logo
logo
Sign in

A look around into the types of smart contracts based on application- With some Vanilla too!

avatar
Mariana Lisa
A look around into the types of smart contracts based on application- With some Vanilla too!

Blockchain and cryptocurrencies are flourishing with enormous business opportunities in the digital era. Many countries are on the mission of decentralizing their governance with blockchain solutions, and some have dived into the coining of their cryptocurrency to enter the marketplace. Major industries are trying to leverage customized smart contract application development to automate legal contracts, quality inspection, and other repetitive tasks. However, it is evident from the financial news updates that crypto and blockchain are hitting our lives with ergonomic use cases and making lives simpler, transparent, and secure in the digital space!

In this blog post, let’s start with some vanilla flavors about smart contracts and then traverse through how it works and their varieties based on application!

 

Smart Contracts-Vanilla Flavors!

Let’s start with its basic definition as per the experts!

 

A smart contract is a computer protocol that executes a task based on pre-defined conditions. These smart contracts are intended to verify, enforce a particular transaction in the process. Smart contracts are built on top of the blockchain framework, and hence, they are traceable, transparent, immutable, and digitized. The high-value transactions can be secured with smart contracts to ensure appropriateness in the legal terms between the entities. Smart contracts are adored for their feature of P2P transactions, which avoids the intervention of intermediaries in the transaction. 

To get a deeper understanding, let’s have a look at the working principle of smart contracts!

 

Working principle of smart contracts- A glimpse!

Smart contracts can be easily understood with the instance of property transfer. Now, let’s assume that Afrin buys a property from Buna!

If Afrin pays Buna as per the deal in the normal transaction, Buna signs off the property ownership through registration. On the contrary, if Afrin pays less amount and argues with Buna to sign the contract or Buna receives payment and asks for more, they need a third-party or court to resolve the issue. 

This is not the way a smart contract performs the transaction! It’s simple and automated!

In the smart contract transaction, Afrin transfers the money or cryptocurrency to buy the property from Buna as per the agreed terms; the smart contract automatically transfers the property title to Afrin without any intermediary or registration process. In case if Afrin does not pay in the specified time frame or pays less, then the property would remain in the ownership of Buna. If Buna receives the payment and does not sign the contract, Afrin would be refunded the paid money or cryptocurrency automatically. This is how smart contracts completely avoid third-party intervention and fraudulent activities. 

 

Once deployed, the smart contract can never be modified by either party without others’ consent, as it’s transparent. The smart contract would be automatically canceled if the conditions are not met within the specified timeframe. 

 

Let’s explore the types of smart contracts based on application!

 

Types of smart contracts-based on their application!

Smart Contracts can be categorized based on their application. 

 

Legal smart contracts

Legal smart contracts are digitized legal contracts that execute a transaction automatically with the piece of code without any third parties. Many countries are developing smart contracts for real estate transactions to avoid fraudulent acts in taxation and other legal compliances. Soon, once the smart contracts are accepted as a mainstream transaction, we could transfer high-value assets without any disputes in the near future. 

 

Decentralized Autonomous Organizations(DAOs)

Decentralized Autonomous Organizations(DAOs) are the communities operating on the blockchain framework. These community members brainstorm and agree on certain specific rules to be followed and implement them as smart contract protocols. On deploying the smart contracts, the community members must abide by the regulations. Deviations from smart contract protocols may cause consequences to the community member as per the smart contract code guidelines. 

 

Application Logic Contracts(ALC)

Application Logic Contracts(ALC) are widely used with the combination of IoT and blockchain technology. These types of smart contracts are specifically designed for applications. For instance, supply chain product quality inspection. Smart contracts are smart contract code guidelines designed to communicate with the devices or products and validate the collected information from them. 

 

Wrapping up!

Smart contracts are still a great deal for common people who don’t have knowledge of the blockchain framework. The evolution of these smart contracts to hit the real-time use cases is in progress, and many countries are experimenting with their tech expert crew. Soon, we may expect smart contract transactions in our real-time applications!

collect
0
avatar
Mariana Lisa
guide
Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more