What Are Smart Contracts?
Smart Contract was a term that was first coined in 1997 by Nick Szabo a cryptographer who is also widely acknowledged for laying the groundwork for bitcoin. Smart Contracts are like any other computer program that is based on if-then statements.
However, these days they are being executed in a way that they deal with real-world assets. They are executed when a pre-programmed condition is triggered.
Smart Contracts are not entirely limited to just Ethereum or Bitcoin platform, NEO also offers Smart Contracts and some projects are already using NEO’s platform for creating smart contracts because of ease in scalability and support for multiple code bases, unlike Ethereum which requires the use of their own development language called Solidity.
Some new platforms are also emerging that offer smart contracts such as:
– Cardano ADA
How Smart Contracts Work?
The process is fairly simple, here are the steps that are involved in creating and executing a smart contract.
1. Initially, a smart contract between 2 or more parties is created (written in code), then posted on the blockchain.
2. In the second step, pre-programmed events have to be triggered in order to execute the smart contract. Relevant information has to be defined along with conditions for trigger events, for example: When to send a sum of money and an expiration date, price rises above a certain value etc.
3. The last step involves the triggering of the event and when the contract self-executes (according to the terms that were initially added to the smart contract code.) Once the contract is executed both parties receive what they promised or committed to each in the contract.
In case the conditions of a smart contract are not met the program will decide whether the funds should go back to the respective parties.
The details of transactions involved in the smart contract are stored on the blockchain ledger, what this basically means is that even if the smart contract does or does not self-execute the all the details will be stored on blockchain in a transparent manner without any tampering.
Smart Contract Benefits
The key elements that make Smart Contracts special are:
– Auto-sufficiency (Accuracy)
There are many use cases for Smart Contract, they are currently being utilized in the following areas:
– Storing records
– Trading Activities
– Automating Mortgages
– Supply Chain
– Real Estate