In the world of cryptocurrencies and blockchain, terms like smart contracts are becoming increasingly common. But what exactly are they?
A smart contract is a digital protocol designed to facilitate, verify, or enforce the negotiation or execution of a contract using computer software or algorithms.
It can be programmed with the rules and logic governing the agreement’s terms between two parties. Smart contracts electronically enforce the terms of the agreement, improve security and privacy, and reduce cost and time by eliminating intermediaries.
Smart contracts are an innovative piece of software that is expected to make a considerable impact in today’s business landscape. Read on for more information about smart contract concepts, how they work, why it is important, and examples of where this technology is already being used today.
What is a Smart Contract?
A smart contract is a computerized agreement that executes the terms of an agreement between parties efficiently, securely, and autonomously. In simple terms, smart contracts are lines of code that execute based on predetermined conditions. 1
Examples of smart contracts:
- A company can set up an escrow service with a smart contract that releases funds to an investor once certain conditions have been met.
- A person could create a “will” with smart contracts to automatically distribute their assets to the relevant people after death.
How Smart Contracts Work with Blockchain Technologies
The blockchain is an immutable record of all information. It stores transactions as blocks, and each block is linked to the previous one. Any attempt to modify data on the blockchain will be rejected by other computers on that network because it would break the link between two consecutive blocks.
A smart contract is a piece of code that can be stored on the blockchain as an immutable record. It can store information about transactions and agreements between different parties. This information can include the contract terms, funds being transferred, or the actions that have been completed, so it’s easy to verify and audit. 2
Why is Smart Contract Technology Important?
To innovate, the use of emerging technology is a must, and smart contracts are an excellent example. The future of smart contracts looks bright, and it is only a matter of time before the world adopts it.
Now let’s look at what factors make smart contracts invaluable
Bottom Line
The concept of a smart contract, first introduced in 1994 by computer scientist and cryptographer Nick Szabo is now coming to be acknowledged as a game-changer. Smart contracts are an essential part of the blockchain ecosystem, and it has the potential to disrupt various industries by automating processes, increasing transparency, and reducing costs.
- Dummies.com: https://www.dummies.com/article/business[↩]
- Medium: https://medium.com/@polysvote[↩]
