Bitcoin and smart contracts

The first smart contracts

The first time smart contracts became known to the public was through Nick Szabo , jurist and cryptographer Nick Szabo who publicly mentioned the term in a paper in 1995. Two years later, in 1997, he developed a much larger paper detailed explaining smart contracts.

In order for smart contracts to be executed, it is necessary that there are programmable transactions and a financial system that recognizes them, in a digital native way.

Precisely, what Szabo defined as non-existent in 1995, in 2009 (nearly 15 years later) would become a reality with the appearance of Bitcoin and its technology, the blockchain blockchain ) .

Bitcoin and smart contracts

Bitcoin has some already created Bridge Smart Contract Development Services that are executed by default and transparently to the user. When we talk about distribution contracts, we are referring to one of the use cases of Bitcoin to make agreements between people via the blockchain . And it is that Bitcoin, among all its advantages, allows to add logic to money, something unique about this type of money: it is programmable money . This logic applied to money allows us to solve common problems that can be found today, but increasing the level of trust throughout the automated process in which the interaction takes place.

Some examples of smart contracts in Bitcoin

For example, new products or applications could be developed such as:

Distributed marketplaces that allow the implementation of P2P contracts y trade in marketplaces with Bitcoin posing as a complete competitor to the current financial system.

Properties such as cars, phones, houses, or non-physical items controlled via blockchain constitute those named smart property . Through the use of smart contracts and properties, the level of trust is allowed to be much higher, reducing fraud, third-party mediation costs, and taking operations to a new level.

Automation of successions establishing the distribution of assets after death. Upon death, the contract will come into force and will be executed by distributing the funds to the address indicated in the contract.

Insurance: accident reports, payment of repairs by the company, reduction of accidental fraud …

And is that the smart contracts They use Bitcoin technology to exist, which is great for Bitcoin because it allows it to receive much more attention by attracting hundreds of thousands of new users to its ecosystem. In fact, it’s not hard to find statements like: smart contracts are bitcoin’s killer app . “

This logic that can be applied to Bitcoin transactions is done through the use of an entire language of its own, allowing it to be the same blockchain that determines what to do based on programmed prompts. This means that we have a transaction with instructions in a distributed and immutable way, offering complete security and without interpretation.

A smart contract

Today, everything is controlled by computer systems. Everything interacts with them. In application development, it’s normal for programmers to create a series of “gateways” to their application (called APIs). These gates allow other programmers to enter your application to create or obtain information. Almost every website or program has their own. In other words, you define a protocol, a contract,Cross chain bridge development a known way of calling the application with a data structure. It is through this door that we will get an answer, but with a predictable data structure.

But this contract is not guaranteed. The application server is controlled by someone who ability to make the program work differently tomorrow. It is centralized and can change at the decision of this third party. It’s not “smart”.

People need predictable, transparent and incorruptible environments. Smart contracts are pieces of similar codes i.e. they have ways to call them and get responses they have a contract but they are also immutable as they are spread out in thousands of nodes that they cannot modify its content. This way, you get a program that will always act the same way without requiring the goodwill of that third party. Something that is needed for almost every use case. Smart contracts are cloud programs that always act the same way and allow you to store information that cannot be treacherously changed.They are the safest programs ever created in mankind and only fail when programmed incorrectly.

Badly programmed smart contracts

Smart Contracts are capable of handling digital assets, so in reality Smart Contracts can handle money. This requires that special emphasis be placed on its correct programming, since the smart contract could have security vulnerabilities or failures that generate runtime errors or unexpected behaviors.

When this happens, the money can be completely lost. It hasn’t happened a few times and without Know How Enough will be left for many initiatives.

Unfortunately, this happens frequently, so it is very important to pay close attention when developing and testing such software.

How is a smart contract made in Bitcoin?

For all of this to be possible, there must be a completely secure process that ensures that at least two parties can perform the contract without having to trust or even know each other.

Smart contract generation process

There are several steps to create Insurance Build a cross chain bridge. Take the example of making secure deposits on any website that accepts bitcoins. Nobody likes to lose their money, right?

Together, all of these features enable not only the construction of new and interesting financial tools on the Bitcoin blockchain but, since every smart contract is made up of people or machines, the innovation possibilities for the field of Internet of Things, Insurtech, Logistics, Administration are so broad that it is likely the first killer app or breakthrough apps in these areas.