Smart contracts and their associated derivatives are the crucial components of Web3 space useful for businesses offering products and services powered by Ethereum. So, for those business owners, knowing ‘How to create a smart contract on a blockchain?’ would be advantageous.
Smart contracts are digital contracts stored on the blockchain and executed automatically when predetermined terms and conditions are met.
Business owners who are beginners and do not possess a better understanding keep struggling with long lines of code of smart contracts. So, to ease their problem, this guide is prepared that highlight everything about smart contract development in a very simple format.
Table of Contents
What Are Smart Contracts?
A smart contract is a program that runs on a blockchain like Ethereum. Smart contracts consist of two parts: Data and code collection. So, when you create a smart contract, you need to take care of this.
The code acts as the function of the smart contracts; on the other hand, the data is considered the state. Smart contracts automate the execution of agreements to enable the participants to ascertain the outcome without the involvement of any intermediary.
- Self-executing contracts known as “Smart contracts” are those in which the terms of the buyer-seller contract are written directly into lines of code.
- According to American computer scientist Nick Szabo, smart contracts are computerized transaction protocols that carry out contract terms.
- Smart contract use renders transactions visible, irreversible, and traceable.
How Do Smart Contracts Work?
A smart contract is an application that operates within a blockchain, and two or more parties agree to the set of rules stored in the smart contract. It is a little complex application that incorporates some business rules. Here is the complete process of how smart contract development works and benefits businesses.
1. Identify The Agreement
The smart contract’s participants choose a shared opportunity and the desired outcomes. There is a wide range of potential agreements, from business deals and rights transfers to asset swaps.
2. Set Requirements
The decision to start a smart contract is either by the parties themselves or in response to certain events or changes in the financial markets. So, before you hire blockchain developers to create a smart contract, set clear requirements first.
3. Code Business Logic
Like any other computer coding and programs, smart contract-based applications are designed to perform once all the conditional parameters are reached. But, all this can only be possible when you properly code the business logic while planning for blockchain technologies.
4. Focus on Encryption & Blockchain Technology
Blockchain technologies are incomplete without encryption as these technologies incorporate standard security protocols. Strong encryption provides the best-required security in authenticating and verifying messages exchanged among multiple parties.
5. Smart Contract Execution
A smart contract is written to a block each time a blockchain iteration occurs. It happens when consensus has been reached through validation and authentication. After the code has run, the results are memorized for compliance and verification.
This is how smart contract development works and ensures seamless integration and execution of blockchain technologies.
Benefits to Create A Smart Contract For Businesses
There are ample resources business owners incorporate while leveraging blockchain-based technologies. But, among hundreds of assets available, most business owners prefer to opt for a decentralized deal due to numerous benefits. Some of the major benefits to create a smart contract are discussed below.
The smart contract system will carry out several manual tasks often involved in constructing pacts. As a result, an entrepreneur saves money by not paying for middlemen who are always involved in the process, such as attorneys, banks, brokers, etc.
The complete transparency of Blockchain apps is one of their best features. Simply said, once information is entered into the system, it cannot be changed without being recorded. As a result, a business owner can create a smart contract without worrying that it will be secretly altered.
3. Improved Security
Similar to cryptocurrencies, smart contracts are known for leveraging the highest level of encryption currently available in the market, like IoT development company and data protection. Because of this, creating agreements via a blockchain is now among the safest methods.
4. Save Time
A legal document must be established, its terms must be discussed and agreed upon, and the document must then be formalized. The time savings are significant because no paperwork is required to create a smart contract.
In addition, any Blockchain-based agreement’s execution is handled and regulated by the network and technology. So, the blockchain app development procedure can be carried out seamlessly without depending on any intermediary.
5. Lesser Frauds
When you develop blockchain-based technologies, they eliminate the possibility of any unauthorized business activity, which reduces the chances of fraud. And while the public still views the enforceability of smart contracts as one of the primary areas requiring reform, the level of suspicion will diminish as modern technology advances.
6. Increased Trust
During the smart contract execution, the human element is eliminated. As a result, parties can establish strong, long-lasting business relationships. The elevated level of trust also boosts brand loyalty. So, businesses can remain assured of building trust when they hire dedicated developers to create smart contracts.
Step-by-Step Guide to Create A Smart Contract
Now that you are well-versed with ‘What is a smart contract?’ ‘How do smart contracts work?’ and the ‘Benefits of smart contract app development’ let’s take a closer look at the development process.
Step #1 – Choose A Suitable Platform
Before planning to create a smart contract on the blockchain, selecting an ideal platform is a must. As several platforms in the market support smart contract creation, it is up to you which platform you’ll choose. Let us make it easier if you are confused about which platform is best for smart contract development.
Many business owners don’t know that bitcoin offers a smart contract platform, but it does. Often known as Rootstock (RSK), Bitcoin is connected via the sidechain. It is one of the safest platforms in the world and retains the qualities of the Bitcoin network. Another best thing about RootStock is that it is compatible with EVM.
Coming to another most-trusted and well-established platform used for smart contract development, i.e., Ethereum. Many developers prefer using Ethereum as it offers tech experts clear guidelines and support. It also reduces the time and efforts required for smart contract development.
