Smart Contracts and Importance of Determinism on Blockchain

Introduction

This article describes what is Smart Contract, its uses, benefits, determinism, and the importance of determinism in the blockchain.

Smart Contract

A Smart Contract is a piece of code, or program, stored on the blockchain. A Smart Contract enables trusted and secure agreements/arrangements to be carried out without the need for a central authority; this is achieved through functionality and criteria defined within the Smart Contract. A Smart contract stores and self-executes on the blockchain. Execution of a Smart Contract occurs when the predefined conditions are met. Simply, a Smart Contract is the agreement between the parties and contains if-else conditions and agreement in its program logic.

A smart contract can be used in:

• Banking and Finance
• Voting
• Gaming (GameFi)
• Cross border Payment
• Government sector
• Supply chain management
• Trading NFTs (auctioning, sell and buy)
• Real estate
• Delay repay Schemes and many more.

You can find details of Smart Contract uses here.

What is Determinism?

A blockchain is secured by a distributed set of block-producing nodes. Generally speaking, the larger the group of nodes, the higher the level of decentralization, assuming that each node is being operated by a unique individual and has a similar stake/mining power.

Upon executing a Smart Contract, each node must reach a consensus on the execution result. If there is no consensus on the execution result, the execution will fail. For example, if the current system time was referenced within a Smart Contract, this would most likely be non-deterministic because there is no guarantee that every node would execute at the exact same time.

There are some guidelines for developing a Smart Contract with determinism in mind.

• In the Smart Contract, if we follow the same operational steps in the same order, we can reach the exact same state every time.
• On the blockchain, every node produces the same transaction order.
• The same computational operation performed across different nodes should return the same result.
• Any differences among the nodes for the same operation lead to the failure of consensus protocol. If it happens, then it is useless.
• Additionally, the same operation performed in different nodes at different time stamps should produce the same result output, for instance, newly joined nodes should give the same output as already existing nodes.

Blockchain’s decentralization and trustlessness are possible because every node in the chain validates every transaction, agrees on the system’s current states, and creates a new block in a deterministic fashion. For example, when a new user creates a wallet in the blockchain, a user needs to wait for the wallet to synchronize with the current state of the blockchain. When the wallet is synchronized, the user can interact, send, and receive funds. This process follows the same rules and creates a valid record of transactions for each user (node). And any node in the network can validate that transaction.

Smart Contract Determinism

Smart Contract must be deterministic because each network node should be able to produce the same result when the same input is given for a method. If the execution of the smart contract in different nodes gives different outputs, then it violates the Consensus protocol and the Smart contract becomes useless.

So Smart contracts should be deterministic and must avoid non-deterministic functions.

Stratis Smart contract tool (Sct Tool) validates for determinism and Format: You can check determinism and contract Validation rules in the Stratis Academy.

Benefits of Smart Contracts

Faster run

Smart contracts run automatically and faster than any manual process.

Security and Safety

The smart contract provides security as it executes in blockchain, uses cryptography and encryption at the blockchain level.

Lower Cost

As there is no middleman or 3^rd party involvement in Smart contract execution such as a lawyer to proceed with the contracts. So it is considered cost-effective. However, the cost is associated with the contract deployment and call/interaction.

Accuracy

There is no human involvement during the execution, so no human error. Additionally, the Smart contract should be deterministic and validated for determinism before deployment, it provides accuracy.

Decentralized

A smart contract runs in the blockchain network in a decentralized manner on the network of nodes so there is no centralized authority to control it.

Trust and Transparency

Data and transactions are encrypted and shared across the network of nodes. None can alter and manipulate the record for personal or organizational benefit. Thus, it provides the trust and transparency of transactions and records.

Summary

Hence, the article has described what is Smart contract, the uses and benefits of a Smart Contract, determinism, and the importance of determinism in the blockchain. I hope, you have got a clear idea about it.

References

1. https://hackernoon.com/dojo-of-blockchain-sovereignty-part-1-determinism-so1d357b?ref=hackernoon.com
2. https://dzone.com/articles/why-smart-contracts-in-blockchain-needs-to-avoid-n