You stepped inside the world of digital currencies, and now you’re fully immersed in it. You’re not alone though because a good 95% of Australians know a thing or two about cryptocurrency. But you also probably know by now that digital currencies have a lot of technicalities. In fact, you might still not be familiar with a lot of technical terms, including smart contracts.
Now if you’re a business owner or investor, it’s very important to learn all about smart contracts, so it’s also easier for you to work with the best smart contract auditors. But don’t worry because we got you covered with this guide.
Defining Smart Contracts
A smart contract is essentially like a paper contract, the only difference being that it’s written in code and executed on the blockchain. When you create a smart contract, you define all the actions that cover that contract, and those actions will automatically be executed once the contract is active. This is one of the things that make a smart contract very beneficial because it’s self-executing because the transaction doesn’t involve any third-party interventions.
The concept of a smart contract started in 1994 when it was introduced by Nick Szabo, a computer scientist who created the first smart contract as an alternative to paper contracts. But it wasn’t until more than a decade later when the idea of a smart contract really gained traction when Bitcoin was introduced to the world.
The Benefits of Smart Contracts
A smart contract is beneficial in a lot of ways because of its accuracy, security and efficiency in doing transactions between parties. So if you adapt smart contracts in your business, these are just some of the many benefits that you get to enjoy:
- A smart contract ensures efficiency in your transactions since everything is self-executing. This eliminates the long process and high cost of executing, verifying and executing contracts. You also reduce—if not avoid—errors because of how codes are created within a smart contract.
- A smart contract is fully automated. Once the code is created, the contract works for itself, eliminating the need to hire additional personnel just to execute and maintain contracts.
- A smart contract is fully accessible on the global blockchain platform, so parties can view them at any time. This gives that sense of transparency that would otherwise be hard to enforce in a paper contract. It also gives you and the other party the convenience of doing transactions no matter where you are in the world.
- A smart contract is highly secure since everything is done within the blockchain, which is a decentralized network. With fewer people having the power to edit these contracts, you can ensure its security at all times.
The Key Elements of a Smart Contract
While a paper contract and smart contract are essentially built on the same foundations, the latter needs three key elements to work—conditions, coding and execution. Let’s break that down further:
- Conditions. Just like you would a regular paper contract, you need to set predetermined conditions in a smart contract for it to be fully enforceable. This could include the type of transaction, sales percentage, authorizations and timing. Every detail needs to be reviewed properly to avoid any errors once the transaction is executed.
- Coding. A smart contract is written in code by a developer using languages like Vyper, Rust or Solidity. Developers define the conditions agreed upon by both parties and write them in code to be fully actionable once finalised.
- Execution. Once the predefined conditions are written, the contract will automatically execute everything that’s written in the terms. The blockchain will then validate these actions to make sure that everything is done right before approving the validity of the transaction.
The Benefits of a Smart Contract Audit
Auditing is part and parcel of running a business, and doing it with smart contracts is no different. Here are some of the benefits of doing a smart contract audit with the help of professionals:
- Compliance. This is the main purpose of any audit even in smart contracts. An audit allows you to follow legal standards and ensure that your contracts are fully enforceable and without any legal problems.
- Security. Although the blockchain is a very secure network, it’s still not error-free. This means that bugs, exploits, and other issues could still pop up any time. An audit helps to identify any of these issues and address them before they turn into bigger problems. Professional auditors know exactly how to find any loopholes and mitigate risks, so you could protect your business interests and ensure that your smart contracts are secure.
- Credibility. As a business owner, you know how important credibility is to the success of your business. When you have well-audited smart contracts, it shows your customers your commitment to keeping their information secure, which also helps you build your credibility in the industry. Regular audits also help to gain the trust of your customers and investors, knowing that they’re dealing with a business that prioritises their security at all times.
- Cost-Efficiency. You might think that an audit is just added business expense, but it actually helps you save money in the long run by addressing issues before they cost more to fix and preventing errors that could lead to potential losses in the future. So if you want to save money, working with a team of professional auditors is one of the best ways to do that.
Smart contracts are the future of doing business. So embracing it as early as now would be a smart choice because it gives you time to adapt it into your system and find professionals like us who can help you make every transaction as smooth and secure as possible. So if you’re ever new to cryptocurrency trading or digital currencies in your business, start by getting in touch with our team of professional auditors. We guarantee to offer you professional auditing services that you won’t find anywhere else.
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