What are smart contracts: basics and principles of work with Yevhen Kasyanenko

But stop, calmly, imagine that all processes work automatically – there are no errors, no intermediaries are needed, and the concept of “human factor” does not exist at all. Pretty cool, isn’t it?

And what if we say that all this is quite real? That’s exactly how innovative smart contract technology works. And we at KISS Software implement such solutions for business here and now! We will tell you more about everything together with our leading expert in this field Yevhen Kasyanenko.

What is a smart contract in blockchain in simple words?

A smart contract is, in simple words, a blockchain software algorithm that makes and enforces self-executing agreements in the network. The term is taken from the English term Smart contract. In essence, it is a digital code that specifies all the terms and conditions of the transaction, as well as the system’s response to them. Everything works on an automatic basis: a given condition is fulfilled – immediately the action programmed for it takes place. This is an automated way to fulfill the terms of the contract without intermediaries, bypassing bureaucracy and other time-consuming processes that bring only nervousness.

The concept of smart contracts was proposed by cryptographer Nick Szabo back in 1994. He clearly demonstrated it on the example of a vending machine:

• You put money into it.
• You select the desired product.
• The vending machine is encrypted to give you the goods in response to these conditions, which it does instantly, without intermediaries.

This is the process that has become the foundation of today’s digital agreements in DEX applications. Smart-contracts are really a kind of vending machine, only instead of chips, there are documents, actions, rights, assets.

Principles of digital contracts

Yevhen Kasyanenko, as an experienced specialist in this area, over the years of implementation of electronic agreements has identified 3 main principles of their work, which provide them incredible popularization:

• Automation. The set conditions are fulfilled instantly, unconditionally, automatically. There are no mistakes and delays.
• Transparency. Any actions, transactions, everything that happens under the contract is recorded and stored in the blockchain, which means they are easy to verify. Anyone can do it and whenever they want.
• Security. The terms and conditions of the agreement cannot be changed, they are placed on the blockchain forever. However, new terms can be added as they evolve.

Reports from analytics company Chainalysis show that already more than 60% of users are convinced that smart contracts for cryptocurrency and business processes are the most convenient and secure solutions. They are already actively used in insurance, supply chains, NFT, DeFi, DAO. It is not without reason that digital giants such as IBM and Microsoft are already actively applying electronic agreements in their processes. And as Yevhen Kasyanenko noted, the number of adherents of this technology is growing rapidly, smart contracts are definitely the future! And not distant at all.

How do smart contracts work?

We clarified the work of digital agreements with Yevhen Kasyanenko in more detail, he emphasizes the following stages for a general understanding:

• Recording of conditions. Developers write down the terms of the contract on the blockchain using code such as Solidity (this is the most popular programming language for smart contracts, particularly on Ethereum). The right parameters are set through variables – if A happens, B will happen.
• Publication in the blockchain. Then the prescribed code is placed in a pre-selected blockchain network, e.g. Ethereum, Binance Smart Chain, Polygon (ex. Matic), Hyperledger Fabric, others. Once uploaded, the contract becomes public and immutable.
• Execution. If the programmed conditions occur, the blockchain smart contract automatically triggers the specified action immediately, such as a money transfer, access confirmation, data transfer, whatever.

Yevhen Kasyanenko is committed to the fact that personal selection of the right blockchain for each business and its tasks should be individual. This is the basis for the correct implementation of smart technology. That’s why we at KISS Software attach serious importance to this point:

• Where speed and economy are important, we choose BSC or Polygon.
• If openness and flexibility are needed – Ethereum.
• When privacy and control is the issue – we take Hyperledger.

Interesting fact! In 2015, Ethereum-based smart-contract was first successfully used to automate in the management of the voting process in DAO. This was a real breakthrough for the subsequent implementation of digital agreements in management. And in one of the crowdfunding campaigns, the smart contract allowed for the return of funds to investors if the collection goal was not achieved.

Types and categories of smart contracts: choosing the right one

Thanks to the classification of digital contracts, KISS Software experts analyze their use for different scenarios.

By execution environment

• Centralized. Suitable for implementation in a controlled environment, such as private registries, like Hyperledger Fabric. They are already heavily used by many corporations like IBM to provide internal processes.
• Decentralized. If full transparency and independence from control is needed, such agreements are ideal. An example is smart contracts in cryptocurrency – the same altcoins on Ethereum, meme coins on Solana, etc.

According to open data on the web, now about 80% of such smart contracts are DEX. However, our expert Yevhen Kasyanenko predicts an adjustment due to the widespread adoption of blockchain technologies.

By degree of anonymity

• Open. The prescribed terms in the contract can be seen by all participants of the network, which is perfect for the direction of DeFi. And everyone can check them – for this purpose we advise using special analytical services like Etherscan.
• Confidential. Suitable for businesses that want to hide trade secrets or other corporate information from public view. Often such smart contracts, for example, are ordered by logistics companies, easily managing supply chains.

By mechanism of execution

• Automatic. They do not require human intervention at all, due to which the errors of processes are reduced to zero. An example of use can be insurance companies. So, if an insured event is recorded, the system will automatically charge the client compensation.
• Manual. Need regular confirmations to trigger an action. They are useful for complex business processes, such as multi-step real estate transactions, when the participation of lawyers is very important at every stage of the transaction.