Stellar is the second-most go-to choice for blockchain developers when they need to create a smart contract such as ICO token development. This platform is more profitable than Ethereum as the transactions are much cheaper and faster.
Solana platform does not require a tech expert to learn or master any programming language, as blockchain developers can easily create a smart contract using this technology. Solana blockchain development resolves the scalability issue and supports over 60,000 transactions per second.
Step #2 – Pick the Right Tool
Similar to platforms, there are ample tools available in the market that developers may use for smart contract development. Each of the tools is divided into subgroups which determine the purpose individually. Now, the question is – which tool is the best for smart contract development? Here is the list of the most popular tools you can pick from.
- Frameworks: Hardhat, Truffle, Brownie, DappTools, ApeWorX
- IDEs:Remix, EthFiddle, Visual Studio Code and Atom
- Smart Contracts Wallets:Metamask, Phantom, Coinbase Wallet
- Testnets: Rinkeby, Goerli, Kovan, Hyperledger Umbra, Ropsten
Step #3 – Begin Smart Contract Development
Now comes the stage where the blockchain developers start writing the code for smart contract development. The future contract’s terms are all converted into lines of code. Using an appropriate template or an open-source library is one of the most common ways to save time in this situation.
Every Blockchain has its own set of continuously updated development tools. For instance, creating a smart contract on Ethereum frequently involves using OpenZeppelin. Moreover, Hyperledger has a unique set.
Step #4 – Conduct In-depth Testing
Because of the characteristics or nature of Blockchain technology, the smart contract testing phase is considered the most crucial one. A smart contract cannot be changed after it has been created and deployed. Therefore, the testing phase is the developer’s final opportunity to eliminate all the defects and errors before its launch.
The testnets tools are useful in this situation. Depending on the number of parties involved, multiple wallets may be needed. So, whether you go for NFT marketplace development or any other development, conduct in-depth testing before its launch.
Step #5 – Deploy The Smart Contract
Finally, the last step is to build a smart contract, i.e., deployment. The contract must be turned into a .json file to complete this stage and post the contract to the blockchain. The compilation is simple for Truffle to handle.
The Light IT team frequently mixes the finest practices connected with the traditional software development model with blockchain development to offer high-level quality and service. For instance, the CI/CD methodologies are ideal for creating smart contracts.
So, this is the simple five-step process to create a smart contract on the blockchain that, if followed properly, will help you develop a successful smart contract. Now that you are well-versed in the process, begin smart contract development.
How Much Does Smart Contract Development Cost?
The cost of “Gas,” or what it takes for network nodes to execute a smart contract, is multiplied by the gas price to determine how much a smart contract will cost. So, the smart contract development cost is measured in gas. In other words, the cost of using a smart contract is equivalent to the gas price.
So how does gas operate? Nodes process smart contracts and are compensated with a fixed amount of gas for their labour. For instance, a node on the Hedera network processes a contract and is then compensated in HBAR. Smart contracts can be executed on the Hedera network with remarkable throughput since nodes are not “bribed” to process transactions.
Smart Contract Cost in Dollars and Cents
You must take into account two things when using US cash.
- Development Cost
A smart contract can be created and deployed for anywhere between $7,000 and $45,000. The cost of a smart contract for a leading smart contract development company may reach around $100,000.
- Audit Cost
Most businesses spend money on an audit of a smart contract before it enters the mainnet because of its immutable nature. Most publications state that this costs between $3,000 and $15,000. An extensive, complex smart contract may come at a significantly greater cost.
Smart contracts have a significant value because dApp development depends on them. They play a big role in creating a decentralized web full of innovative and helpful applications. Not every business owner knows how to create a smart contract, even after being a crucial component. It is the rationale behind creating this guide.
We hope that after referring to this guide, you might have understood how to create a smart contract, the benefits of a smart contract, and more, so let’s begin the smart contract development process.
You can also avail the assistance of a smart contract development company or ICO development company that can help you with your project. If you hire blockchain developers, consult a reputed firm where experienced professionals work. Now, the decision is all yours!
Frequently Asked Questions
Q1. Can I Create My Own Smart Contract?
Yes, everyone can create a smart contract. For that, you can consult a professional smart contract development company or hire dedicated developers to help you with the development process.
Q2. What Is the Average Cost of Smart Contract Development?
The average cost of deploying a simple, smart contract is around $500. However, you can spend $5,000 on deployment costs for a moderate-sized smart contract.
Q3. How Much Time Does It Take to Create NFT Smart Contract?
It takes almost 48 hours or more for the process to complete, and the business owner has to make a one-time payment for NFT smart contract development. Rest, you can consult the professionals for the same.
Q4. How Long Does It Take to Create A Smart Contract?
Generally, it takes 2 weeks – 2 months to complete the discovery process. The time required for smart contract development can take more than this time, depending on the type of smart contract developed.
Q5. What Are Some Major Uses of Smart Contracts?
Smart contracts are mainly used for gaming, healthcare, and real estate applications. They are also used to configure the entire corporate structure. Some major examples of smart contract applications include trading, investing, lending, and borrowing.