what they are, how they work, their benefits

Whether or not digital currencies have a future, there is something that is here to stay with blockchain: digital contracts are the future

blockchain It is a sort of “accounting book” in which each of the operations what happens in the ecosystem, but it is also the basis for the creation of the smart contracts.

These are programs that rely on the blockchain to ensure that all parties stick to what has been agreed and the technology automatically transfers value when certain conditions are met. Additionally, smart contracts provide:

  • Transparency: the parties can consult the compliance with its terms
  • inalterability: as there are several copies, distributed in the different nodes of the network, the document cannot be modified for the parties
  • Efficiency: be online and use electronic signatures, no need to address a common place

Thus they become key tool New Digital Economy and gain relevance in a world where paper usage is retrograde.

In this context, more and more financial companies are advancing in the use of smart contracts to speed up operations involving several parties.

Smart contracts rely on Blockchain for their operation

Smart contracts rely on Blockchain for their operation

How do Smart Contracts work?

These types of blockchain-inherent contracts work by following simple “if/when…then…” instructions that are written in code on a blockchain.

A computer network, they explain, performs actions when predetermined conditions have been met and verified.

These actions may include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket.

The blockchain is then updated when the transaction is complete: “This means that the transaction cannot be modified and only parties who have obtained authorization have the possibility to see the results.”

In a smart contract, they continue, there can be as many stipulations as necessary to satisfy the participants that the task will be properly completed.

To establish the terms, they point out, participants must determine how transactions and their data are represented on the blockchain, agree on the “if/when…then…”, as well as the rules that govern these transactions, explore all possible exceptions and define a framework for resolving disputes, says Business Insider Spain.

It is necessary to differentiate in smart contracts the use of artificial intelligence, which is not necessarily the basis

It is necessary to differentiate in smart contracts the use of artificial intelligence, which is not necessarily the basis

Benefits of smart contracts

Its resistance to manipulation by third parties, given its distribution structure and its potential for establishing business relationships, makes Smart Contracts attractive in various scenarios. The legal issues or challenges posed by these technologies revolve around whether they constitute a valid contract, versus the specific implications they have on the element of will and obligation. Doubts also arise as to the applicable regulations and criteria and their contribution to the judicial process as evidence.

Advances in the Internet have made it possible to conclude contracts with subjects located in different geographical locations as if they had been concluded between the people present. The evolution of electronic contracting highlights three vital technological milestones for the development of Smart Contracts: 1) The creation of the Blockchain; 2) Networks”Equals” and; 3) The automatic execution of contracts materialized by computer codes.

Thus, the Blockchain brings great advantages insofar as it confirms the veracity of an operation, without the need to resort to a trusted third party, because the veracity of the said operation, that is to say say the creation or transfer of digital assets, corroborated by a decentralized consensus in a network of peers (Red Peer-to-Peer) who do not know each other given the implicit anonymity of the system. Therefore, the Blockchain does not require the support of a bona fide third party, since the validity and veracity of the business is supported purely and exclusively by mathematics.

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