Smart contracts enable services, products or information to be bought and sold in a fair, honest and automated way without the need for a trusted third party to enforce the contract.
What Are Smart Contracts?
Nick Szabo, a legal scholar and cryptographer can be referred to as the creator of smart contracts. In his original report on them, he used the vending machine example. Therefore, in his example, people could input value into the vending machine, and then get access to a drink. Bitcoin could be referred to as a modern example of a successful smart contracts: the network of nodes will only validate transactions made on the blockchain network if certain conditions meant to ensure the authenticity and value of the transactions are all met. If not, the transaction doesn’t go through.
How do smart contracts work?
The process of creating and executing a smart contract is fairly simple and can be outlined in three steps.
- Firstly, a contract between two or more parties is written in code, and posted on the blockchain.
- Secondly, an event has to trigger the execution of the smart contract. Relevant examples in this case include when a sum of money is sent, when an expiration date is met, when a price rises above a certain value and more.
- Thirdly, once the triggering event takes place, the contract self-executes, according to the terms original put into code. Once this happens, both parties get what they promised to one another through the use of the contract. If the conditions are not met, then the program will decide whether the funds should go back to their respective owners. At the same time, the blockchain ledger on which the contract is stored will record all transaction details and hence give it immutability on the network. This means that regardless of whether a contract ends up self-executing or not, all details will still be stored in a transparent manner.
Smart Contract Benefits
At this time, some of the main advantages of smart contracts include, but are not limited to:
- Their function of multi-signature accounts, thus making the spending of funds only possible when a certain number of people agree, as per the original conditions put into place. If an agreement is not reached, then the smart contract will not execute;
- Being able to manage agreements between users, and treating both parties as equals, as per the conditions that both users have agreed to;
- Providing further utility to other possible contracts, and through the use of secondary-smart contracts, linked to the original one;
- A means to store information and records, according to the network conditions.
It is also important to mention that smart contracts completely eliminate the need of a middleman, once required to facilitate a transaction from start to finish. Now, the use of smart contracts can save people time, money, and bring more comfort, as people will no longer be required to meet face to face. A relevant example in this case would be when a U.S. citizen purchased a house in Kiev via a smart contract without ever going to the city and meeting the seller in person.
Other businesses, such as Baanx.com, are also using smart contracts as a way to develop crypto bank networks.
Baanx.com — The World’s First Decentralized Blockchain Crypto Bank Network
Baanx.com is an Open Access, Open Source and Open Ownership platform — sharing bank licenses between Cryptobanks.
They are a Cryptobank with a difference, allowing qualified businesses, individuals, banks and charities to launch their own Cryptobank on the platform using rules based, smart contracts.
Baanx.com puts the end user in full control of their money, a trait the financial sector does not offer right now. With digital currency, there is no need to trust a third party for safekeeping one’s money. People can become their own bank and carry their cryptocurrencies with them wherever they go.
Baanx.com will deliver huge change to the market and disrupt traditional banking by scaling the size of the Cryptobank network to levels big enough to rival the established financial services sector. Their mission is to bring daily use of Cryptocurrencies to the world and create an unopposed banking service for both Crypto and Fiat currencies.
Join the Fight Today!
If you are interested in learning more about the Baanx.com movement then check them out at www.baanx.com and learn how you can support change in banking, decentralisation and open source, open access and open ownership for Cryptobanks.
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Written By Sarah Murray — Communications Manager at Baanx
