Smart contract application on blockchain

I. Introduction

A study shows that the global blockchain technology market size achieved a valuation of 11.14 billion USD in 2022 and was valued at US$ 315.1 million in 2023 and is anticipated to reach US$ 1460.3 million by 2030, witnessing a CAGR of 24.2% during the forecast period 2024-2030.

The rapidly growing digital environment in most countries around the world is expected to boost the demand for blockchain technology in various industries. Similarly, the use of digital payment systems is expected to gain further traction with the effective application of this technology.

1. What is Blockchain?

Simply put, block means block, chain means chain. Blockchain technology means a chain of interconnected blocks. The following block takes information from the previous block to form a chain that cannot be broken, changed or tampered with. Blockchain can be imagined as a Google Docs file, which is shared with everyone. Everyone is allowed to see what's inside. However, deleting or editing existing content is impossible.

Technically, Blockchain is a decentralized database called a digital ledger that records details of all transactions through a peer-to-peer (P2P - peer-to-peer) network system. Essentially, the network is a chain of computers that must all approve a transaction before it can be validated or recorded. Blockchains are best known for their important role in cryptocurrency systems for maintaining secure and decentralized transaction records, but they are not limited to the use of cryptocurrencies. Blockchain can be used to make data in any industry immutable.

Because there is no way to alter a block, the only trust is placed with the user or the program entering the data. This aspect reduces the need for controls from third parties, often auditors or others, saving costs while ensuring reliability.

Since Bitcoin was introduced in 2009, blockchain usage has exploded through the emergence of many cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFT) and smart contracts.

2. What is a smart contract?

Smart contracts simply mean programs stored on the blockchain run when pre-determined conditions are met. They are often used for the purpose of automating deal execution. Thanks to this, all participants in the contract can be immediately sure of the results without the involvement of any intermediaries. Smart contracts also have the ability to automate workflows, triggering further actions when previous conditions are met.

3. How do smart contracts work?

Smart contracts work by following simple “If/when…then…” statement rules, written into code on the blockchain. A computer network performs actions when predetermined conditions are met and verified. These actions include disbursing funds to the appropriate person, registering the vehicle, sending notices or issuing tickets, etc.

The blockchain smart contract will then update when the transaction is complete. That means the transaction cannot be changed and only authorized parties have the right to see the results. In a smart contract, it is possible to set as many stipulations as are necessary to satisfy the participants and commit that the task will be satisfactorily completed.

To establish terms, participants must define how their transactions and data appear on the blockchain, agree on the “if/when…then…” rules that govern those transactions, list all potential exceptions and identify the framework for dispute resolution. The smart contract is then programmed by the developer. Currently, the structure of smart contracts is also somewhat simplified because many organizations providing blockchain services for businesses create templates, web interfaces and many other online tools.

4. Benefits of smart contracts

Smart contracts are becoming increasingly popular thanks to many benefits:

Speed, efficiency and precision

When a condition is fully met, the contract will be executed immediately. Smart contracts are digital contracts and are completely automated. Participating parties do not need to process paperwork or waste time adjusting errors (which often occur due to manually drafting documents).

Trust and transparency

Because there is no third party involved and transaction records are encrypted and shared between participants, information cannot be altered for personal gain.

Protect

Transaction records on the blockchain are encrypted, making them very difficult to hack. Furthermore, since each record is connected to the previous and next records on the distributed ledger, hackers would have to change the entire chain to change a single record.

Save

Smart contracts eliminate the need to use a third party to process transactions. Thanks to that, participants save on related costs, as well as reduce wasted time.

