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Smart Contracts: when the word is a fact

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Throughout the development of humanity, contracts have always been present. First was the word, a promise between parties that was always kept. Then, the signed contracts emerged, either for mutual contribution to development, to sign peace, or simply as a formal testimony to the rules and conditions in different commercial transactions.

But, in various episodes of history and, as a consequence of the scam, these contracts have been invalidated, not observed or violated, with the corresponding consequences, among which invasions, wars and deaths can be mentioned.

Many people have rented a house and are left with nothing overnight due to a bad move by lawyers or one of the parties. But these situations of injustice will remain in the memory of history.

Based on the security of the BlockChain

 

In 1994, cryptographer Nick Szabo realized that blockchains could be used to develop new forms of contracts, through computational algorithms, also called digital, block or self-executing contracts. In turn, because it is throughout the network, this type of contracting also makes entries in the accounting ledger, with the information being duly registered and accessible to all.

A new testament: smart contracts

 

Since the beginning of the Bible, we find various ways in which the word comes true and the terms of contracts are fulfilled. But, there were also times when the man did not keep his word. But, as the cyber world develops in parallel with daily life, new financial figures such as banks emerge, commercial relationships such as e-commerce and electronic marketing, safe and reliable, are also consolidated.

Now, to guarantee the fulfillment of the given word or the commercial transactions, the _Smart Contracts_ appeared, completing even more the commercial world with a computational justice of taleonic nature. There are no mistakes, there is no word delay or there is no possibility of violating it. Justice in its purest expression to fulfill the promised word.

 

What are smart contracts?

 

This type of contract is a software that contemplates the clauses and conditions of an agreement, in other words, the conditions are automatically executed by a system that was programmed according to the conditions and agreements of two or more parties.

Among the possible conditions that may give rise to the execution of a contract, could be specific dates, a breached rule, a given action. These are grounds for executing a contract, with computational accuracy, without the need to go to court and initiate litigation, or with a lawsuit for breach of contract.

 

smart contract development
Source: Pexels

 

Comparing the before and after: how a smart contract works

 

We know that to carry out a contract, the parties involved are advised by lawyers who register the document containing the agreed conditions in a notary or commercial registry. In the case of a violation of any conditions, a legal action is initiated.

  • Wanting to enter into a contract: In the new contracts, there are parties that must agree or sign the contract, which must have an object and conditions that define the agreement, but also, there must be a guarantee given by each of the parties.
  • Guarantee funds: That is, as some type of confirmation, all parties must do a “double purpose” in a direction that the contract stipulates. We would be in the presence of guarantee funds in a specific wallet, ensuring that all participants comply with the obligations assumed.
  • Multi-signature function: this is another of the specifications of this contract, it consists in that the guarantee fund accounts must be signed by each of the parties, with the objective that they do not make withdrawals or manage the established funds.
  • The object of the contract: it must refer to a digital service. In other words, the object of the contract must be backed by a digital action as it is the only way to measure whether or not the contract specifications were met. Now, thanks to the improvement of the internet of things and the asset token, in the future we will be able to make contracts for the provision of a non-digital service.

Unlike traditional contracts, which are drawn up in physical form, new contracts, being special programs, must be coded through computer algorithms and do not require, until now, the permission of a judge or notary.

 

Learn about the benefits of smart contracts

 

  • By entering into a computational contract, we will achieve several benefits in our transaction, by securing it.
  • They allow us autonomy: there is no need to depend on an intermediary to enter into a contract.
  • Eliminates the danger of manipulation: by third parties in favor of one of the parties.
  • Allows trust: Your documents are in an encrypted entry, so that there can be no modifications, manipulations or disappearances.
  • You have backup: Both your transactions and documents are shared in each of the network nodes to avoid modifications.
  • Speed: These contracts are almost instantaneous, they use codes to automate tasks.
  • Accuracy: They are much faster to prepare and activate them since they suppress a series of steps or protocols in commercial records or notaries.

 

smart contract types development
Source: energyfutureslab

 

Types of smart contracts

 

Although it seems like a futuristic proposal, that future is among us today. There are thousands of self-executing contracts that are being carried out in companies and between individuals. Its speed, confidentiality, reliability, security and support are some of the characteristics that drive people to subscribe. In general, there are two types of computational or self-executing contracts: simple and complex.

  • Simple contracts can be used for the registration of art pieces, for the contracting of a digital service, for the loan of money, always with very clear conditions and deadlines assumed by the parties. Also among this classification we will find those agreed with the State or Mixed-governmental, where you can agree to register for the purchase of a home, the rental of commercial premises, or even birth certificates. The registration of school and university degrees, among many other fields.
  • Complex contracts: among them, we can mention the contracts that contemplate regulatory aspects of an activity. For example, autonomous and decentralized regulatory actions.

As you can see, smart contracts go from pole to pole, giving users a wide range of options so that they are governed by a rule that no one can violate.

Now, if you want to make a smart contract you can count on our help, at Péndulo Software we are technological artisans who adapt to your needs as a company. We hope that this article has helped you a little in understanding the great advantages and benefits of smart contracts, however, you can count on our advice by contacting us at +1-206-741-1041, by email: info@pendulosoftware.com, on Instagram: @pendulosoftware or at Twitter: @pendulosoft and we will gladly guide you.

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