A smart contract is a very commonly heard term in recent times. The evolution of blockchain technology over the past decade and its increased rate of adoption have made smart contracts extremely popular. The major reason behind the popularity of the technology is the wide array of benefits it offers to different industry verticals. So, let us dive a bit deeper into the topic to understand what smart contracts are all about. Moreover, with the steady adoption of smart contracts, smart contract developers have been in great demand nowadays. Smart contract developer has proved to be one of the most sought-after career options to explore the available opportunities in the field.
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An Idea of Smart Contracts
A smart contract is basically a computer program or simply a transaction protocol that is focused on automatically executing, controlling or documenting legally relevant actions or events as per the terms of an agreement or contract.
To make it even simpler to understand, smart contracts are programs stored on a blockchain that runs only at the time when the predetermined conditions are met. These smart contracts are typically used for the purpose of automating the execution of an agreement. This, in turn, makes sure that each of the participants can be immediately sure of the outcome without any intermediaries or loss of time.
To sum up, here are the three key points to remember.
- A smart contract is nothing but an agreement between two parties in the form of computer code that runs on a blockchain. Hence, they are stored on a public database and therefore cannot be altered, modified, or changed.
- All the transactions taking place in a smart contract are processed by the blockchain. This means that they can be automatically sent without requiring an intermediary or any third party. Hence, there is no need of relying or depend on anyone.
- The transactions take place on smart contracts only at the time when the pre-set conditions as mentioned in the agreement are met. Since there is no involvement of any third party, there are no issues with trust.
Working Process of Smart Contracts
After reading through the above section, it is clear what smart contracts are. Now, let us understand briefly how smart contracts work.
Smart contracts happen to be self-executing programs meaning that they can execute by themselves, and they run on a decentralized network like a blockchain. The ability of smart contracts to remove administrative overhead happens to be one of the most attractive features associated with blockchain technology. While blockchain plays the role of a type of database confirming the occurrence of transactions, smart contracts execute the conditions that were previously determined. Hence, smart contracts can be thought of as computer code executed on “if/then” or conditional programming.
The characteristics and features of smart contracts allow them to find a wide array of applications in different industry verticals. Smart contracts find their application in the financial industry, including borrowing, lending, investing, and trading, are only to name a few of them. In addition to the financial applications, smart contracts can be readily used in the industry of real estate, healthcare, and gaming. Moreover, they can also be used to develop entire company structures.
Major Benefits of Using Smart Contracts
The popularity of smart contracts is owing to the multiple benefits it offers over the traditional settings. The benefits are expected to increase further with the improvement of the technology.
Smart contracts prove to be highly accurate since no omissions of data take place, which could result in transaction errors. Hence, automated smart contracts eliminate the pitfalls of manual filling out of the huge volume of forms.
Communication is Clear
Everything in smart contracts result in being explicit because of the need for accuracy in detailing the contract. Hence, there exists no scope for misinterpretation or miscommunication. Therefore, smart contracts can play a significant role in drastically cutting down on efficiency lost as a result of gaps in communication.
100 % Transparent
Each of the terms and conditions of smart contracts is completely visible as well as accessible to all relevant parties involved in the contract. So, there is no scope for a dispute after the establishment of the contract. This, in turn, facilitates a hundred percent transparency of the transaction to all the relevant parties.
Quick and Speedy
Smart contracts are live on the internet and run on software code which is why they are able to execute transactions very quickly. With the speed at which smart contracts operate, they can save several hours as compared to the traditional business processes since there is no need to process documents manually.
It is quite obvious that the speed and accuracy of smart contracts would readily enhance the efficiency of operation. Higher efficiency of the smart contracts leads to more value-generating transactions processed per unit of time.
Automated smart contracts make use of the highest level of data encryption presently available. This encryption happens to be the same standard that modern cryptocurrencies use. The level of protection makes smart contracts one of the most secure items on the world wide web.
Backup and Storage
The smart contracts record all the necessary details in each of the transactions. Thus, anytime where any of the details are used in a contract, they are permanently stored for future records. In any unfortunate event of loss of data, these attributes can be easily retrieved.
Businesses worldwide have become conscious of their impact on the environment. With smart contracts, the impact on the environment is readily reduced since they are paperless. These contracts enable the “go-green” movement by eliminating the requirement for a huge volume of paper.
Outcome is Guaranteed
Smart contracts come with the attractive potential to significantly reduce or simply eliminate the need for litigation and courts. With the help of self-executing smart contracts, the parties involved commit themselves to adhere to the rules and regulations of the underlying code in the contract.
With all the stunning benefits that smart contracts have on offer, different industry verticals are trying to incorporate the same and make the most use of them. In this regard, businesses are looking forward to hiring an experienced, smart contract developer to get the best possible results from emerging technology.
