Crypto, blockchain, and NFTs were indeed buzzing more than COVID, the worst pandemic. Smart contract development is another rising sub-element among these technologies that has gained massive exposure in the tech market thanks to its automated task execution over blockchain technology.
While many criticize these decentralized solutions to be a hoax, a few are digging deep and broadening their perspective to make use of these technologies for the greater good.
A smart contract eliminates the dependency on a third party and takes a stance to automate task execution when the terms and conditions of the agreement are met.
Indeed, it’s a revolutionizing technology featuring techniques to reduce costs and save time on legal activities. With such benefits, businesses have shifted their interest to integrating smart contracts into their digital solutions.
If you are among those, then this article shares a step-by-step guide from its very basics to core elements to give you a better understanding of smart contracts: why use them, what are their key elements and the criteria to choose the right company for successful smart contract development.
Before we get into advanced smart contracts, let’s take a look at traditional contracts.
Traditional contracts have been in use for hundreds of years, whether to exchange goods or claim something legally.
These were nothing more than a piece of paper with an agreement written on it.
Consider a real estate agreement between two parties, which are simply a seller and a buyer who agrees to trade the property for a fixed amount specified in the agreement.
The catch here is, a third party should assist both parties (in this case, a real estate agent) to bring simplicity and convenience to their trade.
Once the trade is finalized with a fixed amount, both parties gain something at the end.
However, a third party is compensated for his work, whether it did a good or horrible job.
These types of contracts exist in every other industry, from the corporate world to entertainment and media.
Downsides of Traditional Contracts
Even though traditional contracts were reliable, they had issues that affected the execution process and caused the contract to be either delayed or canceled. Such as
The Third Party’s Involvement
The presence of a third party is detrimental to the contract because the third party frequently overcharges and mismanages the contract, which causes it to fall apart or be terminated.
The fact that third parties have control over the essential terms of an agreement is another issue. This means that if an agreement isn’t handled properly, a central party may take control of it and cause a deadlock.
This could result in theft, fraud, asset loss, money laundering, etc.
Paperwork and Legal Hassle
Among the downsides, paperwork and legal hassles make the list as well. Even in the digital age, paperwork is still used to create contracts and streamline workflow. This is unacceptable in this day and age, as they are easily lost by any human error.
Another downside that stands out is the legal hassles; we all know how complex legal matters are. Making the contract and getting it signed by two parties takes an awful lot of time.
This may lead to a loss of interest and lead potential clients to look for other options.
Smart Contract: The Solution
With the emergence of bitcoin, blockchains were introduced to the world.
Despite their appearance, none of the businesses or IT firms regarded them as a revolutionary and promising technology.
However, between 2013 and 2015, the blockchain gained massive interest, and a large part of the credit for this success goes to Ethereum, a new cryptocurrency and blockchain that debuted with the aim of completely altering the digital landscape.
In particular, 2014 was the turning point for the blockchain because many companies began to see it as a solution to their sectors due to its decentralized pseudo-anonymity, which increases security and automates task execution.
That same year, smart contracts became operational on the digitally distributed ledger and received appreciation from all industry verticals.
If we remove the third parties from the traditional contract and make it digital using programmed conditions and add it to the blockchain, then it will become a smart contract.
Smart contracts are nothing but codes containing the terms and conditions of an agreement (mostly in if/else conditions) that automatically execute particular tasks if the desired condition in the codes is met.
However, the data sharing or transactions will be revoked, and the transfer of any asset will fail if the conditions are not met.
This algorithm ensures that there are no losses for either party, whether the transfer of assets fails or succeeds.
On top of this, they are transparent to the public, so everyone can understand how they work and how their transactions happen successfully.
The main advantage of smart contracts is that they do not require a third party to perform their tasks.
However, they are not always easy to understand; they can be complex depending on the industry they serve.
