Blockchain and smart contracts have become a subject of interest over the past few years. Cryptocurrencies are growing in price, generating tons of money and a whole new world of possibilities. Anything related to blockchain and Bitcoin has turned into a modern gold rush for both users and developers. According to etherscan, 49% of all the transactions with Ether cryptocurrency are carried out within smart contracts.
Just like anything related to finances, the market started looking for ways of regulation. As a step in that direction, smart contracts started gaining popularity. But what are they and how do they work?
What Is A Smart Contract?
A smart contract is a program, a piece of code that helps to regulate transactions with digital currencies and assets between parties. Just like any traditional contract, it is a set of rules that regulate what is supposed to happen under certain circumstances. However, a smart contract is created in such a way that the execution of a contract is automatic if all the conditions were met. If something goes wrong, the contract gets revoked and the asset exchange is not performed. This algorithm secures the possessions of all the parties involved making sure there are no losses.
Besides, there is one more major advantage of smart contracts: using a smart contract does not require turning to a third party to ensure that all parties execute their parts of the contract.
But the contracts are not always that simple, they can be complex and involve transactions in various fields, such as insurance premiums, like Fizzy from AXA, or crowdfunding (for example, WeiFund app). They have a huge potential for replacing some of the functions currently performed by lawyers or notaries. Thus, various industries will eventually have to adjust to keep up with the pace.
Things To Consider When Developing A Smart Contract
If you have decided it’s time for you to try out the benefits of smart contracts for yourself, there are a few things that you need to consider before you start.
Does it make sense for your business?
Since smart contracts are built on blockchain technology, digital currencies are used for payment. The question is: do cryptocurrencies work for you? If your business is already related to any kind of blockchain platform, the answer is simple. However, if you are operating within the field where you haven’t dealt with blockchain yet, perhaps, you should consider learning a bit more about it. Jelvix, an international development company which specializes in offshore dev services, has it summarized for you in one of their blog article “Do You Need Blockchain In Your Project?”.
Consider the limitations of smart contracts
If you figured out that your answer to the previous question is “yes”, then it’s time to dive into a bit more details about smart contracts, specifically, their limitations. Smart contracts went a long way from 1994 when they were invented to the present, and yet, there are some things that are off-limits for now.
- The contracts can only be applied to something that is completely executed within the digital world. The whole blockchain system is decentralized and is not legally regulated. Thus, any cases that need involvement outside of the net should not be bound by these contracts.
- Smart contracts can operate only on a fact-based basis. They rely solely on objective facts and not on the subjective judgments of parties.
- Their execution is performed in an “if-else” form or any other one similar to that. This does not give much space for sophisticated variations.
Now that you have an idea of what you can and cannot do with a smart contract, you can plan it out. It is crucial to understand what it is exactly that you want the contract to do. You can create a contract to verify transactions, transfer payment for a service, or perform a cryptocurrency exchange, and so on. In order to achieve this, you can look into something similar that is already created or research the market to understand how it can be beneficial for you.
Find a trustworthy developer
This goes without saying, but it is extremely important who is going to build your contract. Even though smart contracts are based on the blockchain, they generally require at least some knowledge of blockchain development.
That said, you need to look for someone with knowledge of blockchain and anything related to it. You would probably want to put a bit of time and effort into finding a person or a team to meet your needs. Here is a Blockchain Hiring Guide with various options.
Researchers from Singapore and the UK revealed that there are 34,200 smart contracts that are vulnerable to hacker attacks. So, during and after your contract is built, testing will be a crucial part of the process to make sure that there are no exploits. Any bug in the contract can lead to loss of your resources or your customers’ money, as well as to the loss of reputation. Audits and QA tests can help you create a successful smart contract that will add a lot of value to your business.
The security and the inevitability of execution are what make smart contracts so appealing, and this is why their development is bound to continue. It’s a brand-new way of doing things traditional for any business that makes people appreciate its convenience.
However, there are some tricky issues that come with smart contract development. The major issue is low-quality code that can be exploited by hackers to steal your money or freeze your wallet. Considering that smart contracts’ code can’t be edited after its launch for security purposes, you need to pay close attention to choosing the development team and testing your smart contract with a highly skilled QA blockchain specialist.
So, regardless of whether you have decided that your business is not ready for a smart contract yet, or you are already eager to start creating one, make sure to keep yourself up-to-date on everything related to this technology. And, of course, secure yourself by working with professionals in the field.
Author – Jelvix Editorial Team
Jelvix is a top-rated software development company assembling development teams for different businesses around the world. Their specialization is complex web projects and mobile applications.