Smart Contract
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible. Smart contracts were first proposed by Nick Szabo, who coined the term, in 1994.
What is a Smart Contract?
A smart contract is a computer protocol that digitally facilitates, verifies, or enforces the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible. Smart contracts were first proposed by Nick Szabo, who coined the term, in 1994.
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.
History of Smart Contracts
The concept of smart contracts was first proposed by Nick Szabo in 1994. Szabo, a computer scientist, legal scholar, and cryptographer, recognized the need for a digital transaction protocol that could be enforced without the need for a central authority. He proposed the use of a decentralized ledger, or blockchain, to store and execute the terms of a contract.
In 2015, Ethereum, a blockchain-based distributed computing platform, was launched. Ethereum introduced the concept of a Turing-complete smart contract system, which enabled developers to create self-executing contracts that could be used to facilitate, verify, and enforce the negotiation or performance of a contract.
Comparison Table
| Traditional Contracts | Smart Contracts |
|---|---|
| Manual | Automatic |
| Time-consuming | Time-saving |
| Expensive | Cost-effective |
| Error-prone | Error-free |
| Centralized | Decentralized |
Summary
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible. For more information about smart contracts, visit websites such as Ethereum, Blockgeeks, and Investopedia.
See Also
- Blockchain
- Cryptocurrency
- Distributed Ledger Technology
- Ethereum
- Smart Property
- Smart Assets
- Digital Signature
- Digital Identity
- Digital Currency
- Digital Token
