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Smart Contracts on Cardano ADA, how do they work and when will they be available?

By Alvaro Blanco
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You already know that Cardano is a third generation cryptocurrency, but the smart contracts on Cardano, When they will be available? Do you know how they work?

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In 1994, a visionary first coined the term "smart contract," and that someone was Nick Szabo, a famous cryptographer, of whom much is known about his work and research in the advances of blockchain technology, but very little about his private life.

Well, that's how geniuses are. But going back to the topic of smart contracts, Nick Szabo realized that the decentralized ledger that is used in blockchain platforms could be used for smart contracts, also called smart contracts.

That is, in blockchain, contracts could be converted to computer code, stored and replicated in the system, and monitored by the network of computers running the blockchain. This would also lead to comments on the ledger, such as transferring money and receiving the product or service.

Let's go more space for you to fully understand how smart contracts work in the crypto universe.

From the written or spoken agreement to the smart contract

First of all, let's take a look at the definition of contract that we could find in any dictionary:

Contract: “A written or spoken agreement, especially one relating to employment, sales, or lease, that is intended to be enforceable by law.”

So, a contract is an agreement between two parties who mutually agree to behave or act as the contract states. The contract generally has to have a specific form and include some elements such as date, conditions, names and signatures, and if one of the parties does not agree with the performance of the other party, then the law has to compromise to solve the problem.

What is the problem with these types of contracts? That this type of agreement cannot impose the correct and honest behavior of the participants, and therefore, there must be a third party that solves all possible problems.

Therefore, there are so-called legally binding contracts, which means that the parties must obey the written terms in the contract and perform their contractual obligations as indicated. And failure to do so may result in legal consequences, such as compensation for damages.

What is then the difference with a smart contract? That in a blockchain, that uses smart contracts, like cardano ada, for example, and which we will talk about in depth later, we can avoid intermediaries when we want to send a transaction.

A distributed network can act as an intermediary and ensure that a transaction sent by Paco to Ana is processed as expected if all conditions are met.

smart contracts

Why smart contracts on Cardano are so important

What would happen if Paco and Ana could create a digital contract between them and a distributed network, as an intermediary, ensures correct execution and forces both to act honestly? This is exactly what a smart contract can do.

And this is what he was talking about Nick Szabo, of the importance of implementing a complete transaction between the client and the supplier, which takes into account much more than a digital cash protocol, because in reality a protocol is needed that guarantees that the product will be delivered if the payment is made and vice versa.

In this way, smart contracts greatly reduce the cost of fraud and execution of many commercial transactions.

What was Nick Szabo really aiming for? The need to have more than just a transaction system to ensure that the product would be delivered if payment is made.

This works well for what is considered fiat money. For example, if you buy a product in an online store and the delivery is not made, the seller will be in breach and the weight of the law will fall on him.

It may take some time, but you will probably get your money back.

So, if we really want to use the full potential of distributed networks, we need to solve the aforementioned payment problems and establish trust between the parties. And that is what smart contracts can do for us.

What are smart contracts

A paper contract is just an agreement and the parties are responsible for its execution. For example, if Ana promises Paco that she will pay him 1.000 euros for some company shares, both are responsible for delivering the money and actionsyes They can do it hand to hand if they are close to each other.

Ana could also pay in advance and Paco would send the shares once he receives the money from Ana. In this case, Ana must trust that Paco is honest and will send the shares, but Ana is still at a disadvantage. But, a digital smart contract is also responsible for the execution part of the agreement.

The situation would be much better for Ana and Paco if they use a smart contract. First, they make an agreement and create a digital format of it. The smart contract will contain Paco's address for payment and the amount of money that Ana must send. There will also be an address for Ana, where the stock and the expected quantity will be listed.

Once the contract is called implemented, which is a process similar to signing a paper agreement, the executing party has full control of the distributed network that processes the smart contract and no one can change it or stop it. Neither Ana nor Paco nor anyone else.

the smart contract it is 100% fair and does exactly what it is supposed to do. The order in which Ana and Paco send the promised assets does not matter. The smart contract can hold cash and digital shares in a temporary account. Once the smart contract can exchange the assets it just does it, to program the smart contracts the programming language is used Solidity.

If one of the parties does not send the asset, after a specified time, the contract returns the asset that is in the temporary account to the former owner. No one can cheat and it never happens that one party has both assets and the other has neither. the smart contract is a 100% reliable broker.

There is no reason to hire a legal authority at any time, because the smart contract does not generate conflicts, because at the time of writing it takes into account all possible outcomes and all parties know exactly what happens under certain conditions and when. Smart contracts behave deterministically.

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smart contract

How a smart contract works in ADA

The smart contract is somewhat more complex, because it is actually a computer code, which must be written by a special programming language. In other words, a smart contract is a set of automatically executable rules that have been provided through a computer program.

Code is written off-chain by a programmer and must then be implemented in a process similar to submitting a transaction. A transaction is also integrated into a wallet and then sent to the network. Once the contract is implemented, it is stored on the blockchain and it is run by special software called a virtual machine.

