Blockchain 101 -Smart Contracts
In the previous post, we discussed the concept of Blockchain, its advantages, and how it eliminates the need for intermediaries in transactions. One way this is achieved is through the use of smart contracts.
So - What are Smart Contracts?
Smart contracts are self-executing agreements with terms directly written into lines of code, defined by Laura Porter. They exist across a distributed, decentralized blockchain network, and the code controls the execution, making transactions trackable and irreversible. Nick Szabo first proposed this idea in 1994 to record contracts in the form of computer codes that activate automatically when certain conditions are met.
Here is a simple example of how smart contracts can be used. If Mr. Akin wanted to carry out a transaction with Mr. Dami on the Internet, there is a high chance that Mr. Dami might back out of the transaction after Mr. Akin transfers the exchange. Before Blockchain technology, this issue was handled by an intermediary that both parties trusted to mediate. However, this solution brings additional problems, such as extra costs and time delays. With smart contracts, a contract can be written on the blockchain network, which will only execute after both parties meet the conditions of their agreement, thus eliminating the need for intermediaries.
Here’s what to remember:
- Smart Contracts are stored on a public blockchain database and cannot be altered, making them highly secure.
- Transactions are processed by the blockchain, making them automatic without the need for a third party.
- Transactions only occur when the conditions in the agreement are met, which eliminates trust issues.
Where can we use them? :
Smart contracts can be used for any type of transaction, including financial trades and services, insurance, credit authorization, legal processes, crowdfunding agreements (ICOs), health systems, and even government and voting.
Smart contracts are revolutionizing the way we conduct transactions, and their use cases are endless. They provide an efficient and secure alternative to traditional contracts, eliminating the need for intermediaries and streamlining processes.