5. Application of smart contracts in practice

Here are some ways businesses benefit from smart contracts today:

Smart contracts in the financial industry

Decentralized finance applications (DeFi DApps) represent an effective alternative to traditional financial services. This type of application is increasingly popular thanks to its trustworthy, immutable, transparent nature based on blockchain technology and smart contracts. DeFi DApp provides parallel services for the financial and banking industry, such as: Loans, savings, transactions and a number of other financial services. The decentralized business model can bring significant benefits and conveniences to both financial institutions and users. With high transparency, 24/7 functionality, and lower costs using smart contracts, DApps have the potential to lower the barrier to entry in the financial services sector for the global population. DeFi (decentralized finance) projects have raked in billions of US dollars in value. This trend is expected to continue as more and more people become familiar with the unique value propositions of this sector. Users can participate in this new generation of financial services without centralized custody or intermediary fees. Although the DeFi sector is only a few years old, with the number of innovative DApps that have provided a lot of value and convenience to consumers, the impact of DApps and smart contract support on The financial industry was clearly felt.

NFTs and Smart Contracts: Blockchain Technology in the Game

The global gaming industry is an ecosystem worth hundreds of billions of dollars. The gaming industry continues to grow rapidly, but the way value is created and distributed across the industry may be inequitable. Developers create and publish games, and players pay to participate and interact with those games. This maintains a one-way value flow, with players spending money to unlock access to in-game assets and game configurations.

In contrast, in-game blockchain technology allows players to capture the utility and value of in-game purchases, as well as redeem assets more efficiently. Blockchain technology in games is often driven by Non-Fungible Tokens (NFTs) - unique digital assets that represent in-game assets. NFTs are developed based on smart contracts. These tokens are unique, rare and indivisible, facilitating player ownership. Smart contract-based games have the potential to drive widespread adoption and create a more equitable value model.

Thanks to the implementation of blockchain technology in the gaming industry, players will save in-game purchases, sell them to others or transfer to supported related games. Because NFTs are unique and can be designed to retain value beyond the game they originate from, NFT games and DApps built on blockchain have the potential to expand the gaming economy, driving development of new games. Some blockchains with significant gaming growth include Ethereum, TRON, EOSIO, and NEO.

Smart contracts and Blockchain in the legal industry

One of the most promising real-world use cases for smart contracts is their potential to act as legally binding contracts. It is the type of contract that informs most business engagements today. Technology has driven innovation in the legal industry, most recently with the advent of electronic signatures. Smart contracts represent another new development in this space and are likely to soon become the choice for parties to legal agreements, contributing to reducing costs incurred from hiring lawyers and intermediate.

The widespread use of separate smart contracts for a multitude of transaction types could reduce costs and increase execution speed. To date, several countries have begun to allow the use of smart contracts and blockchain in the legal industry in certain contexts.

For example, a blockchain-based certificate authentication system can be solved the problem in The United States currently has 2 million fake degree certificates and 300 unauthorized universities [7, p. 673-693]

Blockchain in real estate

Through tokenization, smart contracts are promoting partial ownership of assets. Therefore, it lowers the investment entry barrier for many people, reworking documents and transaction processes by merging blockchain and real estate transactions. In particular, there have been several successful attempts at tokenizing real estate through platforms such as RealT and SolidBlock.

Anyone who has purchased a home or other real estate knows the hidden costs associated with closing costs, title transfer and brokerage fees. These are costs that are reduced or even eliminated by leveraging smart contracts. Once a piece of assets is tokenized, much of the necessary record keeping can take place through the associated smart contract, thereby saving time and money for all parties.

Application of Smart Contracts in emerging technology

One of the most exciting applications of blockchain technology and related smart contracts is its ability to facilitate complex computational tasks, involving machine learning (ML) and artificial intelligence (AI)).

By combining the data-intensive processing of AI with the decentralized, immutable security of blockchain technology, in the future, AI has the potential to create smart contracts on its own. As smart contract applications are deployed across different industries, they will become increasingly more complex to suit each sector. AI can enable the building of more complex, more responsive, modern smart contracts and enterprise-grade DApps with more utility.

Smart contracts can benefit from the advanced computing capabilities and adaptive systems of AI technology. While AI implementations use smart contract technology to automatically execute rule sets, while providing a secure existence environment for valuable, sensitive machine learning data.

