Smart Contracts

3 min read

Technology is getting smarter, that’s no secret. The word “smart” has found itself  comfortably situated beside more and more products — smart phones, smart  TVs, smart watches, even smart thermostats. 

Surprisingly, one of the most important and consequential “smart” technologies  today was initially conceptualized in the early 1990s, long before the first iPhone  was released, and before Blackberry was even founded. And today it’s a reality,  providing an infrastructure that’s become fundamental to the crypto space. 

Of course, I’m talking about smart contracts.  

Smart Contract. Associate.

What are Smart Contracts? 

Smart contracts are self-executing agreements that are coded on a  decentralized blockchain network. They define the rules, penalties, and possible  outcomes of a contractual agreement, and then execute an outcome based on  the data received. In a functional sense, they’re the mechanism by which  transactions can occur on blockchains without the need for a trusted third party.  

Smart contracts remove the the labor, cost, and risks associated with typical  contracts like lawyers, enforcement costs, and the potential for contract breach  or fraud. All of these functions mediated or removed by the smart contract itself,  as it operates autonomously once deployed.  

Put simply, smart contracts replace middle men with software code.

A Real-World Example

An often-cited example that provides the simplest illustration of how a smart  contract operates is the functionality of a vending machine.  

• The person using the vending machine provides the input — the money  required for the desired product as well as the letter and number combination  of that product. 

• Based on that information, the vending machine provides the output — the  chosen product as well as change, if they put in more money than was  necessary for the item they purchased. 

In this scenario, the rules (D4 = Twix, E6 = Snickers, and so on) and conditions  (only release a product if sufficient funds have been deposited) are already  programmed into the machine, so no one needs to be there to retrieve your  product for you, give you change, or stand guard to make sure you’re not stealing.

Ethereum, DeFi, and Everything Else  

Though the concept of smart contracts was first proposed in the early 1990s,  Ethereum brought smart contracts to the forefront when it was founded in 2015.  In fact, Ethereum was designed to use smart contracts as a fundamental part of its infrastructure (smart contracts define the rules for the decentralized  applications, or DApps, that are built on the platform). 

Once a smart contract is deployed, it’s not under anyone’s control and thus  cannot be tampered with — not even by the person who created it. Users can  interact with the smart contract by providing information to perform  transactions, which the smart contract then uses to execute functions based on  its preprogrammed rules.  

Future Use Cases 

The scope of smart contract application is still somewhat narrow, especially  considering what it could look like in five or ten years. While today smart  contracts are used widely in DeFi protocols and to power the NFT market, they  soon could be utilized for everything from real estate to insurance to mainstream  stock markets. 

In addition, a number of institutions are focusing on blockchain- and smart  contract-based solutions, including Goldman Sachs, the Australian Securities  Exchange, and Barclay’s Corporate Bank. More and more mainstream  institutions are waking up to their potential of smart contracts and sensing the  shift in direction that’s taking place even in mainstream financial markets. 

Risks — and the Associate Solution

Because they function autonomously once deployed, smart contracts are not  without their risks. As is often said about contracts in the legal world, they must  be “airtight,” as any vulnerabilities in the code can be exploited with disastrous  results. This happens more often than many would like to admit, but the more  mainstream crypto becomes, the harder it is to ignore.

Unfortunately, hacks are not uncommon. On January 28, hackers stole $80  million from the DeFi protocol Qubit. And just two days ago, the DeFi project  Wormhole accounted that it was the victim of a hack worth $320 million. 

With the risks of hacks — not to mention password losses, hard drive crashes,  and other irreversible events — smart contracts at their current level of  accessibility and with their current level of risk simply don’t make sense for most  people to use. 

Associate gives you the ability to decentralize the management of your  organization without these risks. It utilizes a technology similar to smart  contracts to automatically execute member decisions.  

For example, members can propose a vote to replace an administrator. If this  vote passes, the action to remove administrative privileges from that user is  executed automatically. Even the administrator, despite their current privileges,  cannot overrule the decision or stop the action from being executed. 

Associate offers the transformative power of decentralization to everyone  without the risk. It’s perfect for collectively operating open-source software,  managing internet communities, or funding non-profits. No matter the venture,  Associate will only ever step in if something goes wrong — say, to help you  recover a password loss, but will never interfere with your association in any  way. 

While smart contracts will surely continue to evolve over time, you don’t have to  wait to benefit from the transformative power of decentralization. You can start  your own association today, for free, in less than 5 minutes.  

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