What are Ethereum Smart Contracts?
Smart contracts can be confusing to many people, just as the idea of blockchain can be difficult to understand. But this does not have to be the case anymore, since public chains have simplified the technology, especially when it comes to the most confusing part, the interactions involved.
Smart contracts are different from standard ones; the latter describes the terms involved in the relationship and the law governs most of them. On the other end, the former enforces relationships through cryptographic codes.
In this case, smart contracts are usually executed according to the way the creators have set them to be used. Cryptographer and computer scientist Nick Szabo conceived these contracts back in 1993, terming them as a digital vending machine of sorts.
According to Szabo, users can feed in value or data and get a finite item on the other end, as someone would do with a snack or soft drink machine. In Ethereum, this means someone can give a certain number of ether to another person on a particular date, and with the use of smart contracts. The user will have to create a contract, and then push data to it for the contract to carry out the command.
Remember, although Ethereum is designed for creation of contracts, the tools are not to be used separately. What’s more, they can also be handy in creating fully decentralized autonomous companies or building blocks used for decentralized applications.
Bitcoin was the first cryptocurrency to use smart contracts, thanks to the fact that value can be transferred from one person to the other across the network. The connection can check the validity of the nodes if particular conditions are considered. However, bitcoin is only suited for currency use only.
On the other hand, Ethereum is efficient since it does not have restrictive language as in the case for bitcoin, and instead features a language that developers can use to write their preferred programs. Smart contracts can do several things, including the following. First, they can be used to manage agreements among users like one user selling insurance to the other.
The other use includes storing information on a particular application like registration of the domain or keeping records of membership. Another purpose that these contracts play is serving as multi signature accounts, where funds can be spent in instances where the required percentage of the people is optimum.
The idea behind smart contracts is that they rely on strength in numbers, in which case the contracts have to support each other. When someone places a certain bet, one smart contract looks for information on the bet, while the other uses the information from the first contract to settle the bet. It is worth noting that running any of these contracts will attract a fee for ether transaction.
The fee comes down to the computation power that is required to carry out the process. Smart contracts might seem complicated, but the process is as simple as it can get once you understand what is required of these contracts. You can always decide which blockchain to work with depending on your preference. Whether you choose bitcoin or ether, the choice is yours.
Ethereum is looking to include the largest number of users possible, just like what most other blockchain platforms are doing. But the potential problems are still unknown yet due to the limitation in the aspect of computation for every block, which has seen the chain at a support level for approximately 15 transactions every second, this result is relatively low compared to Visa’s 45,000 transactions in the same period, and other parties that are doing great.
The main obstacle to Ethereum as is the case with many other blockchain technologies, remains a contention among academics and developers alike. Although Ethereum developers might boast that its smart contracts make it more flexible than bitcoin, this does not make it unique in any way, when you factor in the aspect of scalability. However, even if this might seem disappointing, there is still a bright side, since there is great news on the propositions on solutions yet under way.
In blockchain, there is a use of technical ideas as well as incentives that make it ideal to monitor what someone owns without necessarily relying on a centralized management. The only concern, however, is that it can be difficult to maintain the balance despite the increase in users. To curb this problem, Ethereum uses nodes to form networks that can store the history of transactions as well as the account balances for the entire chain.
Not forgetting, these nodes are also convenient in storing contracts as well. But with the transactions increasing by the day as new blocks are added, this can prove to be a difficult task. Thus, there are concerns that developers’ decision to increase the size per block for the transactions to fit in might come at a cost, since the nodes will be pushed to the limits as far as storage is concerned.
This will lead to some people being pushed out of the network in the end. In case the nodes grow excessively, maintaining them will become a grueling task that only a few large companies can run them will be able to remain in the game. Nevertheless, with all the challenges, nodes are far reaching when it comes to ensuring security and privacy for the users.
Ethereum features scaling projects taking care of diverse scalability difficulties. But sharing can be helpful when someone needs to avoid using the full nodes altogether. In this case, each node can be packed with a section of the data to take care of the particular transactions. Then a node can always look for information on another block in which the former node does not have access to.
And this will mean nodes having to rely on each other to perform, but Ethereum seeks to handle the problem by the use of incentives to manipulate the actors in any system. The other issue that comes to play here is the transactions executed outside the chain.
This can help enhance the capability among the technologies to match what the users expect it to do, which means being almost limitless in supply and carrying out transactions fast. Scaling may take a while, but it is possible that in the end a positive result will come out of the efforts employed into making these systems better for everyone.