Why Should Businesses Use Smart Contracts
Blockchain technology has become a new sensation in the tech market. This gives plenty of opportunities for smart contract development services to put more effort into making it an agile tool for everyday corporate use. Moreover, the smart contract market size, which was around 149 million USD in 2021, is expected to reach 820 million USD with a CAGR of 26.40% by the end of 2030.
Image Credit: Verified Market Research
This is convincing enough for people to keep developing smart contracts and reap maximum profit by serving multinational clients.
Use Cases Among Different Industry Verticals
Smart contracts can play a key role in data sharing, transactions of digital assets, and many other things, which is beneficial for a multitude of sectors, including healthcare, finance, manufacturing, real estate, and other industries.
For instance, the smart contract can be used in the NFT marketplace to automate the transfer of digital assets once the buyer pays the required amount of cryptos to the seller.
Apart from just ensuring whether the conditions of a particular agreement are met, smart contracts perform various other tasks as well. Such as confirmation of ownership and digital copyright, developing blockchain-based solutions (games), securing P2P transactions, etc.
Every business is aware of how a third party/central body misuses the terms of a contract, leaving the businesses to fight for their rights legally. This is time-consuming as well as expensive when fighting legally in court.
On the other hand, smart contracts rely on no third party/central body to carry out task execution. This promises businesses to get more control over the contract with no to zero chances of fraud, money laundering, and theft.
Since smart contracts bring hefty benefits to the table with their decentralized characteristics enterprises seek to implement this technology throughout their solutions. Following are some of the benefits to consider for using a smart contract.
Smart contracts operate on the blockchain, a decentralized distributed ledger secured with cryptographic hashes and layers of encryptions. With such a secure network it’s almost impossible to breach the security of blockchain and smart contracts.
The record history of any smart contract is made publicly available, which brings transparency at every level of exchanging assets over the blockchain. This again means that anyone can see if any alterations to the smart contracts are done.
Affordability is among the benefits of smart contracts since it does not require any intermediate authority to streamline the flow or to ensure successful data transfer. Smart contracts save the money spent on banks, notaries, and lawyers.
The traditional contracts rely on paperwork which is an outdated method that takes an awful lot of time to get the contract signed and fulfilled by two parties. On the other hand, smart contracts automatically work for both parties and make the transfer of data or digital assets within a few minutes by verifying the terms of the contract.
Key Points To Consider For Smart Contract Development
It’s necessary to follow up on some prerequisites of any technology just to make sure they get well-versed with your business solutions. And it applies to smart contract development as well. So let’s see what are the key points you should consider before developing a smart contract.
Regulation Still in The Early Stages
Blockchain is comparatively new, as is the concept of smart contracts. Though its utilization among industries has skyrocketed, it’s still in its infant stages. Hence it’s not always predictable what uncertainties may change the course of events with no legal regulation over these technologies. For this reason, many hesitate to use a smart contract for their business. And if you think this parameter is something that matters to you then you may want to wait till it becomes widely used.
Smart contracts function on the blockchain, and they require crypto at points to make a transaction. The question here is do crypto and the blockchain work for you? If your business relies on blockchain-based solutions and its element then smart contracts are just meant for you.
However, if crypto, blockchain, and its other elements just don’t align with your industry yet or you are not sure whether they do, you have to dive a bit deeper and take the help of smart contract development services to find out how they can benefit your industry and the requirements for implementing the solution.
The Limitations of Smart Contracts
You read it right, smart contracts have limitations too. And if you have met the above criteria and want to implement smart contracts in your solutions, just hold on a bit because these limitations may force you to think twice.
- Smart contracts work on top of blockchains, and since these are decentralized they can only function in the digital landscape. So it cannot be referenced with any legal activities outside of the digital landscape.
- Smart contracts can only work on facts. They are not made to act on subjective judgment but rather focus on objective facts.
- The smart contracts are built on specific terms and conditions and it is mostly written in if-else conditions which gives not much flexibility to perform any variations.