Above are just some typical examples of smart contract applications. In addition to the fields mentioned above, smart contracts bring benefits to the healthcare industry, solve problems of Internet of Things (IoT) technology.

II. The Smart Contract Development – Key Factors to Consider

Blockchain-based smart contracts are the latest innovation on the technology scene. These self-executing contracts with deal terms written directly into code have transformed traditional business processes, bringing transparency, security and efficiency. The importance of Smart Contracts continues to grow, pushing businesses to delve deeper into the development and implementation process. However, developing smart contracts is not an easy task despite successful basic research results. It requires an understanding of coding, rigorous testing, and careful consideration of various factors such as security, scalability, and interoperability. To be able to grow, it is important to have a comprehensive understanding of the Blockchain platform. Additionally, mastering the specifics of Smart Contracts, including logic, data structures, and potential risk situations, is essential for successful implementation. Smart contracts continue to reshape the digital landscape, offering unprecedented opportunities for automation, transparency and efficiency. By considering the essential factors listed below and leveraging trusted platforms, businesses can tackle the complexity of Smart Contract development in recent years and fully exploit potential of Blockchain technology. The 6 key factors are:

1. Determine purpose

Before diving into Smart Contract development, it is important to clearly define the purpose and scope of the contract. Identify the specific use case or business logic that the Smart Contract will address.

2. Choose the right Blockchain

When developing Smart Contracts, it is essential to consider the costs associated with different Blockchain platforms. Surprisingly, gas fees can have some impact on Blockchain platform costs. For example, Ethereum is a popular choice for Smart Contract development but can incur high gas fees during times of network congestion. Then Binance Smart Chain or Solana could be suitable alternative Blockchain platforms

3. Define rules

Smart contracts operate based on predefined rules and conditions that are encoded in the contract's code. It is important to define these rules correctly to ensure that the contract works as intended. Specify the conditions for contract execution, including input parameters, validation criteria, and actions to be taken when the conditions are met. Choosing programming languages such as Solidity for Ethereum or Rust for Polkadot will help in writing clear and concise Smart Contract code that accurately reflects the desired logic and rules.

4. Prioritize security

Security is an important factor when developing Smart Contracts, as vulnerabilities in the code can lead to serious consequences, including loss of funds or exploitation by bad actors. Follow best practices for Smart Contract security, such as input validation, access control mechanisms, and protection against common attack vectors like reentries and integer overflows. Use security tools and frameworks like MythX and OpenZeppelin to conduct automated security testing and identify potential vulnerabilities in code. Additionally, engage with the developer community and undergo peer review to receive feedback and improve the security posture of Smart Contracts.

5. Check the code

Thorough testing is essential to ensure the reliability and functionality of Smart Contracts. Implement a comprehensive testing strategy including unit testing, integration testing, and end-to-end testing to validate contract behavior under various conditions and in some cases testing frameworks like Truffle and Ganache will become very useful. Conduct rigorous testing on the testnet environment before deploying contracts to the mainnet to proactively identify and resolve any issues or bugs.

6. Deployment environment

Choosing the right deployment environment is crucial for successful Blockchain Smart Contract development. Consider factors such as network scalability, decentralization, and governance when choosing a deployment environment.

Reliable platform for smart contract development

Ethereum

Launched in 2015 by Vitalik Buterin, Ethereum is one of the prominent and widely deployed Blockchain platforms for smart contract development, allowing developers to create decentralized applications and perform Programmable transactions. It is considered the ideal choice for building DApps, decentralized finance (DeFi) protocols, and non-fungible tokens (NFTs).

Hyperledger Fabric

Hyperledger Fabric, developed by the Linux Foundation, is an enterprise-grade Blockchain framework designed to build permissioned networks and business Blockchain solutions. Unlike public Blockchains like Ethereum, Hyperledger Fabric allows organizations to create private and consortium networks with controlled access and enhanced security features. With support for modular architecture, deployable consensus mechanisms, and Smart Contract implementations in familiar programming languages like Go and JavaScript, Hyperledger Fabric is well-suited for enterprise applications. requiring scalability, security, and regulatory compliance.

