Pando Guide to What Smart Contracts Are

Smart contracts specify the parameters of a negotiation or agreement, just like any other contract would. The fact that the conditions are formed and carried out as code running on a blockchain, as opposed to on paper on a lawyer's desk, is what distinguishes smart contracts as "smart." In order to securely automate and decentralize nearly any type of agreement or transaction, no matter how complex, smart contracts expand on the fundamental concept of Bitcoin, which is sending and receiving money without a "trusted intermediary" like a bank in the middle. Furthermore, they provide security, dependability, and global accessibility because they are built on a blockchain like Ethereum.

advantages of smart contracts photo credit: Unifid Infotech

Why are they important?

Developers can create a wide range of decentralized apps and coins using smart contracts. They're employed in a wide range of applications, from new financial tools to logistics and gaming experiences, and they're stored on a blockchain like any other cryptocurrency transaction. Generally speaking, a smart-contract software cannot be altered or reversed once it has been added on the blockchain (although there are some exceptions).

Decentralized applications, often known as "dapps," are applications driven by smart contracts and contain decentralized financial technology (also known as DeFiopen in new window), which aspires to revolutionize the banking sector. DeFi apps enable cryptocurrency owners to conduct complicated financial activities, including as saving, borrowing, and insurance, from anywhere in the globe without a bank or other financial institution getting a cut. Among the current dapps that use smart contracts and are more widely use, Pandoopen in new window is a very popular one.

It is a network of smart contracts that provide decentralized financial services including cryptocurrency swapping, borrowing and lending, asset management and many more. It does not have a central platform or infrastructure to facilitate transactions. Among its suite of offerings, Pando Ringsopen in new window eliminates the need for a bank by allowing investors to earn interest and borrowers to get loans instantaneously; 4swapopen in new window enables users to swap their tokens within seconds at the cheapeast fee possible.

Currency exchange is both time and money consuming in conventional finance. Furthermore, lending liquid assets to total strangers on the other side of the globe is neither simple nor safe for folks to do. However, both of those possibilities as well as a wide range of others are made conceivable by smart contracts.

How Are Smart Contracts Used in DeFi?

Smart contracts were first proposed in the 1990s by a computer scientist and lawyer named Nick Szabo. Szabo famously compared a smart contract to a vending machine. Just like a soda machine can automate a sale without a human intermediary, smart contracts can automate virtually any kind of exchange.

The most widely used smart contract platform at the moment is Ethereum, however many other cryptocurrency blockchains (including Mixin Network,EOS, Neo, Tezos, Tron, Polkadot, and Algorand) are also capable of supporting them. Anyone can design and deploy a smart contract to a blockchain. Any interested party can view its code, which is transparent and publicly verifiable, to determine exactly what logic a smart contract employs when it gets digital assets.

There are numerous programming languages used to create smart contracts (including Solidity, Web Assembly, and Michelson). Each smart contract on the Ethereum network has its code stored on the blockchain, enabling anybody with an interest to check the contract's functionality by looking at its code and current state.

Along with the blockchain and transaction data, every computer on the network (or "node") keeps a copy of all active smart contracts and their current state.

All nodes in the network execute a smart contract's code when it gets cash from a user in order to agree on the result and value flow that results. Because of this, smart contracts may operate securely without the need for a centralized authority, even when users conduct intricate financial transactions with unidentified parties.

Smart contracts are typically unchangeable once they are put into use on a blockchain, not even by their inventor. (This regulation is subject to exceptions.) This makes it more difficult for them to be blocked or censored.

What Direction Will Smart Contracts Take in the Future?

Around the world, smart contracts are put to use in a variety of developed use cases. These consist of:

Programmable/Conditional Payments Smart contracts make it possible for transactions to take place, with the option to execute them only once a particular set of conditions has been satisfied. For instance, an external shipping data oracle can transmit the location of a shipment; when the preset shipment location is confirmed, capital or payment will be delivered by the smart contract. This straightforward application cuts down significantly on paperwork, logistics, and monitoring.

Decentralized Finance Smart contracts are widely used in DeFi apps to support a variety of use-cases, including margin trading, derivatives, stablecoins, and basic lending and borrowing. DeFi platforms are able to run completely without any restrictions, over an extended period of time, and at scale by utilizing smart contract functionality and a data oracle. An open source, non-custodial liquidity protocol called Aave, for instance, enables earning interest on deposits and borrowing assets.

Tokenized Real-World Assets Real-world assets are transformed into digital tokens through the process of tokenization, which takes place on a blockchain trading platform. These tokens may be moved around and traded more easily thanks to smart contracts, which also do other crucial tasks like monitoring price feeds and exchange rates. Markets are able to gain from all the standard advantages of blockchain networks in this way, including unquestionable ownership, transparent, trustless transactions, and an open ledger of records that anyone can access.

Conclusion on smart contracts

The way people and organizations connect, receive financial services, and trade information is swiftly changing thanks to smart contracts. We anticipate the widespread adoption of smart contracts across all traditional industry verticals in due course, as distributed ledger technology continues to increase the transparency and efficiency of our online systems.

The information contained in this article is for informational purposes only and does not constitute financial, investment, or other professional advice. The views expressed in this article are those of the author and do not necessarily represent the views of the company or organization they work for or Pando. Any investment decisions made by the reader should be made after consulting with their own financial advisor and conducting their own research. The author and the company or organization they work for and Pando will not be liable for any financial losses incurred as a result of reliance on the information contained in this article.