Smart contracts require a blockchain to operate, which is why, according to your business alignment, you have to go with a blockchain. Most companies rely on Ethereum since it offers multiple consensus mechanisms for enhanced and rapid trading.
However, there are much better options available, such as Polygon, which requires no gas fee (transaction costs) for trading digital assets.
Now that you have some understanding of smart contracts, you have to make a plan and consider the terms and conditions to include in your smart contract to obtain the specific automated output.
For instance, you can include user authorization, transaction verifications, and other terms and conditions in your smart contract to securely transfer digital funds.
You can analyze the market and even find out if your competitors have already begun using a smart contract solution to enhance their business solutions.
Smart Contract Development Company
Great now you have a plan, you just need someone who can take your preferred blockchain solution and develop a smart contract.
Here, joining hands with a smart contract development company can bring a lot to the table.
The smart contract development company can suggest multiple things, including a suitable blockchain network, the best digital wallets, and some other terms and conditions for your smart contract to execute tasks with more efficiency.
Besides smart contract development, the company has years of experience developing decentralized solutions, including blockchain, NFT platforms, crypto exchange platforms, and decentralized games, so you don’t have to worry about anything from the development phases to deployment.
QA and testing
Though smart contracts operate on the safer side of a digitally decentralized platform, sometimes, due to a lack of skilled development, developers end up building faulty smart contracts that are vulnerable to cyber crimes.
For this reason, it’s highly advised that the client company take the testing phase of smart contracts seriously. Also, to make sure the smart contract development company performs pre-deployment and post-deployment QA tests to verify the solution is secure from all ends.
The Hardest Part: Choosing A Development Partner
You will soon notice the hardest part is not the smart contract development, but rather finding the right company. And it’s a true fact since only a few claim to have the right expertise in developing smart contracts.
However, there is only one way to find out, by assessing each company.
Though it may seem like a time-consuming activity, it’s worthwhile.
Criteria For Evaluation
It’s possible to shortlist your companies using a few criteria and get matched with an ideal company for the sake of your smart contract development.
Domain Expertise and Experience
Among the things a client should always put more weight on is the company’s domain expertise and years of experience in building smart contracts and other decentralized solutions.
You can visit each company’s portfolio section and look at what projects they have done and if they align with your smart contract development type. Furthermore, you can take a look at their reviews, and customer feedback to understand if they offer satisfactory services.
Another aspect to consider is a company’s experience in providing a wide range of solutions. A greater number of years of experience promises quality production, and these more experienced companies are more capable of managing projects effectively. So it’s always best to stick with the most experienced firm.
Knowledge of Tech Stack
Knowledge of the tech stack is indeed important since it is the sole object that will be used to develop your smart contract. The following is the technology stack to consider for building a smart contract solution.
|Blockchain and Smart Contract Technology Stack
|Solidity, Vyper, Rust, Python, and C++
|Ethereum, Binance, Polygon, Solana, Cardano, etc.
|Smart Contract Libraries
|Openzeppline, Hardhat, Infura, Alchemy, Geth, Quicknode, etc.
|MongoDB, CouchDB, The Graph
|Metamask, Truewallet, Coinbase, Walletconnect
|Ether JS, Web3 JS, Node JS, React JS
|Additional Technical Expertise
|Cryptography, Web Development Scripts
Maintenance and Support
It’s natural to run into challenges and even deadlocks during and after the deployment of your smart contract development. As a result, having 24*7 maintenance and support is critical for receiving real-time updates on the maintenance of your solution. This is why it’s recommended to choose smart contract development services that offer hands-on maintenance and support.
There you have a step-by-step guide for successful smart contract development.
Smart contracts are the need of the digital era, especially with new emerging tech-metaverse AR/VR and the marketplace storming the tech industry. These technologies will be operating on a massive scale and will require hundreds of thousands of smart contracts to automate task execution for transactions and the transfer of digital assets.
If you are eager to build your own smart contracts, then it’s probably a good choice to join hands with a smart contract development company.