Blockchains & Smart Contracts
In the world of blockchains, Smart Contracts are a powerful tool to have at hand. Not all blockchains support them. Ethereum takes the lead in Smart Contract action. Others are rapidly catching up. These contracts are incredibly transparent – everyone gets to see the contract’s terms and code. It’s the best accountability move to make, IF you know how to read a smart contract..
Possibilities
The cool part is: Smart Contracts aren’t just about transactions. They’re like the base of decentralized apps (DApps) on the blockchain. Think about digital identity verification, voting systems, supply chain management, NFTs – the possibilities are endless.
The example we’ll take is a smart contract of the Cryptopunks NFT collection. Cryptopunks are the first 10,000 NFTs created on Ethereum and have been incredibly popular and valuable. The moment we write this, there is already 1,246,797 ETH traded (+/- 4.5 Billion USD if you calculate with ETH at $ 3,700). You can see it on a block explorer (in this case Etherscan for Ethereum), which we have taken the contract screenshot from:
When you put a contract address in Etherscan, you can view the contract. In this case we are viewing ‘ 0xb47e3cd837ddf8e4c57f05d70ab865de6e193bbb ‘ and see in the first red marked area ‘CRYPTOPUNKS’. Below that you see the tab ‘Contract’. The last marked area shows the code for anyone to see. Here you can also directly interact with the contract via the tab ‘Write contract’.
Pros of Smart Contracts:
- Efficiency: Automate processes, eliminating the need for intermediaries and streamlining transactions, making them faster and more efficient.
- Transparency: The terms and outcomes are visible to all parties involved, promoting transparency and reducing the risk of fraudulent activities.
- Accuracy: Automation reduces the chance of human error, ensuring that the terms of the contract are executed precisely as programmed.
- Cost Savings: By removing intermediaries and automating processes, smart contracts can lead to significant cost savings in various industries.
- Decentralization: Operates on a decentralized blockchain network, reducing reliance on centralized authorities and enhancing security.
Cons of Smart Contracts:
- Complexity: Developing and deploying smart contracts can be complex, requiring expertise in programming and a deep understanding of blockchain technology.
- Irreversibility: Once deployed, smart contracts are typically irreversible. If there’s a mistake in the code or an unforeseen issue, it can be challenging to rectify.
- Security Concerns: While blockchain is considered secure, vulnerabilities in smart contract code or external threats can pose security risks.
- Legal Recognition: The legal status of smart contracts varies across jurisdictions, and there may be challenges in enforcing them in traditional legal systems.
- Limited External Data Access: Smart contracts have limited access to external data sources, which can be a limitation in scenarios requiring real-time external information for execution.