Virtual machines run on nodes in the distributed network and run smart contracts. Then the result of the execution is taken and a mutual consensus must be achieved between the nodes. This is very similar to what happens with normal transactions. You can imagine it as a big global computer consisting of many distributed nodes. So the contract between Ana and Paco is processed on many computers and consensus must be reached to have a single version of the truth and/or behavior.

A smart contract code enables decentralized automation by facilitating, verifying, and enforcing the terms of an underlying agreement. During the execution of the smart contract, it is checked if all the conditions are met to produce some expected result or perform some predefined action.

So do you understand why we said that Nick Szabo was really a visionary? Because smart contracts are most beneficial in any type of agreement, where the parties want to make any type of transaction, create a contract and let it run automatically.

It is useful for all kinds of sales, loans, purchases, bets and much more. Because reduce the risk of fraud or manipulation, and since there are no third parties involved, costs are also reduced.

Now how do smart contracts work in a cryptocurrency? We already told you about it, taking for example Cardano Ada.

Smart contracts on Cardano

Cardano is currently one of the most talked about projects in the crypto space because it offers scalability and security through a layered architecture. It was conceptualized by one of the co-founders of Ethereum, Charles Hoskinson, and three organizations worked full time to take care of the Cardano universe: the Cardano Foundation, IOHK, and Emurgo.

Cardano's approach is unique in the crypto space as it is based on scientific philosophy and peer-reviewed academic research.

Now what programming language do you use for smart contracts?

Cardano has chosen Haskell and Plutus as its preferred languages. Haskell will be used to code Cardano, while Plutus will be used for smart contract creation.

When will smart contracts be available on Cardano?

Alonzo's testnet will finally allow developers to implement their own decentralized applications, smart contracts on Cardano are already in the testing phase and in August 2021 they will finally be available.

According to the implementation plan that has been revealed a few days ago, Alonzo's update it has been made in the form of a hard fork. Initially, smart contracts are available for testing purposes only, and full mainnet launch is scheduled for august.

The Cardano roadmap is being met without any delays, so let's hope this update goes as planned.

Cardano Pluto

Smart contracts for Cardano must be written in Plutus or IELE and are intended to support a higher level of security.

Plutus is a smart contract language that uses the Haskell programming language, which is renowned at the academic and developer level for its combination of academic and industry-level talent with basic computer science credentials.

Therefore, writing smart contracts will be more secure and reliable than any other smart contract language. The Plutus platform will be a Haskell library and an accessible toolbox for developers to create smart contracts and can support code that runs on-chain and off-chain. Due to peer review and high security, the code for Cardano smart contracts is secure, tested, and documented.

Cardano Haskell–Marlowe

Marlowe is a new language for modeling financial instruments like smart contracts on a blockchain. It has been designed for people who are business engineers or subject matter experts rather than experienced developers.

It is a simple Domain Specific Language (DSL) comprising a small number of powerful building blocks that can be assembled into expressive financial contracts. It is built on the Haskell language, which has its own established ecosystem and testing framework. You don't need programming experience to use Marlowe and you can explore Marlowe financial constructs with a browser-based contract editor and simulator.

Marlowe interacts with real-world data and enables the formulation of smart contracts. It is aimed at fixed-term financial products, such as hedges, fixed-term deposits, and crowdfunding.

Marlowe is ideal for financial startups, analysts, or those in the fintech community, as well as universities that might use it for testing within their financial courses. with marlowe, you can write smart contracts that are easy to read, write and understand without programming experience.

Smart contract

Conclusions

As Cardano founder Charles Hoskinson said, “one of the biggest problems with Bitcoin is that it is blind, deaf, and dumb, and that is by design.”

Bitcoin was never intended to replicate and comply with current financial systems. Yet that is exactly what is desperately needed to continue building a decentralized world. It will not be easy and there is still a long way to go.

But we are on the way, a safer, more democratic and decentralized way in which smart contracts provide a virtually foolproof financial ecosystem, invest in CardanoAt first glance, it seems like a good idea.

Will people trust smart contracts? The answer is simple, they will because cryptography today is a reliable alternative, which is basically about trust in the source code and decentralization.

A smart contract is just source code that is deployed and executed by the entire network. Clients verify the validity of transactions and locks. They can easily verify the logic in smart contracts and thus add a programmable layer to the blockchain technology. Each smart contract is processed independently of each other, so the breach of one contract does not affect the rest.

The revolution cannot be done abruptly and we do not need to go down this road. It is easier to work in slow evolution. Cardano will be in the future, and hopefully not too far away, a third generation cryptocurrency suitable for the decentralized evolution of humanity. To be clear, we are far from the vision, but it is time to think about it and take small steps to realize it, another very interesting project, especially to invest in Siacoin.

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Cardaniers is a financial information channel, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risk, including the risk of permanent and total loss. Past performance is not indicative of future results. Proven strategies are not recommendations. Consult your financial advisor before making financial decisions.

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Armando Tachon 09/09/2021 - 12:55

Good morning excellent the information contained thank you very much for your collaboration

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