What is a Smart Contract and How Does it Work?

Nowadays, whoever owns the technology owns the world. Science, economics, art, and all other social institutions are connected by a certain ghostly thread or under the peculiar auspices of technology. Octie, as the wisest inhabitant of our lagoon, has dedicated himself to the study of scientific innovation and the movement of world progress. And night […]

Date published:

3 August 2022

Date modified:

31 August 2022

Nowadays, whoever owns the technology owns the world. Science, economics, art, and all other social institutions are connected by a certain ghostly thread or under the peculiar auspices of technology. Octie, as the wisest inhabitant of our lagoon, has dedicated himself to the study of scientific innovation and the movement of world progress. And night and day, he sat in his cave and absorbed tons of information so that later he could provide it to all users of Octogamex.

It’s no secret that our scientist octopus is crazy about NFT, DeFi, and GameFi. At the same time, Octie, like no one else, understands the importance of such a phenomenon as smart contracts, without which the existence of his favorite products and masterpieces would be impossible. In this article, he will try to answer the question: “Why is Smart contract technology valuable for the modern world?”.

What is a Smart contract?

The history of smart-contracts dates back to the 90s of the twentieth century when the American scientist Nick Szabo invented the Bit Gold virtual currency. He defined them as computerized transaction protocols that fulfill the terms of a contract.

Smart-contracts are certain transactions (programs) that are stored in the blockchain and are used to automate the processes of executing an agreement, in which all participants in the transactions were confident in the successful outcome of their operation. This method should make participants transparent about the operation, which avoids the introduction of an intermediary of any kind.

Nowadays, smart-contracts allow young companies to create a variety of decentralized products, which allows this technology to be used in all industries and various industries.

Types of Smart contracts

The technology of smart contracts has not stood still since its inception but has constantly developed and improved. It made it possible to distinguish three main types of smart contract technology according to their main criteria, characteristics, and principles of operation.

Smart Legal Contracts are one of the most common types of smart contracts. The main function is the mutual agreement of the parties to hold them accountable for the fulfillment of their part of the agreement. In other words, users “agree” to operate according to pre-distributed requirements. An example would be a sale purchase procedure, where the seller undertakes to transfer his assets to the buyer after receiving funds for them.

Decentralized Autonomous Organizations or DAO is a fairly common type of smart contract in which all participants in the operation are guided by a set of previously agreed rules encoded in a smart contract. They perform the same functions as the previous one, but they are regulated by the community and do not require any intermediaries.

Application Logic Contracts, or ALC, are a type of smart contract that provides direct (or indirect) communication between various devices and blockchains while being multifunctional smart contracts.

Example of a Smart contract

At this stage of existence, smart contracts have become an extremely important tool in the global ecosystem. Through their technology and basic functions, smart contracts can be used in financial transactions such as trading, lending, borrowing, and investing.

Moreover, flexible technology allows it to be integrated into various spheres of human life. We can already clearly see this. For example, the integration of smart contracts in the gaming industry (GameFi and blockchain games), healthcare, and real estate.

List of Smart-Contract Platforms

To a certain extent, 2022 can be called the year of smart contracts. After all, this year, there was a trend towards the expansion and implementation of decentralized finance platforms and Web3 applications.

Many blockchains use smart contract systems, be it DeFi or PoS, and in this “battle” it’s hard to pick the best one.

However, as always, our Octie expert has compiled a list of platforms to use in 2022:

  • Ethereum
  • Hyperledger
  • Tezos
  • EOS
  • Stellar

What are Smart-contracts Used for

Smart-contract technology has many different advantages, which makes it almost the best blockchain technology tool at the moment. All features are beautifully implemented on the OctoGamex platform. The best minds have artfully added the main benefits of smart contracts for your convenience. Each of our users can always feel the effect of the successful operation of this technology.

All our transactions prove to be efficient and fast. As soon as the condition is met (for example, you buy NFT) and all funds have been paid out and transferred to the seller’s account, the contract is executed immediately. Within a few seconds, you become the owner of the NFT or any other object for which smart contract technology is inherent.

Of course, the most important thing that a smart contract can offer the user is transparency and security. It’s especially clear in DeFi products. If a third party is not involved in trading in any way, then users must be sure that the information transmitted by a smart contract will not be stolen or used by third parties for their purposes. It’s where a smart-contract comes in. Thanks to its functionality, it allows you to track the life of a transaction from its appearance in the blockchain to the receipt of the final goal.

In addition, the price per transaction that smart contracts consume is also important. The user pays only the set commission within the chain, getting rid of additional expenses.

How Smart-contracts Will Change the World

It doesn’t take a sage to understand how smart contracts can change the world. It’s all about their technology. The decentralized nature and transparency encourage the world community to abandon centralized platforms, intermediaries, and the banking system as a whole. Why use the services of third parties when you can independently make transfers, purchases, and sales of your assets, directly monitoring them and paying a commission within the network?

It contributes to the improvement of commodity-money relations between the inhabitants of our planet. So, smart-contracts can remove any barriers to financial transactions.

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What is a Smart Contract and How Does it Work
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What is a Smart Contract and How Does it Work
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[Smart contract technology] ➤ Meaning, types, examples☝ Octogamex Blog: What are smart contracts used for in cryptocurrency - Learn here!
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