Right now, almost 70% of smart contracts in blockchain are exactly automatic. Although there are still some corporate systems that favor manual contracts. Over time, according to Yevhen Kasyanenko, there will be more and more automation. And whoever is the first to resort to it will gain an advantage in the market.

Examples of smart contracts in real life

The future is already here, especially where there is active use of smart contracts on the blockchain. For the sake of clarity, we want to demonstrate just a small part of those real-life examples. Pay attention to the scale, the globality of the technology and how it is already influencing processes in different niches.

Government projects

• Estonia has already implemented a distribution registry for collecting and storing data of citizens, real estate, business, protection of personal information.
• Colombia is actively using digital contracts for public procurement to eliminate the risk of corruption.
• The UAE is planning a strategic direction for Smart Dubai. And it could be the first total automation of all important processes, like record keeping, issuing licenses, visas, etc.

Our team leader Yevhen Kasyanenko believes that very soon all leading world governments will come to use smart contracts and blockchain. After all, it gives control over all spheres of life in the country, transparency and protection from manipulation and corruption. Namely, this is what the outdated model of bureaucracy lacks.

DeFi (Decentralized Finance)

This niche is already very zealous in implementing digital contracts that automate, for example:

• lending;
• token exchange operations;
• staking, etc.

As a prime example, the DEX service Aave already offers loans without intermediaries, with unchanging terms and conditions spelled out in smart contracts. Many decentralized exchanges are also launching automated staking with APY payments and token exchanges via liquidity pools.

DAO

Yevhen Kasyanenko explains that decentralized autonomous organizations via smart-contract allow users themselves to manage processes on automation. In particular, the famous MakerDAO project gained huge popularity because it was one of the first to implement smart technology in its processes.

According to Statista forecasts, in 2025 the volume of funds in the turnover of DAO-services will exceed 1 trillion dollars. That’s quite a scale!

NFT

There is no need to talk about the fact that digital assets are increasingly replacing real works of art, everyone knows about it. Today at auctions are already more often sold NFT-paintings than exhibits of artists. And this is not surprising, which is easy to demonstrate with a simple example:

• You have created an NFT-art.
• In the smart contract you have prescribed that at each resale you, as the owner, will receive, say, 10% of the price.
• Everything will work without intermediaries, and the money will go immediately to the wallet you specified.

Smart contract is the basis of all interchangeable tokens. After all, it is through it that digital objects – pictures, music, videos, etc. – are tokenized. A smart contract also provides ownership to the owner of the NFT and transfers it to the new owner after the purchase.

GameFi

Blockchain games like the popular Axie Infinity or the meta-universes The Sandbox and Decentraland are completely tied to the operation of smart contracts. All in-game processes and assets are controlled by programmed conditions and actions.

For 2023-24, the industry has already raised over $5 billion dollars. This is just the beginning! Being a supporter of the GameFi industry, Yevhen Kasyanenko predicts the growth of the niche and the attraction of huge capital here.

Business

Our whole team is convinced, modern realities are already dictating new conditions for the survival of businesses. The main focus now is on automation, transparency and security of processes. And these, as you remember, are the basic principles of smart contracts, which we voiced at the very beginning of our article.

Every year more and more companies will switch to this technology. That is why our expert Yevhen Kasyanenko invariably advises all clients to implement smart contracts now in order to be among the first, occupying their niche. As an example, we have recently developed such a solution for commercial real estate leasing business. Our team helped to automate and simplify the entire transaction cycle, minimizing time and money spent on the final result. This is convenient not only for the owner, but also for the tenants – everything works in a few clicks, and the terms of transactions are completely transparent.

Advantages and disadvantages of smart contracts

To put any misunderstandings aside, we have highlighted for you the clear pros and cons that go along with the implementation of digital contracts. This way, any startup and business can already realize how important it is to pay attention to this technology right now. Most importantly, a professional approach is essential here.

Smart contracting is indeed an incredibly progressive tool. But only in skillful hands, without a professional approach.

KISS Software’s smart contract services

“When people ask me what we do at KISS, I usually smile and answer: we make your contracts smarter than some people in the office,” shares Yevhen Kasyanenko, a leading expert and head of our team.

In all seriousness, we help startups and companies to adopt cutting-edge blockchain technologies to take their business to the next level, with the goal of staying ahead of the competition and making the most of their niche. This way businesses can keep their focus on growth rather than bureaucracy.

Yevhen has built such basic principles into our team’s approach:

1. High degree of professionalism and reliability. Each of our smart contract developments undergoes a high-level audit. We understand that the main thing for smart-contract is the absence of errors in programming from the beginning.
2. Individual approach. We deeply analyze each individual business project to better understand what will be the most profitable solution and adapt smart-contract to it.
3. Data Protection Guarantee. We believe that security is paramount and try to minimize any risks to “zero”. We use only trusted networks like Ethereum, BSC, Polygon, etc. as blockchains. We are responsible for our work with a long-standing reputation.

Conclusion

It cannot be ignored that Smart-contracting is becoming the backbone of every modern business. It is what allows you to scale your business, simplify transactions, increase security and transparency.

A future without routine processes, full automation and more free time – what is available here and now! We make what yesterday seemed like a dream come true with the help of blockchain-based smart contract technology.

“Want to learn more about how this can improve your business? Request a free consultation now! Get one step closer to implementing a modern solution into your business!”