Smart contracts generate a hundred percent trust in their execution. The contracts are entirely transparent, autonomous, and secure, thereby eliminating the possibility of bias, manipulation, or error. Once formalized, the contract is executed automatically by the network.
Savings happen to be one of the most significant benefits of using smart contracts since they eliminate the need for any middlemen, third parties, or intermediaries such as banks, lawyers, witnesses, etc.
Major Tools Required by a Smart Contract Developer
Once you have decided to hire a smart contract developer for your business, it becomes very important to know the major tools they require to successfully carry out the work and fetch the intended results.
To make it easier to understand where we have created the ultimate smart contract developer roadmap.
Smart Contract Language
The smart contract language happens to be the basis for any smart contract developer to write the contracts. There are a number of smart contract languages that the developers can make use of to write the contract. Here are the three major smart contract languages used by developers.
Smart Contract Essentials
The essentials include the tools to use in smart contracts. There are a number of tools used by developers, but here are the two must-haves.
Chainlink is actually a blockchain oracle meaning a device that enables smart contracts to become hybrid smart contracts. They include some of the off-chain components and connect with the real world. Although smart contracts are great, they have a drawback of not being connected to the world. Now, to make use of some of the off-chain components such as data or external computation to keep the smart contracts decentralized, it is also important to have the external data as well as computation decentralized. It is exactly where the Chainlink network and tooling come into play.
It is considered to be the standard library for Solidity. At any point in time, a smart contract developer using Solidity looks forward to a quick way to deploy ERC20, NFT/ERC721, DAOs/governance, upgradable contracts, or simply anything that developers do in this space; an Openzeppelin package happens to be of great help. Openzeppelin is basically a suite of smart contracts that are previously written. So, the developers need not reinvent the wheel. It saves a lot of time using their already-audited extendable smart contracts.
Deployment and Testing Framework
The frameworks of smart contracts prove to be extremely important from the point of view of a smart contract developer. The frameworks play a crucial role in allowing the developers to test and deploy smart contracts in an effective manner. Here is a small list of the frameworks used by developers categorized under different sections.
- The Big and the Best Ones: Brownie, Hardhat, DappTools
- The Popular Ones: Apeworx, Remix, Truffle, Foundry
- The Alt Ones: Embark, Waffle, web3j, sbt-Ethereum, Saddle
- Non-EVM Ones: TerraSDK, Anchor
At the time of deploying smart contracts in some capacity, a wallet is necessary to store funds or at least testnet funds.
- MetaMask: It is one of the most popular wallets and extremely easy to use.
- Gnosis Safe: It is a multi-signature wallet and a great tool for smart contract developers handling a huge volume of money.
- Ledger / Trezor: These are cold wallets that are a bit more cumbersome to make transactions.
Many developers make use of a wallet or a combination of more than one, depending on the requirements.
Block explorers happen to be one of the vital tools for developers who wish to see the transactions and what is going on in the world. The common block explorers used are listed below.
Layer 1 Connection
For the purpose of sending transactions, blockchain is required. But if you wish to cut down on the cost, there is nothing to worry about since all of them have free options. However, it would be ideal for developers to run their own layer one node yourself. A “layer one node” refers to the blockchain connection. For instance, sending a transaction on the ETH chain requires the transaction to be sent to an ETH node. Some wallets like MetaMask have a connection to a layer one node running in the background. Some of the popular layer 1 connections are listed below.
- quick note
Front End Tools
- The Graph
Security Analysis Tools
Audits are extremely important at the time of releasing code onto the blockchain. It is because anyone can view and potentially exploit the same once it is there. Therefore, it becomes extremely important to ensure fewer errors in the code. In this regard, some special security analysis tools come to the rescue of developers to make smart contracts more secure. Some popular ones are listed below.
Maintenance and Monitoring
Finally, maintenance and monitoring are extremely crucial for the success of smart contracts. For easy maintenance and monitoring, tools like Openzeppelin’s Defender & Tenderly are great. These tools allow the developers to monitor the production code and make sure that they are safe.
After reading through the post, it becomes quite clear what a smart contract is all about and how it works. In addition to this, the benefits offered by these contracts prove to be valuable for almost every industry vertical and hence are gaining a lot of popularity in recent times. Also, it is clear about the roadmap of a smart contract developer when you plan to hire one as a business owner looking forward to implementing smart contracts in your business.
Every business, regardless of the type of industry to which they belong, is trying to implement smart contracts and blockchain technology to utilize their benefits to the fullest. The potential of the technology hasn’t yet been utilized completely since it is still in the stage of evolution. However, the time is not far from where the full potential of the technology would be utilized and implemented to enjoy its benefits. So, we have to wait and see what the future has in store for smart contracts and blockchain technology.