The idea of a digital agreement designed to assist, verify or execute the terms and conditions of an agreement without the presence or requirement of a third party is an old concept like the BitIQ App. In 1994, Nick Szabo first named this framework a smart contract. Though it is that old, it was not clear and known to people until blockchain technology emerged. The advent of blockchain technology brought the digital protocol’s complete possibilities into focus.
The presence of Bitcoin smart contracts on blockchain technology has the overall concept of Bitcoin investment easier for those who are enthusiastic cryptocurrency investors. Smart contracts are very beneficial where the direct transfer of value is inextricably linked.
A smart contract allows individuals to carry forward rule-based transactions and agreements without the presence of any third party. Finally, smart contracts digitally assist and verify the entire performance or negotiation.
Bitcoin Smart Contracts- Here Is An Overview
A Bitcoin smart contract, in other words, is nothing but a digital agreement. Bitcoin smart contract is nothing but a software code that is initially stored and later executed to all the connections in the Bitcoin Blockchain network. The originator of smart contracts elaborates the rules and is acknowledged by all the individuals and parties involved.
Diving deeper into the aspects of Bitcoin smart contracts, they are not restricted to defining rules present in the agreement. Also, Bitcoin smart contracts are accountable for executing the roles automatically and obligations. Bitcoin smart contracts are not operated by any central authority which makes it offer seamless transaction functionalities to users.
Advantages of Bitcoin Smart Contracts
There are some significant advantages of using the Bitcoin smart contracts. Some of the benefits are as follows:
- The Bitcoin smart contract can increase speed, accuracy, and efficiency. The agreement is executed immediately in a Bitcoin smart contract when all the required conditions are fulfilled. In addition, as the Bitcoin smart contracts are digital and automated, the party or an individual do not require dealing with any paperwork, which is quite tedious.
- The Bitcoin Smart contract gives the party trust and transparency. With Bitcoin smart contract, the party does not need to worry about the thought that the information might get tampered with. The main reason for this is there remains no involvement of third-parties. At the same time, the encrypted transaction logs are only limited to the participants only.
- The Bitcoin smart contract allows a high level of security. This is because all the bitcoin transaction records are encrypted. The security level is so well established that is no scope for information or other details to be hacked. Moreover, as every single entry on the distributed ledger is directly linked to all the entries before and after, the hackers would be required to change the entire chain to change one record.
- Finally, the Bitcoin smart contract helps parties with savings as well. The presence of Bitcoin smart contracts puts an end to the requirement of the third party to carry out the transaction process. As a result, the fees included with the presence of third-party are excluded, and the delay in execution is eliminated.
Limitation of Bitcoin Smart Contracts
Like any other contract, there are some limitations in the Bitcoin Smart contracts. The limitations that are present therein Bitcoin smart contract are as follows:
- In Bitcoin smart contracts, there is no option for sending HTTP queries. Thus in this scenario, the contracts are not able to gather any data or information about the real-time world events taking place. This is due to the design that is implemented in a Bitcoin smart contract.
- If any external data is used or included in a Bitcoin smart contract, it has serious chances of jeopardizing the consensus, which is critical regarding decentralization and security.
The above article gives you a brief overview of how vital a Bitcoin smart contract is. The advantages and the limitations will let you have a clearer picture of the need for the Bitcoin smart contract. If you want to know more about the Bitcoin smart contract, you can go through the same section at Bitcoin Era for further details.