We have talked about digital cash in the early days and here we are slowly the digital assets like bitcoins, ether and other cryptocurrencies are slowly becoming mainstream digital cash! Similarly, smart contracts are the digital versions of traditional contracts! They are the backbone of Ethereum and other reputed blockchains.
Origin of Smart Contracts
The phrase “smart contract” was first used by Nick Szabo. He published the idea in 1994 and an examination of the potential applications of smart contracts in 1996. Nick Szabo’s concept was a digital marketplace based on these automated, cryptographically secure procedures. A setting where business operations and transactions can be conducted directly and without middlemen. In recent times. Ethereum’s smart contracts make this vision a reality.
What are Smart Contracts?
Smart contracts digitalize contracts, By converting an agreement’s terms into computer code that runs automatically when the conditions of the contract are met. Smart Contract (or Crypto Contract) is a computer program. The conditions of the agreement between the buyer and seller are directly written into lines of code, making it a self-executing contract. The agreements and underlying code exist in the decentralized blockchain network. The major advantage of smart contracts is that the transactions are traceable and irreversible, and the code regulates their execution. Smart contracts enable trusted transactions and agreements to be made between distant, anonymous parties.
A smart contract is programmed to do things if this – then that style. For example, vending machine analogy can be beneficial to understand the concept better.
Analogy – Digital Vending Machine
The vending machine delivers the mentioned coke or coffee of your choice when you put a dollar in it; for example, when you choose the item, the vending machine displays the cost of the item, and when you pay the amount, it fills your cup with coke or coffee of your choice. It is programmed that way. Similarly, the smart contract is programmed with certain predetermined conditions depending on the agreement.
Features of Smart Contracts
- Public Record: Last but not least, much like contracts, you can review a smart contract before you sign it (or otherwise interact with it). Even better, everyone can review the contract’s provisions because they are publicly available on the blockchain.
- Privacy Protection: Your privacy can be safeguarded via smart contracts. You can shield your privacy from prying eyes because Ethereum is a pseudonymous network (your transactions are linked publicly to a special cryptographic address, not to your identity).
- Visible Terms: Last but not least, much like contracts, you can review a smart contract before you sign it (or otherwise interact with it). Even better, everyone can review the contract’s provisions because they are publicly available.
- No Middlemen: Since the transactions are based only on the lines of code that were written based on the agreement, there is no need for centralized authority involvement to approve the agreement.
The requirement for trustworthy parties to carry out the contract’s obligations is one of the main issues with a traditional contract. This can be easily overcome by creating a custom smart contract based on your need. You can develop smart contracts based on your requirements from a reputed smart contract development company. Contact BSEtec for more details.