Background of article
The word ” smart contract ” has become a hot topic for everyone talking about “blockchain.” But do you really understand how it works? How is it used in the real world?
The principle of “smart contract” is explained in plain English, in a sentence: when the set terms are triggered, the decentralized system automatically executes the contract. Still do not understand? Give everyone a simple and straightforward example.
A story about old contract
Suppose your friend’s company urgently needs money, and he finds you (because you are a big boss and has lots of excess money). Although you think he is very reliable, and believe that he will pay back the money on time. So you got a witness together. As a result, he wrote an IOU for your protection. The deadline for the repayment has been several days. At this time, your friend suddenly stays uncontactable. You sent a WeChat or Whatsapp and called him. He did not reply. Suddenly you realized that this person is in fact very unreliable and that the loaned money may have to be floated.
What do you do at this time? How can money be found?
Most people will make the following actions:😞
- Prosecute the other party and resolve it through legal process. (But the legal fees are expensive and the time cost is also high)
- When you fall for yourself, the money you recover may not be enough to pay for the lawyer’s fees. The money is gone.
How can smart contract help you in this case?
But if you decide to use “smart contracts ” at the time, this process of borrowing money will be like this.
First of all, you and your friend sign a smart contract, the content is:
“Friend A borrowed xxx from you, the interest is xxx, in a certain year, your friend will pay the principal and interest to you.”
If your friend has no money at the time of repayment, the system will automatically deduct your friend’s account and automatically transfer the money to your account. The entire transaction does not need to find a middleman as a guarantor, but also eliminates the time cost and default risk of debt collection.
So, the fundamental problem that smart contracts solve is: ” trust. “😄👍
Other smart contract application
We no longer need to establish trust in “personal feelings,” but instead hand over cold and selfless “digital codes” to justify the implementation of contract content.
Using this logic, we can think about it carefully. There are many practical applications of smart contracts, such as insurance compensation, copyright lease, betting on gambling, financial delivery, cross-border trade, and so on.
What next? Why smart contract has to do with Ethereum?
Having said so many “smart contracts”, what does it have to do with blockchains? What does it have to do with the money?
When it comes to this issue, we must give an example of the ” Ethereum,” which is currently the largest application of smart contracts in the market.
First of all, everyone can think of Ethereum as an open ” global smart contract computer system, ” which provides a technical platform for anyone who wants to write smart contracts, companies, and institutions. This allows everyone to write personalized smart contracts based on their own needs. Of course, Ethereum’s services for providing smart contracts are not free. The person who implements the smart contract is required to pay a certain amount of ether to ensure the normal operation of the smart contract.
Take away message
- Do you need smart contracts?
Understand the system used in the system. Buy Ethereum as a smart contract fee.
- Increasingly need for smart contracts in the industry?
More people buy Ethereum to perform smart contracts.
- What happens when more people buy Ethereum?
Demand is greater than supply, and the price of the ether is rising.
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