Usually, when people hear anything about blockchain, they associate it with Bitcoin first of all. In reality, blockchain can improve almost every sphere of our life. According to a Statista report, the sector with the highest distribution of blockchain market value is the banking one. Why? The answer is security, one of the most important factors when we are talking about money. Today we will tell you more about the transaction protocol that keeps blockchain payments safe — smart contracts.
A smart contract is an algorithm that uses “if-then” logic to form, accumulate and provide information about the possession of the assets.
As it was said before, blockchain is at the heart of smart contracts. When the operation is made, it’s validated by a huge network of computers.
The development of smart contracts is strongly associated with Etherium. In 2013, Vitalik Buterin, the founder of Bitcoin Magazine and Etherium co-founder came to the conclusion that blockchain technology can benefit not only cryptocurrency but a very wide range of areas as well. The main condition is that actions should be described as mathematical rules.
There are two main advantages of smart contracts:
No third parties
There is no necessity to spend hours in a queue at the bank or even go out of the home. No need to involve notaries, accountants and other professionals. This means there are additional fees. Everything is conducted autonomously and permanently.
How secure are smart contracts?
The best thing about blockchain is decentralization. Of course, each medal has two sides, but generally, we can speak about a great positive change that has already begun thanks to this technology. Blockchain is considered to be incorruptible. Once a smart contract has been concluded, it is impossible to alter any of its terms. There is no centralized control. A smart contract is transparent, which means any user can see the changes in the terms of the contract since the information about them is publicly available. Moreover, the data of the contract parties is not disclosed.