Corda

Corda, developed by R3, is another enterprise-focused Blockchain platform specifically designed for financial institutions and businesses. Built with a focus on privacy, scalability, and interoperability, Corda allows businesses to transact directly and securely without intermediaries. Corda's unique features include a “notarized” consensus mechanism, support for fine-grained access control, and compatibility with existing regulatory frameworks and financial systems. With an emphasis on enterprise-grade security and interoperability, Corda is the preferred choice for building Blockchain solutions in the financial, trade finance and supply chain sectors.

Binance Smart Chain (BNB)

Binance Smart Chain (BNB) is a Blockchain platform developed by cryptocurrency exchange Binance, providing Smart Contract functionality and compatibility with the Ethereum Virtual Machine (EVM). As a parallel chain to Binance Chain, Binance Smart Chain supports fast transaction processing, low fees, and seamless interoperability with the Binance ecosystem. With a growing ecosystem of decentralized applications, decentralized finance (DeFi) protocols, and NFT markets, Binance Smart Chain offers developers an alternative platform to build solutions Blockchain solutions are scalable and cost-effective.

Cardano

Cardano developed by IOHK and led by Charles Hoskinson, one of the co-founders of Ethereum, is a Blockchain platform known for its scientific approach to development and emphasis on sustainability, extensibility and interoperability. Cardano aims to provide a secure and scalable infrastructure for building decentralized applications and Smart Contracts. With its unique Ouroboros consensus algorithm and support for formal verification methods, Cardano provides a powerful and secure platform for developing mission-critical applications in the fields of finance, healthcare, and governance.

III. Some preditions for the trend of Smart contract

Smart contracts are poised to revolutionize the way transactions are traditionally done, providing a level of automation, transparency and security that traditional contracts cannot match. But what does the future hold for smart contracts? In this section, we will predict some trends that could shape the future of smart contracts.

Increasing adoption across industries

One of the most important trends in the world of smart contracts is their increasing adoption across many industries. From real estate to finance to supply chain management and healthcare, more and more sectors are recognizing the benefits of smart contracts and looking for ways to integrate them into their operations.

As blockchain technology continues to develop and become more accessible, we can expect this trend to continue. In the future, smart contracts could become a standard tool for executing transactions across many industries.

Integrate with IoT

The integration of smart contracts with the Internet of Things (IoT) is another interesting trend. IoT devices generate huge amounts of data, and smart contracts can provide a secure and efficient way to manage this data.

Improved security and privacy

Although smart contracts offer many security benefits, they are not immune to vulnerabilities. As the use of smart contracts increases, improving their security will become increasingly important.

We can expect to see new security techniques and tools being developed to protect smart contracts from attacks. Additionally, privacy-preserving technologies, such as zero-knowledge proofs and secure multi-party computation, can be integrated with smart contracts to enhance their privacy.

Legal and regulatory developments

As smart contracts become more widely used, they will inevitably encounter legal and regulatory frameworks. With proper consideration this could lead to significant developments for the legal sector (for example, cryptocurrencies are already being seriously considered).

Interactive ability

Interoperability, or the ability of different blockchain platforms to interact with each other, is another important trend for the future of smart contracts. As the blockchain ecosystem becomes more diverse, the ability for smart contracts to operate across different platforms will become increasingly important. Interoperability could enable many new applications for smart contracts, from cross-chain financial products to decentralized data markets.

Buy and take home

The future of smart contracts is full of potential. With growing adoption, integration with IoT, improved security and privacy, legal and regulatory developments, and interoperability, smart contracts are set to change. how we make transactions.

Conclusion: However, realizing this potential will require continued research and development as well as collaboration between various stakeholders, including developers, businesses, regulators and experts. legal expert. By working together, we can overcome the challenges smart contracts face and realize their full potential.