract is signed and uploaded to the blockchain, all your transactions and procedures will be automated and done without you even following them.

It is also very possible to rely on smart contracts in various types of deals and agreements in all their forms, whatever the nature of these deals.

Flexibility

Smart contracts offer great flexibility as you can customize them and make them relevant to your business, or even to the agreement you want, they can organize task-based non-financial agreements, or facilitate voting processes for example by using smart contracts to vote for all citizens of the country, or keep To protect your digital identity and privacy.

Save time, effort and money

Yes, smart contracts are very economical, as you will not need a lawyer, a consultant or a notary, and there are no expenses for various procedures, not even additional expenses for any intermediaries, and your transactions are without taxes or discounts, which is why many companies resort to this type of contracts today.

Safety

It is impossible for any hacker, no matter how ingenious, to modify, alter or tamper with smart contracts, as they are protected by highly complex ciphers and algorithms that make them impervious to hackers.

Speed ​​and efficiency

Smart contracts save a lot of time and effort, as you do not have to follow them or hire people or bodies to make sure that everything is fine, and you do not need a fleet of lawyers and accountants to control everything, as for financial transactions, they are done in the blink of an eye.

independence

This has been the most attractive feature of smart contracts, which is that they provide autonomy or decentralization. No third party, whether a bank, government agency, or organization, can look at your contract data, nor impose any additional conditions or costs on you.

Smart Contract Applications and Uses

Smart contracts, as we said, are very flexible, and therefore can be used in various types of deals and agreements, regardless of the type of business or the size of the deal or the way it will be conducted in terms of simplicity or complexity, and it can even be used in hundreds and thousands of other non-financial matters, and I will mention to you the most important Uses of smart contracts:

1. Financial Services

Smart contracts are used in many financial services, whether related to financial transactions between companies or related to financial and accounting matters, and we have talked about financial transactions, and how companies can easily conduct various transactions with each other using smart contracts with agreement on different terms, duration and methods of payment and all of these the details.

As for financial and accounting matters; Smart contracts using blockchain technology can check for various errors that can occur, and make transactions and money transfers if everything is in order.

It also allows organizing the process of calculating and paying taxes automatically without human intervention, or with a small human intervention compared to the traditional method.

Smart contracts can also take over the daily books and accounts, and ensure that the company's financial and accounting records do not leak, in addition to allowing shareholders to participate in decisions related to the company in a transparent manner without any manipulation or fraud.

2. Supply Chain Management

The supply chain or supply chain is one of the most difficult things that different companies deal with, because it depends mainly on the paper system, which has many problems and costs a lot of time, effort and money, in addition to the problems related to loss, tampering and counterfeiting.

Here came the role of smart contracts to manage all parties to this process and make it completely digital, facilitate the control of the existing inventory and make the various payment processes fully automated, in addition to the tasks required and share and display this data to all parties involved in the chain, and through this it has solved many problems and saved Lots of time and effort.

3. Insurance

The insurance sector faces many problems to perform their work, starting from investigating whether these accidents are real or fabricated in order to obtain insurance funds, in addition to the difficulty of conducting the required transactions in the event of huge disasters such as floods, earthquakes and volcanoes, but all of these problems can be solved using contract technology. smart.

In the first case, the smart contract can be connected to sensors and IoT devices in cars and homes, and through them, it is possible to determine whether accidents are real or artificial easily, in addition to transferring funds instantly.

In the second case, in the event of a problem like this, smart contracts identify those affected by these disasters, and immediately perform all financial transactions.

4. Medical records

Smart contracts can organize all matters related to medical records starting with their collection and presence in one place, and dealing with them effectively as well as maintaining confidentiality and privacy related to patients.

Surprisingly, many countries today are using blockchain technologies and smart contracts for this purpose, and there are many emerging companies on the scene that specialize in managing medical records.

5. Clinical clinical trials

Data is the oil of the twenty-first century, and when it comes to medical data, it becomes a lifeline for patients, so clinical clinical trials and their management and handling of the data that result from them is very important.

And let's take into account the clinical clinical trials that were conducted in order to reach the effectiveness and importance of Covid-19 vaccines, and the need to share this different information between research institutions around the world, and smart contracts allow us to automate data sharing processes between organizations while maintaining privacy and fair use of this data.

