Have you guys ever used a vending machine? The ones you see at the airport or in a shopping mall or public places.
Remember the time you inserted a currency note, pressed a button and bam you got what you wanted!
Ok so what happened here was that you put a currency note and pressed a button.
If these two conditions are met:
- You put the right currency note
- You pressed the right button
On successful authentication of these two conditions, an output is triggered which is dispensing the product to you via a chamber. =
This example right here is the premise of what smart contracts are and how they are going to change the internet.
In this vending machine example, you see, no human was involved. The machine is pre-programmed.
What exactly are smart contracts?
Simply put, smart contracts are programs that run when some specific conditions are met. There is a certain outcome you expect and there is no human involvement.
It is just like any legal contract, except that its execution is automated. For example, if your travel insurance contract were “smart”, it could automatically disburse the insurance amount you’re owed if your flight gets canceled without you having to call or follow up with anybody.
I hope you got a basic understanding of what they are.
What are real-world applications of smart contracts?
Smart contracts have a lot of real-world applications. The most prominent areas that use them are healthcare, finance, and NFT projects with potential in the supply chain too.
Smart contracts in finance:
The most widespread adoption of smart contracts is in the decentralized finance space.
A lot of interesting use cases like lending, borrowing, and staking are possible, thanks to smart contracts. Moreover, as the name suggests, since it’s decentralized, all the above use cases are achieved without the presence of any central authority such as a bank.
These smart contracts simply automate the workings of a bank. Here’s a real life example
Pancake swap is a decentralized crypto exchange.
Firstly, it allows users to stake or loan their tokens, just like a bank would allow you to deposit your cash in a fixed deposit or a savings account.
Upon staking their tokens, users earn interest and rewards and also a fee that traders might pay to use the staked tokens.
All these transactions are governed by smart contracts.
Smart contracts in NFT
What the heck are NFTs?
NFTs stand for non fungible tokens. They are a form of digital assets that you can buy, sell, own and trade. Owning an NFT comes with its exclusive perks and rewards.
Certain projects and companies mint limited NFTs and make sure that each NFT has its own unique utility. NFTs are also revolutionizing the way more mundane things like loyalty programs and identity management work.
Smart contracts are the technology that brings NFTs to life.
They define all the conditions required to buy, sell, own and trade an NFT. Let me give you a real-life example
Opensea is an NFT marketplace that lets you trade NFTs. You can also auction your NFTs.
All you have to do is just list your NFT at a selling price. The moment a buyer is interested, the trade goes through and you get the money.
All the governance and transactions are enabled by smart contracts.
Why are they the hidden treasure in changing the internet?
As you saw from the examples above, smart contracts help create a trustless, transparent and decentralized world.
- You are no longer dependent on intermediaries like Paypal, banks etc who take increasingly long amounts of time to transfer money or assets due to the manual nature of their underlying processes
- You are now in control of own your data and not at the mercy of centralized companies such as Google and Facebook that can change their algorithms whenever they want.
- You can now own, buy, sell and trade digital assets on the internet. You can also take advantage of the power of NFTs beyond digital assets.
I am very bullish on the potential of smart contracts and the power it shifts from the hands of the central entities like banks and big internet companies to the common people .
If you have any idea in this space and want to create a smart contract, head over to accelchain.xyz and get started within minutes. Don’t worry if you don’t have hardcore technical skills. We got you covered!