Introduction

For more than a decade, the blockchain has been established as a technology where a distributed database records all the transactions that have happened in a peer-to-peer network. It is regarded as a distributed computing paradigm that successfully overcomes the issue related to the trust of a centralized party. Thus, in a blockchain network, several nodes collaborate among them to secure and maintain a set of shared transaction records in a distributed way without relying on any trusted party. In 2008, Satoshi Nakamoto introduced Bitcoin by that was the first proposed cryptocurrency introducing the blockchain as a distributed infrastructural technology. It allowed users to securely transfer crypto-currencies, known as “bitcoins” without a centralized regulator. Besides, Ethereum, NXT, and Hyperledger Fabric were also proposed as blockchain-based systems used for the cryptocurrency. Unlike Bitcoin, they can use smart contracts (SC). Blockchain technology overlaps traditional contracts by including the terms of agreements between two or more parties, but surpasses them thanks to smart contracts by automating the execution of agreements in a distributed environment when conditions are met.

What are Smart Contracts?

Smart contracts are computer programs or protocols for automated transactions that are stored on a blockchain and run in response to meeting certain conditions. In other words, smart contracts automate the execution of agreements so that all participants can ascertain the outcome as soon as possible without the involvement of an intermediary or time delay.

Smart contracts are self-executing contracts in which the contents of the buyer-seller agreement are inscribed directly into lines of code.
According to Nick Szabo, an American computer scientist who devised a virtual currency called "Bit Gold" in 1998, Smart contracts are computerized transaction protocols that execute contract conditions.
Using it makes the transactions traceable, transparent, and irreversible.

Benefits of Smart Contracts

Accuracy, Speed, and Efficiency: The contract is immediately executed when a condition is met. Because smart contracts are digital and automated, there is no paperwork to deal with, and No time was spent correcting errors that can occur when filling out documentation by hand.
Trust and TransparencyThere's no need to worry about information being tampered with for personal gain because there's no third party engaged and Encrypted transaction logs are exchanged among participants
Security: Because blockchain transaction records are encrypted, they are extremely difficult to hack.Furthermore, because each entry on a distributed ledger is linked to the entries before and after it, hackers would have to change the entire chain to change a single record.
SavingsSmart contracts eliminate the need for intermediaries to conduct transactions, as well as the time delays and fees that come with them.

The Working of Smart Contracts

A smart contract is a sort of program that encodes business logic and operates on a dedicated virtual machine embedded in a blockchain or other distributed ledger.

Step 1: Business teams collaborate with developers to define their criteria for the smart contract's desired behavior in response to certain events or circumstances.

Step 2: Conditions such as payment authorization, shipment receipt, or a utility meter reading threshold are examples of simple events.

Step 3: More complex operations, such as determining the value of a derivative financial instrument, or automatically releasing an insurance payment, might be encoded using more sophisticated logic.

Step 4: The developers then use a smart contract writing platform to create and test the logic. After the application is written, it is sent to a separate team for security testing.

Step 5: An internal expert or a company that specializes in vetting smart contract security could be used.

Step 6: The contract is then deployed on an existing blockchain or other distributed ledger infrastructure once it has been authorized.

Step 7: The smart contract is configured to listen for event updates from an "oracle," which is effectively a cryptographically secure streaming data source, once it has been deployed.

Step 8: Once it obtains the necessary combination of events from one or more oracles, the smart contract executes.

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Limitation of Smart Contracts

Because smart contracts can't send HTTP queries, they can't acquire information about "real-world" events. This is by design.
Using external data could jeopardize consensus, which is critical for security and decentralization.

Use Cases of Smart Contracts

Smart Contracts play a very essential role, it helps to make the transactions taking place more safe and secure and function in an organized manner. And not just that, it helps other components like applications running on these platforms be even more accessible

The use cases for smart contracts range from simple to complex.
They can be used for simple economic transactions, such as moving money from point A to point B, as well as for smart access management in the sharing economy.
Smart contracts could disrupt many industries.
Banking, insurance, energy, e-government, telecommunications, the music business, art, mobility, education, and many other industries have use cases.

Conclusion

Smart Contract technology is reshaping conventional industry and business processes. Being embedded in blockchain, smart contracts enable the contractual terms of an agreement to be enforced automatically without the intervention of a trusted third party. As a result, smart contracts can cut down administration and save services costs, improve the efficiency of business processes and reduce the risks. Although smart contracts are promising to drive the new wave of innovation in business processes, there are a number of challenges to be tackled. This paper presents a survey on smart contracts. We first introduce blockchains and smart contracts. We then present the challenges in smart contracts as well as recent technical advances. We also compare typical smart contract platforms and give a categorization of smart contract applications along with some representative examples.