Smart contracts are digital agreements that execute automatically based on real-world inputs. They are immutable, distributed, and stored on the blockchain. The terms of the agreement between both parties are written into lines of code.
Smart contracts are automatically executed when predetermined terms and conditions are met; they permit trusted transactions and agreements between anonymous parties without a central legal authority.
Although various blockchains support smart contracts, Ethereum is currently the biggest supporter of smart contracts. They are programmed with a unique programming language called Solidity.
Brief History of Smart Contracts
Nick Szabo initially conceived the idea of smart contracts as a graduate student at the University of Washington in 1997. He explained that he used “smart” because these contracts could execute pre-programmed steps that traditional paper contracts could not.
Bitcoin technology was invented ten years after; then, smart contracts were permitted to venture beyond theory and become a reality.
Benefits Of Smart Contracts
Transparency
The terms and conditions of a smart contract are encrypted and visible or accessible to all relevant parties. This transparency removes any possibility of manipulation, bias, or error.
Speed and Accuracy
Smart contracts are digital and automated; there’s no paperwork to process and no time spent reconciling errors that often result from the traditional filling of documents.
Security
These contracts use the highest form of data encryption available, the same that crypto-currencies use. This level of protection makes smart contracts one of the most secure items on the world wide web.
Storage & Backup
Smart contracts store the essential details in every transaction. In other words, anytime your details are used in an agreement, they are permanently stored on the blockchain for future records and cannot be altered.
Where Can Smart Contracts Be Used?
Finance
Insurance
E-commerce
Auditing and taxation
Elections
Charities
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Image Source – Nenad Novaković