6. Government services

Smart contracts can help digitize all government transactions and services quickly and effectively, by transferring all data to the blockchain, and this will help to complete all procedures in an easy and instant way while preserving this data without any possibility of penetration, forgery, manipulation or leakage .

7. Vote

Voting and voting can be secure today thanks to blockchain technology and smart contracts… A smart contract can be programmed to provide a secure and protected environment for voting that is encrypted with a hard-to-crack encryption.

The use of smart contracts in this matter will increase the number of citizens interested in voting, in addition to the fact that it will not require the cumbersome process of identifying identities, queues, and long counting times.

8. Loans and Mortgages

Digital contracts provide automation of loans and mortgages through agreed terms and conditions, thus saving a lot of time wasted in various procedures, as well as facilitating payments and refunding the mortgage immediately after completing the required payment.

9. Digital ID

One of the great advantages of smart contracts is that it is possible to conduct the transactions or deals you want without the need to reveal your identity or identify yourself, meaning that all your data and information - your digital identity - is safe and no one can view it under any circumstances except If you let him.

10. Internet of Things

Experts predict that we will enter the era of the Internet of Things soon, which means that our entire lives will become automated including the homes we live in and all the appliances inside, and all these devices work in harmony with each other, the alarm clock is connected to the coffee maker, the water heater, the TV Connected with your daily schedule, with lights, and so on.

Smart contracts are one of the best options on the scene that can link all devices together, organize communication between them through pre-made protocols that control decision-making and how these devices work together and organize data sharing between them.

11. Banking Transactions

Smart contracts have solved many problems related to banking transactions, so there is no longer a need to pay extra expensive transfer fees, nor to wait days for the money you sent to reach its intended recipients. Very sometimes.

12. Real Estate

Organizing the legal issues of real estate is a very cumbersome process, especially if you are buying or selling a property abroad. You will need a great effort and many consultations with accountants and lawyers, in addition to weeks or months alone or with a lawyer in order to complete the required papers and procedures.

Now you can bypass all this in the case of implementing smart contract systems that will allow the rapid transfer of real estate ownership, and the completion of all licenses and financial transactions quickly.

13. Betting

There are many betting economies in the world today and you probably know many of them, such as: horse racing bets or football bets, and these economies and the money that is pumped into them are so large that there is a need for systems to manage them, which is what smart contracts can provide with ease and ease Through it, it can be ensured that there is no cheating, manipulation or even circumvention of the rules.

Smart contracts can also control money transfers, whether for loss, payment of dues or gain, and receipt of profits automatically and very quickly, which will make the process completely safe.

14. Intellectual property

By using smart contracts in the areas of intellectual property for creators, we can create an environment that stimulates creativity, and this is because there are many problems today that are related to intellectual property violations, especially with creative works such as drawing, writing, photography and composing … where these artists are exposed to the theft of their works and use them without paying royalties. or use of these materials.

The use of smart contracts will make it impossible to steal artworks and infringe intellectual property, but also facilitate operations and money transfers, as with every use of your music or uploading your paintings, you will be paid automatically.

There are already many artists today who are using smart contracts and blockchain in order to protect their intellectual property rights.

Disadvantages of smart contracts

Smart contracts, despite these many advantages that we mentioned, also have many disadvantages that may make some people stay away from them, and you will notice and wonder that these flaws are caused by the features we mentioned before, and this is what makes smart contracts a very thorny topic and causes a lack of interest from investors and companies And the bodies on it despite its great advantages.

These defects are:

1. There are errors in its programming

Smart contracts, as we mentioned, depend on the codes in order to program the legislation and its clauses, so if these codes are written badly, or when there are any gaps in the code, a lot of big problems arise, which unfortunately become unmodifiable or undo in any way, Therefore, the affected parties incur huge and heavy losses.

2. The lack of legal legislation for it today

The other problem is the absence of any governmental laws or legislation regulating the operations that take place through the blockchain or through smart contracts, and this is what makes dealing with it thorny, and makes many bodies and institutions not deal through it.

3. There is no control over its use

The biggest problem from my point of view is that these technologies can be used in any business even if it is immoral, criminal or even terrorist. The lack of oversight and protection of identities and data makes the field open to human and organ trafficking, arms and drug deals, planning robberies and various terrorist operations.

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