First of all, what is a Smart Contract?

The concept of "Smart Contract" was actually invented by computer and cryptographic engineer Nick Szabo in 1994. However, it was not until the advent of Blockchain technology that the term began to be used more frequently. A "Smart Contract" consists of a set of lines of code that automatically executes all or part of an agreement based on a set of parameters that are entered and stored securely on a blockchain. The smart contract code is replicated on multiple nodes on a blockchain and that is what makes it so secure, being immutable and permanent on the network.

Here is an example of a Smart Contract for a decentralized lottery.

If you want to have a contract with greater legal validity, you must create a Smart Legal Contract. This implies having an understandable front end for the user and that this understandable contract has a smart contract associated behind it. This must take into account the legality and the right of withdrawal.

It seems that all Smart Contracts are centered on the Ethereum network or the Ethereum Virtual Machine at least, but it is not so. Currently there are different types of Blockchain and it is true that in public blcockhain, the development of Smart contracts is very common under the solidity language and the use of the Ethereum virtual machine. However, in permissioned or even hybrid blockchain, it is very common to use technologies such as Hyperledger Fabric, where there are also Smart Contracts, but they are called "Chaincodes". The programming of chaincodes is with commonly known languages such as Java.

Smart Contracts & IoT

More and more companies are relying on Blockchain technology to provide solutions to real problems. In addition to acquiring greater security, decentralization and immutability, they may be able to automate processes and save costs through the use of smart contracts that allow them to dispense with third parties. In fact, a further benefit to be found with the application of smart contracts in business solutions is the increased speed of processes and the reduction of risks.

Ethereum Virtual Machine

The Ethereum Virtual Machine is a computing engine that acts as a decentralized computer that has millions of executable projects, acting as the virtual machine, which is the basis of the entire operating structure of ethereum >> CoinMarketCap

Basically the EVM is the software platform that all developers of decentralized applications (DApps) will have to use. That is, the role of the EVM is to implement a number of additional functionalities on the blockchain to ensure that users face limited problems on the blockchain. Each Ethereum node runs on the EVM to maintain consensus across the entire blockchain. Thanks to the EVM anyone can create their own DApp and there are also infinite uses for Smart Contracts such as being able to create digital art (non-fungible tokens -NFT) and sell it on a decentralized marketplace.

The Ethereum Virtual Machine can not only be used by Ethereum, it can also be used on other Blockchains or other protocols to improve the level of compatibility and take advantage of the resources already offered by the EVM.

Forward-Looking

Although we have focused on talking about Smart Contracts developed under the Ethereum Virtual Machine in this article, permissive or hybrid Blockchain enterprise solutions tend to make greater use of tools such as hyperldeger fabric's Chaincodes, which we will explain how they work in a future article. This is not to say that EVM Smart Contracts are not used, rather, they are mostly used for the development of DApps.

However, there are still some challenges to overcome for smart contracts. Firstly, their adoption and legal validation by a regulated institution. On the other hand, the complexity of these will have to be reduced if they are to be more widely accepted and possibly there will have to be a regulation of standards. Finally, compliance with the GDPR regulation will have to be monitored in the privacy environment, the speed of executions will have to be improved and the high fees that exist when there is congestion will have to be reduced.