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Smart contracts an innovative tool


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Smart contracts

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Smart contracts an innovative tool

  1. 1. SMART CONTRACTS AN INNOVATIVE TOOL By Manzar Mammadova & Daria Sorochynska 111i
  2. 2. Smart Contracts what are they and how do they function
  3. 3. A smart contract is an agreement between people or organizations, which is in a form of a program code that runs automatically and receives all the necessary data through so-called "oracles" - programs that provide communication between the real and the digital world.
  4. 4. Rather, smart contracts should be referred to as a blockchain because today, such contracts are implemented through blockchain, and if you go into detail, perhaps 99% of smart contracts should be called ethereum contracts, since they are created on the air (ether- cryptocurrency).
  5. 5. The dynamics of Ukraine's relations with the EU is growing, which in turn necessitates the optimization of regulation of business entities. The development of technologies, compatible with modern law, will increase the quality of control over business activities. One of the areas of such optimization is the development and consolidation in the legislation of smart contracts, since these contracts are indirect, non-counterfeit and accessible to all blockchain participants.
  6. 6. How to make a smart contract? ■ It is important to note that a smart contract requires several mandatory elements: ■ 1. The digital identification and digital presence of all parties to the contract. ■ 2. Smart contracting requires a decentralized private environment into which smart contracts will be recorded; ■ 3. The subject matter of the contract and the availability of the necessary instruments for its implementation. For example, if any calculations are provided, then these are cryptocurrency accounts. ■ 4. It should specifically describe the conditions for its implementation, which participants confirm at the same time.
  7. 7. History of development of smart contract ■ In 1996, when the first round of global Internet development began, American programmer and cryptographer Nick Szabo first introduced the concept of "smart contracts", which is hard to imagine today without being tied to Blockchain. Szabo described the smart contract as a computer protocol that, on the basis of mathematical algorithms, independently performs operations with complete control over their execution.The prototype of smart contracts is the ordinary paper contracts used by any modern organization.
  8. 8. Advantages of smart contracts:
  9. 9. ■ 1. Autonomy. You make all the agreements yourself - you no longer need to contact brokers, banks, notaries, attorneys and other intermediaries to confirm or certify the agreement. ■ 2. Trust and preservation. Cryptography, data encryption, and blockchain storage are responsible for keeping your documents secure.There are hundreds of duplicates, and no one will be able to say that your documents have been lost. Blockchain and its decentralization also make it virtually impossible to hack and swap your smart code. ■ 3. Speed. It usually takes a lot of time to work with paper documents and their support. Smart contract software automates these tasks, thus freeing you from personal involvement in many of the business processes that are typically done manually. ■ 4. Saving. Smart contracts save your money as they eliminate intermediaries' business processes. The cost of servicing ordinary contracts, such as notarized assurances of transactions, can reach hundreds of thousands of dollars, because sometimes not only the contract itself, but every transaction on it, is required to certify a notary. ■ 5. Accuracy. Not only are automated contracts faster and cheaper than usual, they also help to avoid mistakes that occur when manually filling out forms and eliminating the human factor in contracting transactions.
  10. 10. Disadvantages of smart contracts:
  11. 11. 1. Lack of infrastructure and lack of information. Speaking of smart contracts, there is actually one convenient base for their creation today, the airbase, in other cryptocurrencies there is no convenient service for creating smart contracts. In addition, there is usually not all necessary the information to make smart deals. 2. Openness of information. In smart contracts, all information is accessible to everyone. 3. Lack of legislation regulating smart contacts. Legislators are simply not keeping up with technology, and today there is no specific base for regulating smart contracts. 4. The permanence of smart contracts. On the one hand, this increases the security of smart deals, and on the other, contracts should be able to make changes.
  12. 12. An example of possible use of smart contracts If you want to buy a car you need to come to the car dealership, choose a car, go to the bank to pay everything, by the way, if you exceed a certain amount, you need to explain where the money came from, after the payment come to the car dealer and pick up the car. And this is probably a simplified version, which will take the whole dayHowever if you choose to buy a car with smart contracts, you just need to select the model and confirm the purchase, then come and pick up the car, all the property status, who owns it automatically updated online, which increases security.
  13. 13. Conclusions and suggestions ■ Therefore, the highlight of a smart contract is its automatic execution, if it concerns the contractual relationship, as well as the possibility of a certain legal fact. However, it should be borne in mind that at present, a smart contract is not an ideal instrument for contractual relations and cannot completely replace the classic paper contract scheme as it does not have clear legislative regulation. In addition, a mistake made when writing it can cause unwanted results for the parties and even the loss of cryptocurrency assets. ■ The use of smart contracts, of course, will allow optimizing the economic activity of legal entities. However, it will take some time to significantly expand the use of such a tool, which can make the use of a smart contract more flexible and allow errors to be corrected by "modifying" a smart contract without losing its security level.