What are the characteristics of smart contracts? How is it different from traditional contracts?

Nov 25,2022
What are the characteristics of smart contracts? How is it different from traditional contracts?

Previously, I have introduced to you what is a smart contract. A smart contract is a technology that intelligentizes contracts in life and can be automatically executed by programs when certain conditions are met. It's just like you made a promise with me, everyone decided on rewards and punishments, and then entered the promise into the blockchain according to the code. Once the agreed standard is opened, there will be programs to automatically execute, which is called smart contracts. What are the characteristics of smart contracts? How is it different from traditional contracts? Next, let's have a look.

What are the characteristics of smart contracts?

Compared with traditional contracts, smart contracts have three characteristics:

1. Disclosure of contract contents

The smart contract is deployed on the blockchain, and its contract content is naturally open and transparent.

2. The contents of the contract cannot be tampered with

Similarly, due to the deployment on the blockchain, the content of the smart contract is difficult to modify.

3. Permanent operation

The smart contract operating on the blockchain is also jointly maintained by the nodes on the blockchain. As long as the blockchain is in place, the smart contract can be permanently operated. There is a feeling of brotherhood that "the chain is in the contract".

Compared with traditional contracts, smart contracts supported by the three features of blockchain have the following advantages:

1. Trust.

Because the smart contract is based on the blockchain, the contract content is open and cannot be tampered with. Code is law. Investors can buy and sell transactions safely without trust based on their recognition of code.

2. Economical and efficient

Compared with traditional contracts, disputes often arise due to differences in understanding of contract terms; Smart contracts can prevent conflicts well according to the measurement language, rarely generate disputes, and the cost of reaching an agreement is very low. On the smart contract, the arbitration results will be executed immediately. Therefore, compared with traditional contracts, smart contracts have the advantages of economy and efficiency.

3. No third-party litigation required

If Xiong Da and Xiong Er bet on whether it will rain tomorrow, the loser will need to give each other 100 yuan. If the loser reneges, the winner will not be rewarded. Therefore, it is inefficient and time-consuming to go to a third-party arbitration institution. If the bet is written on the smart contract, when the bet is reached, each party will put 100 yuan into the smart contract address. The smart contract will automatically execute according to the final result, and the winner will take all the rewards. It can be seen that smart contracts do not require third-party litigation.

Differences between smart contracts and traditional contracts

1. From the perspective of automation, smart contracts can make intelligent judgments on trigger conditions, while traditional contracts can only make judgments on the basis of perception (in other words, the parties to the contract may have different understandings of this consideration standard, and at this time, they need to rely on a third-party arbitration institution).

2. From the subjective and objective perspective, the conditions such as punishment in the smart contract are clear in advance and applicable to the objective request scenario; Traditional contracts are more suitable for subjective request scenarios.

3. In terms of cost, the cost of smart contracts is significantly lower than that of traditional contracts. Since various implementation conditions in the smart contract have been written into the code early, the implementation can start without consuming a lot of manpower and material resources.

4. In terms of the form of punishment, various digital currencies are used as collateral in smart contracts. If there is a breach of contract, the defaulter will lose assets, but in traditional contracts, sanctions will be imposed according to legal sanctions.

5. The scope of application is different. Smart contracts can be promoted and put into use worldwide. However, traditional contracts have specific scope and breadth of application because of different regional cultures, customs, and actual laws and regulations. However, despite its strong certainty, smart contracts still lack some flexibility in the security law.

Speaking of this, I believe you have a certain understanding of the characteristics of smart contracts and the differences between smart contracts and traditional contracts. In general, if the smart contract can synchronize with the real data, it will be more powerful. We also believe that smart contracts will bring us greater surprises in the future.